Industrial Report (C) JETRO Japan Economic Monthly, July 2005 Japanese Publishing Industry Japanese Economy Division Summary In 2004, Japan's publishing industry reversed course to show an increase in book sales due to the release of several million-sellers. The aggressive use of a marketing technique known as "media-mix" along with comprehensive publicity and advertising programs are credited with this development. While Japan's publishing industry has traditionally consisted of publishing firms, distribution agencies and retail stores, the emergence of the Internet has spawned new forms and channels of publishing. Other significant developments in the publishing industry include the increased popularity of Japanese comic books and magazines overseas. 1． Market Overview The All Japan Magazine and Book Publishers’ and Editors’ Association estimates publication sales in 2004 at 2,242.8 billion yen, a 0.7% increase over the previous year and the first such increase in eight years. Books accounted for 942.9 billion yen, a 4.1% increase over last year, while magazines only registered 1,299.8 billion yen, a decrease of 1.7% (Fig. 1). Several million-sellers created a bright spot in the 2004 sales figures although the weeklies led the slide in magazine figures. Fig. 1 Estimated Value of Publication Sales (billion yen) 3,000 Books Magazines 2,590 2,657 2,637 2,542 2,461 2,397 2,228 2,500 2,325 2,311 2,243 2,000 1,564 1,467 1,379 1,563 1,532 1,300 1,500 1,543 1,426 1,362 1,322 1,000 1,073 994 946 906 1,093 500 1,010 943 1,047 971 949 0 95 96 97 98 99 00 01 02 03 04 Sources: Figs 1-3, 5 and 6 were compiled from the Research Institute for Publications' "Annual Report of Publishing Indicators" The estimated number of publications sold was 3,720.7 billion, 1.9% less than the previous year, the ninth consecutive year of decline. Book sales rose 4.7% to 749.15 million, and magazines declined 3.4% to 2,971.5 billion. Although books did well, they could not check the overall continuing decline of magazines. Despite these declines, new book issues increased 2.7% from a year earlier to 74,587, and the number of magazine titles being published grew to 3,624 or a 2.0% increase. There is a sustained trend of responding to the diversification of readers' needs with small issues of multiple titles (Fig. 2). The returned unsold books declined 2.1 points from the previous year to 36.7%, but magazines recorded their highest rate ever rising 0.7 points to 31.7% (Fig. 3). 1 Industrial Report (C) JETRO Japan Economic Monthly, July 2005 Fig. 2 Number of Magazine and New Book Titles Published Fig. 3 Rate of Return of Unsold Books and Magazines 80,000 45.0 （％） 74,587 69,003 72,055 72,608 40.0 60,000 39.9 39.4 39.1 38.8 65,513 65,026 37.7 67,522 35.0 36.7 65,438 40,000 New books Magazines 31.7 30.0 31.0 29.6 28.9 29.4 29.4 20,000 25.0 3,318 3,359 3,394 3,433 3,624 Books All magazines 3,460 3,489 3,554 20.0 0 99 00 01 02 03 04 97 98 99 00 01 02 03 04 2. Industry Structure and Trends (1) Industry structure Close to 4,000 publishing firms edit and issue publications. After being printed and bound by a printer, the publications are distributed by more than 70 wholesalers, known as distribution agencies, and sold in over 20,000 bookstores and other retail outlets (Fig. 4). Fig. 4 Publishing Industry Structure According to the Establishment and Enterprise Census released by the Authors, Planning & Statistics Bureau at the Ministry of Internal Manga Artists ⇒ Production Affairs and Communications, publishers ← Foreign Publishers Publications Editorial numbered 5,420 in 2004, employing 97,796 ⇒ Newspapers Copyright Agencies people. This was a decrease from 2001, but Agencies there was a 3.0% increase in the number of employees. The publishing industry is Printing ⇒Binding overwhelmingly made up of small and medium-sized enterprises or sole proprietorships with just under 50% of all Distribution companies having five or fewer workers Distribution Agencies （Tohan, Nippan, etc.） according to the 2001 census. Retailing Books and magazines bound and readied for sale are delivered by the "New Used Returns distribution agencies to retail outlets around Bookstores," Book- CVS Conven Railway Over Used Cooper-ative -ience Society -seas the country. There are approximately 70 Bookstores stores St o res distributors, but two, Tohan and Nippon Shuppan Hanbai, together hold close to 90% of the total market share. The distribution system is User distinctive for its fixed-price and consignment sales system. Publishers are allowed to set the list price for publications and conclude resale contracts with distribution agents, bookstores and others, and to require them to sell at list price. This practice is permitted under an exemption in the