Rising iSun: Thoughts on the iPad's prospects in Japan

Today's guest post is by Peter Payne, a longtime watcher of Apple's prospects in the Japanese markets. Peter is the proprietor of the Japanese pop-culture web shop jlist.com (some content NSFW).

Apple's new iPad has gotten off to a great start and managed to impress a lot of reviewers, which is quite an achievement if you think back to the negative press that was being written about it immediately after Steve Jobs announced it in January. By all accounts, it seems to be a wonderful invention; perhaps it's the perfect "throw this in your bag for a weekend in Vegas" computer. Still, how the device will be received outside of the U.S. remains to be seen.

Take Japan, a country that I've lived in for nearly two decades. When the iPhone 3G was introduced two years ago, it got off to an extremely slow start. The shape and functionality were just too different for the Japanese, who prefer clamshell phones with physical numeric keypads. Due to an odd linguistic quirk of the Japanese language, it's actually faster to enter Japanese hiragana-based text using a numeric keypad than with a QWERTY keyboard, and -- I am not kidding here -- many best-selling novels are actually written using keitai denwa (mobile phones) with numeric keypads.

However, as time went by, a core of dedicated Japanese iPhone fans emerged and helped evangelize the device, mainly by showing their friends all of the newest apps that they'd downloaded, and the iPhone started to catch on in a big way. Even the popular boy band SMAP quit their contract sponsoring NTT Docomo's phones and signed on with Softbank, presumably so that they could help promote the iPhone. These days, though, iPhone's share of the smartphone market tops 46 percent, and attending one of Danny Choo's media events for hipster blogger types is like a miniature iPhone convention.

How about the revolutionary iPad, though? Will Japanese fans go for this new device? I have some experience with Apple and the Japan iTunes store -- on my site, we sell the prepaid cards that let people around the world access iTMS Japan's content -- so I'll look into my crystal ball and see what's in store for iPad.

Frankly, I'm not sure that the future is going to be all that rosy. First of all, if you thought the iPad name was an embarrassment, imagine how Japanese fans might feel about using a product with the same name (phonetically) as the Ai-Pad: a pad made by Awajitec with an electronic sensor that lets others know when old people have wet themselves. However, a bigger issue is the hostility that Apple has encountered when trying to "change the world" in a conservative place like Japan.

Despite the resounding success of the iTunes Music Store as a way to distribute music in the age of the Internet, it took years for Japan's major music companies to put their content into the system. Several still hold back, only posting new releases after they've sold in traditional outlets for a while. Sony still does its best to ignore the iPod and iTunes entirely, and won't let its artists' music be distributed through iTunes Japan except in a few cases. Clearly, Sony is still miffed about losing its Walkman crown. This harms no one but Sony's customers, who can find the music they want for free if they're so inclined.

This issue of not being able to get compelling content from Japanese publishers is likely to be more of a problem in the case of iPad, which some see as nothing more than a device for media consumption. Take a look at the iPad "features" page on Apple's Japanese website. In place of advertising the cool Hollywood movies that you can watch on the device you have, you'll find...video podcasts? There's no mention of iBooks, or of using iTunes as a platform for viewing manga comics, which would be a potentially killer app.

I think that getting top-notch content for the iPad is likely to be a challenge for a couple of reasons:

1) Despite its reputation as a technologically advanced country, it's my experience that Japan is often happy to follow behind the rest of the world in many areas, and there's a general tendency to wait before embracing big changes that come along. If I've learned anything about Japan, it's that companies here are extremely risk-averse and will study an issue carefully before they act if they think there might be a downside later.

2) Currently, Japan's business world is set up in a way that guarantees lots of profit for companies producing content. Whereas a U.S. bookstore will get books for 45-55 percent off the cover price, the retail markup for books in Japan is less than half that, leaving another 25 percent of the pie for producers. This means that a manga company considering publishing on the iPad has to factor in taking a hit on per-unit sales, as well as agree to the more reasonable prices that digital distribution will require. The popular manga magazine Shonen Jump has a circulation of 2.8 million copies per week. Do you think they'll be in a hurry to embrace any change that might disrupt that gravy train?

3) By and large, Japanese Internet users are not currently pirating media online in anywhere near the numbers that they are in Europe and the U.S., which means that Japanese media companies feel less urgency to act. They'd rather keep selling music CDs for $30 each as opposed to changing before the outside world forces change upon them. Yes, CDs really cost $30 in Japan, although imports from the U.S. are usually a more reasonable $18.

All is not lost for Apple, though. As it did with iTunes, it can play companies off of each other in various ways. If the number three publisher in a certain market would like to become the number two publisher, they are likely going to be interested in working with Apple in this new distribution platform. Apple can exploit this in the same way that some smaller music publishers were able to enjoy great success on iTunes Japan due to the lack of big names like Sony.

The Japanese market for electronic books designed to be read on cellular phones has been maturing for a number of years. In this market, there's no single site that dominates like iTunes does for music in the U.S., maybe Apple can appeal to the higher display quality of the iPad to win bibliophiles. The fact that iBooks will be available to everyone with an iPhone or iPod touch has got to be attractive to Japanese book publishers.

In a place that's as resistant to change as Japan is, doing what Apple is trying to do is going to be an uphill battle. I certainly wish the Apple team well.