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Japan's digital video market up 31%; packaged media still industry cash cow

Digital video has struggled to take hold in Japan, but is beginning to gain traction, achieving 31% growth in 2014 to reach ¥81 billion ($670 million), according to the latest round of research from Futuresource Consulting.

"Japan's home video market is the second largest on the planet, surpassed only by the USA," says Joanna Wright, Senior Market Analyst with the company. "It has a strong packaged video sector that continues to provide the lion's share of revenues, but high broadband penetration, strong uptake of connected devices and a willingness to pay for premium entertainment are all finally coming together to galvanise interest in digital services."

Japan has always had a strong mobile culture, which has seen phenomenal growth in recent years, as smartphones overtook the legacy base of high-end internet-enabled feature phones and powered through to an installed base of 82 million at the end of 2014, equating to 65% penetration. Mobile operators play a significant role in the online video market with many launching their own subscription video services and prompting the SVoD-via-mobile market to skyrocket from one million users in 2011 to nearly nine million in 2014.

"Pay-TV will continue to play an important role, accounting for 50% of spend last year and rising to 54% of overall video spend in 2018," says Wright. "This will be lower than other developed countries such as the UK and USA, as traditional Japanese broadcasters have maintained significant control over the market with free-to-air still accounting for 61% of households in 2014 and sliding down to 56% of households by 2018."

Packaged video continues to dominate overall home video spend, accounting for 83% of home video in 2014, with both rental and sell-through holding up comparatively well. While DVD is declining, Blu-ray is growing at nearly the same level, supported by strong sales of anime, music titles and the Hollywood hit of last year, Frozen.
Japan has the second largest Blu-ray market in the world after the USA and is on track to account for 45% of sell-through spend in 2014. Additionally, there is a strong rental culture in the country and this plays a key role in maintaining the packaged video market, accounting for 50% of spend in 2014.

Despite small declines, the sector is expected to remain significant, reaching ¥259 billion ($2.1bn) and accounting for 44% of spend in 2018.

Moving forward, overall home video spend is set to remain relatively stable, to reach a total of ¥1.3 trillion ($10.7bn) by 2018.

Story filed 02.02.15

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