Antimonopoly Law. Publications in Japan are generally sold through the consignment sales system. Bookstores benefit from this low risk system in which unsold inventory may be returned to the publisher after a certain time period. This has given rise, however, to extensive returns of unsold publications. Publications usually find their way to consumer bookshelves through bookstores and cooperatives. According to the Ministry of Economy, Trade and Industry's Census of Commerce, the 2 Industrial Report (C) JETRO Japan Economic Monthly, July 2005 number of book and magazine retailers (including stationers) 1 in 2004 was 34,241, a decline of 4,409 from the 2002 census. Employees totaled 208,458 with over 80% of establishments retaining less than 10 people. Those with two employees or less accounted for 40% of all establishments. Even while these establishments are decreasing, the margin of decline for those with less than 10 employees is especially wide. A shakeup of small and medium-sized enterprises is underway as new bookstores with retail area exceeding 500 tsubo (approximately 1,650 m2) are on the rise, intensifying the industry's consolidation toward large-scale retail stores. Although magazine sales at convenience stores contribute to revenue, the estimated sales volume of weekly magazines sold mainly at such establishments fell a significant 4.9% in 2004 from the previous year, blunting revenue. (2) New trends Since 1997, publication sales have steadily declined. Although 2004 saw the first upturn in eight years, it has become difficult for publishers to expand sales by conventional means. Behind this is the spread of entertainment media and the rapid expansion of "new used bookstores," which sell new releases at a discount almost immediately after they are published. Trends which undermine the fixed-price system and the established distribution network continue to emerge. Online book sales are one example. Increasing numbers of publishers, distribution agencies and bookstores are setting up an online presence just as the tools for selling directly to consumers are diversifying, with online sellers such as Amazon.com and Rakuten proving very successful. The new-used bookstore, Book-Off, has launched an online service called E-Book-Off to further drive its sales. Electronic publishing, where content is distributed directly over the Internet, has also moved into high gear. Business start-ups from outside the industry and self-publishing by authors over the Internet are growing. Cellular phones take electronic publishing even one step further with the creation of a genre known as "mobile phone novels." Bookstores are taking a generally cautious stance and are avoiding electronic distribution ahead of new book or magazine releases. One publishing and digital media business, Impress, distributes the digital versions of its books ahead of new book releases, the first to do so in the publishing industry. Since electronic distribution costs two-thirds less than paper books, the company is planning advance online distribution of close to 200 new books and magazines in the coming year. Media mixing is also gaining currency. New releases are thoroughly publicized in several mediums in an attempt to achieve synergy, by linking up with television programs and movies in addition to using whole page advertisements in newspapers, or by selling related games and character products. This began with Kadokawa Shoten's cinematizing of novels in the eighties, and more recently, Gentosha has been successful with developing media mixes. Since the start of this year, there has been a growing trend in creating books generated from material such as blogs on the Internet. Shinchosha's comic book and cinematic versions of Densha Otoko ("Train Man") have made effective use of this new marketing style. This story first came to public attention as message board postings which were subsequently published in book-form. 3. Product Trends (1) A stream of million-sellers In 2004, seven million-sellers including Harry Potter and the Order of the Phoenix, Sekai no Chushin de Ai o Sakebu (Crying Out for Love at the Heart of the World), and Baka no Kabe (The Walls of Fools) emerged. Book sales in 2004 fell just short of 943 billion yen, a 4.1% increase from the year before, with several block busters contributing to an overall rise in sales volume. New books increased 2.7% to 74,587. Media mixes made effective use of television dramas, movies and music 1 The 2004 Census was a sample survey, so the industrial classifications differ from those in 2002. Retail book & magazine and paper & stationery businesses were calculated as one classification. 3 Industrial Report (C) JETRO Japan Economic Monthly, July 2005 as vehicles for growth.