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BBC Studios Targets Opportunities in the Evolving Japanese Video Market

Video Entertainment Market Analysis and Commentary

18 Feb 2020 - Video consumption in Japan is continuously evolving, with consumers steadily embracing OTT content. This presents a perfect opportunity for content deals like the recent multi-year contract between BBC Studios and Japan’s leading OTT provider, U-NEXT.

“This first ever multi-year contract between BBC Studios and U-NEXT comes in the wake of a period of modernisation within the Japanese TV and content market,” says Tristan Veale, Market Analyst at Futuresource Consulting.

Under the BBC Studios deal, U-NEXT will have access to more than 3,000 episodes of SVoD localised titles, including Luther, Death in Paradise, Father Brown and Top Gear. This marks the first multi-year deal between the two parties, with the license period starting this month.

Differentiation Locks in SVoD Consumers

“Deals like these are important as they help to bolster the commitment of current subscribers,” says Veale. “This abundance of high-quality localised drama and documentary titles is likely to build a cult-like, binge watching audience. That generates word of mouth promotion and helps U-NEXT to both capture subscribers and reduce churn.”

U-NEXT, in particular, needs this range of quality content to differentiate itself. It is one of the more expensive SVoD services in Japan, costing customers three times as much as Netflix. It leads the way in terms of consumer spend, although several other SVoD services have larger subscriber bases.

Turbulence in an Expanding Market

The Japanese SVoD market has had a dynamic two years, with several major new entrants and international players achieving significant net subscriber additions. As the dust begins to settle, Futuresource anticipated the Japanese SVoD market to end 2019 with a 15% increase in both subscribers and spend.

“Japanese consumers are attracted to digital content access rather than digital content ownership,” says Veale, “which paves the way for continued momentum in the SVoD market. By 2023, it’s likely we’ll see SVoD account for half of all Japanese consumer spend on home video despite continued affinity for buying or renting DVDs and Blu-rays.”

Current SVoD market leader Amazon Prime achieved an estimated eight million active video consuming subscribers at the end of 2019. Netflix has experienced major growth in the territory, doubling its number of subscribers to reach three million in 2019. Some local services are finding it more difficult to maintain growth in a highly competitive environment, particularly as Japanese households are less likely to subscribe to multiple services when compared with other territories. A library of localised content is imperative, particularly for services which rely solely on video for revenue, as this is the key pull factor.

Improving User Interfaces Facilitating Growth

“Back in 2010, a government-led initiative boosted sales of smart-TVs, resulting in a sizeable installed base, which eclipsed that of many other countries. Yet, the operating systems were ungainly, and the user experience left a lot to be desired. Fast forward ten years and media streamers are growing in popularity; smart TV user interfaces have improved significantly, to the point that consumers who have bought one in the last 3 years are twice as likely to stream content on it compared to owners of older TVs; and for many, smartphones or tablets are their primary viewing device.”

The Future of Japanese Video

“Video consumption continues to play an important role in Japanese culture,” says Veale. “However, overall spend is flattening off as viewing time is being distributed among more video platforms and the traditional Pay-TV subscriber model is being challenged. Central to this change is that Japanese consumers are enjoying content on their mobile devices, though this is helping drive the shift towards OTT content. We expect this year’s Tokyo Olympics to drive TV set sales, therefore increasing the number of households with an up-to-date smart TV user interface, and consequently may help to drive the transactional digital market, along with SVoD.”

Futuresource Consulting’s video insights Japan market report reviews the overall video entertainment market and assesses the impactors and drivers as the sector evolves. Key areas covered include Electronic sell-through (movie and TV), iVoD (movie), subscription online video (SVoD), Pay-TV VoD, DVD and Blu-ray (sell-through and rental), subscription Pay-TV and box office. For further information on this report, please contact Jack Tammaro via jack.tammaro@futuresource-hq.com.

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Here at Futuresource Consulting we deliver specialist research and consulting services, providing market forecasts and intelligence reports. Since the 1980s we have supported a range of industry sectors, which has grown to include: CE, Broadcast, Entertainment Content, EdTech and many more.