This month, in the CEO Spotlight, we welcome Mutsuo Hoshino, one of Japan’s innovators in the Digital Out Of Home industry.
Mutsuo Hoshino, CEO of PAS Communications
- What is the current state of the large Out Of Home LED business in Japan?
Business is has been getting pretty tough recently. The economic downturn has put a lot of pressure on advertisers to scale back their media buying activities. To be honest, the industry is still surprisingly small. On the hardware side, LED screens from Taiwan have brought a lot of price competition to the market and it is cheaper than ever to deploy a big screen. Up until 2007, we were seeing new screens going up quite frequently, but over the last couple of years, a number of those screens, particularly the ones in less popular areas, have shut down.
- How did you company start out?
We started in 1991 as a content developer for Large LED screens. In those days, the hardware was incredibly expensive. One square meter of LED cost around $150,000 dollars. Obviously that put a pretty tight limit on the number and size of screens that could be deployed. By 1996 the cost had come down to around $50,000 to $100,000 and now it is just a fraction of that. So we saw a lot of screens come on line in the late 90s and early 2000s.
The market expanded pretty rapidly, perhaps too rapidly, and Japan ended up with some screens that could just barely sell enough advertising to stay afloat. With the economic downturn, many got shut down, which actually helps the screens that are still running. we are proud to say that we have been profitable for the last 8 consecutive years.
- When did you switch from developing content to actually owning a media?
In 1996 we launched our first screen in Tokyo’s Harajuku district. We put the screen on one of the busiest and trendiest intersections in Tokyo. It is the perfect place for an OOH LED. We really wanted to pick a location that would have some staying power and Harajuku brings together a powerful combination of things that make it ideal for and OOH Media.
First of all, it is the area where Japan’s fashion trends originate. To make it in the Japanese fashion industry, designers have to have their cloths seen in Harajuku. People from around the world look to Harajuku to find out what the latest is in Japanese fashion trends. In addition to that, Harajuku is just a couple of blocks from the Meiji Jingu (Emporers Shrine) which is a major cultural treasure and tourist attraction. The government keeps the area clean and always will protect the surrounding neighborhood because of its proximity to the shrine. Millions of people visit the shrine every month and most also visit Harakuku at the same time.
Harajuku has always attracted lots of tourists, going back to the days when American soldiers came to the area after WWII. It is one of the most international areas in Tokyo. Redevelopment of the area has brought in a lot of new high end stores, Omote Sando Hills is one of the trendiest shopping malls in the world. The combination of fashion, tradition, culture, shopping and millions of people make it the single best place for an OOH LED screen in Japan.
- Are you considering launching any new screens, even as we are in the midst of an economic slump?
We are actually. The downturn has changed our plans and thinking regarding new media development, but it has not stopped it. We need to be more conservative about where we want to launch, and costs, but there are still real strong opportunities. OOH is growing in Japan as traditional media provide weaker CPM and advertisers lose interest. Radio and print are suffering much more than other areas. We are looking at the Ginza (Japan’s most upscale shopping and dining district) as a potential location for a new large LED deployment.
Obviously location is important, but even in an appealing area like Ginza, picking the right place for a display is critical. Ten meters in one direction or another can make all the difference in the success or failure of a media. When you really start to analyze the number of potential places to deploy a display, in a small geographic area like the Ginza shopping district, you quickly go from thousands to tens, then to just a few. The rent is very expensive and the CPM has to be real or advertisers will not pay, its that simple.
We are determined to find the right location and make the media fit our budget or there is no point in doing it. We are not trying to prove a new model, Large Screen OOH is a mature market in certain Tokyo districts. Its all about making the right choices.
- How about new technology? Integration with mobile phones?
We are highly interested and are constantly looking for interesting models that have potential to cross over to out of home. Japan’s mobile developers are driving that more than OOH and Digital Signage companies. QR codes have some limited potential, but are more suitable to static advertising. I am not sure how other technology will integrate with Digital OOH but we are watching carefully.
- Do you plan to deploy new mobile technology?
If advertisers want it. We need to educate advertisers about what is possible and what new technology currently exists and has been deployed. We are a very demand focused company, but sometimes advertisers do not know what their options really are. So much is possible. We want to help advertisers achieve their goals, which are more CPM based than rich media oriented.
Thank you for your time today Mr. Hoshino, you have provided us with a fantastic perspective of the Japanese OOH market.
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