Cool Japan: Trends Underpinning Japan Creative Content as an Export Force

Note: This is an edited version of an analysis I wrote as a Council Member with Gerson Lehrman Group (http://www.glgroup.com) and posted to GLG members on September 19, 2007.

Japan original creative content is suddenly appearing on the international scene in ways not seen before. In my view, this is an extension of trends that have long been underway and are now being enhanced by the growth of the Internet and a number of economic forces that are encouraging entrepreneurship in Japan.

For decades Japan has been recognized as among the best at taking external inventions and technologies and making them better. The automotive and semiconductor industries are just two well known examples. No longer is "Made in Japan" shorthand for low-cost copycat products. Japan is universally recognized for high-quality, high-performance products.

However, Japan has often been derided as lacking an ability to innovate and create at the international level. A paucity of Nobel prizes and world-changing inventions are often cited as an example of this. Indeed, Japanese Nobel laureate Leo Esaki spent 30 years in the US, and more recently the inventor of the blue LED, Shuji Nakamura, moved to the US to further his work.

When it comes to Japanese creative and artistic content, most would probably think of historical and traditional images, such as woodblock prints of geisha serving tea under cherry blossoms at an ancient temple, or tranquil images of a snow-capped Mount Fuji over a calm lake. The elegance and beauty are instantly recognizable, but would never be confused with cutting edge popular culture.

Nevertheless, in recent years Japanese imagery has crept into western media and entertainment. Movies such as Memoirs of a Geisha and The Last Samurai are examples that harken back to the historical imagery, but more recent examples such as Quentin Tarantino's Kill Bill series or the "Harajuku Girls" featured in Gwen Stefani music videos are beginning to represent more stylized and modernized images from Japan film and pop culture.

These are however just the tip of the iceberg when it comes to Japan content as an export industry. A conference that took place September 19, 2007, in Tokyo, called the Japan International Contents Festival is an interesting milestone in this trend toward increasing interest in Japan original content for export. A brief look at animation, gaming, and youth fashion provide some interesting insight.

Animation, known as anime has had a cult following for several years, but recently has attracted more general attention. Actually, Japanese animation has been exported for decades, but it was often not generally recognized by audiences as Japanese. A good example of this is Speed Racer that was available on US television in the 1970s, but almost no child would have considered it anything more than typical Saturday or Sunday morning television just like everything else. Feature-length animation such as Princess Mononoke (1997) and Spirited Away (2001) by Studio Ghibli are more recent examples of Japanese animation attracting critical and audience attention for their artistry and story-telling. Tie-ins with games and merchandising such as Pokemon and the robot-based series such as Gundam and Transformers are further examples of well-known content with a Japanese source. The rise of the internet has made Japanese anime, and the related print media manga, much more widely accessible. The best content is widely recognized by critics and fans alike for its cutting edge style, artistry, and story-telling.

Gaming is somewhat similar in its appeal to a youth demographic with cross-over appeal to a wide range of audiences. Nintendo is of course well known, to the point where the phrase "play Nintendo" is almost synonymous with video gaming itself. More and more, Japanese game developers are being recognized as world class designers and programmers, accolades that have not accrued to their colleagues in traditional software development fields. Japan is indeed the second largest producer and consumer of gaming content after the US, with several characters and titles selling well internationally.

Youth fashion is also interesting. For years Japanese, particularly Japanese women, have been big spenders on imported luxury brands such as Louis Vuitton, Chanel, and Christian Dior. Perhaps less obvious is the degree to which Japanese youth spend on keeping up with the latest local styles and trends. Ground zero for all this is the back streets of Shibuya and Harajuku, with the undisputed shopping mecca Tokyu Department Store's 109 shop just a short walk from Shibuya station.

The story of 109 is itself interesting: Some 15 years ago, it was just another sleepy multi-story department store filled with boring attire for salarymen and office ladies. Sales were falling and costs were rising, forcing Tokyu management to take a new approach. At the same time, many little stalls near the station were doing a brisk business catering to young people. Tokyu took the bold step of offering space in the 109 building to these young entrepreneurs, but with the caveat that successful sales results were required to keep the space. At the same time, these shops learned that the best salespeople were young people similar to the shoppers themselves, who could wear and comment on the clothes for sale. In short order, these shop assistants became mini celebrities, with power to influence trends. This continues to this day, with a Darwinian focus on sales results and trend awareness.

Again, the Internet has brought trend awareness from the streets of Shibuya to the countryside and to the rest of Asia, to the point where trend-conscious young people, with more and more disposable income, can see what is happening in the hottest spots around Tokyo and dress accordingly. Additionally, the fashions from Tokyo tend to fit the Asian coloring and physique well, attracting further interest from an international consumer audience stretching from Korea to Singapore.

So what do these trends tell us about business and culture in Japan? I'd like to offer a few observations. First of all, none of the business areas were orchestrated by government ministries or national initiatives. Quite the opposite took place, i.e. basically these industries were left alone to grow and develop on their own. Secondly, Japanese youth and young people in their 20s and even 30s often live at home and do indeed have a reasonable amount of disposable income available for fashion and entertainment. This provides a large domestic audience for creative content that is also quite discerning. This keeps designers and entrepreneurs very focused on creating content that people will buy. Third, the recession of the last decade has lead many creative and intelligent young people to rethink the life-time employment, salaryman culture of the past, and venture into creative and entrepreneurial ventures. For the first time and ecosystem has developed around creative content, much of it centered around Shibuya. Fourth, the revision of the Commercial Code has made it much easier to establish both companies and limited partnerships for creative ventures.

Put together, these trends are perhaps a reaction to the old Japan, Inc. linkage of government and industry. Indeed many of the most creative ideas and businesses have simply bypassed the traditional way of doing things. The Internet is a major enabler in this, but not the only one. The revision of the Japan commercial code also helps, in that new entrepreneurs can much more easily set up companies or limited partnerships for creative ventures.

I can offer a few simple examples. One business contact of mine is a young Japanese company CEO who is all of 26 years old. He started out 4 years ago with a desire to produce content for Japanese television, but quickly realized that he was simply too young to break into the very rigid market for traditional video content. So he changed gears and got into internet marketing. His business took off almost immediately, as there were very few barriers to entry. His primary market, young women between 18 and 25, were also primed to purchase products on the internet or via their mobile phones and didn't much care about the traditional ways of shopping. This convergence has not abated and this particular business continues to grow.

In another case, a small animation studio I know has learned that it can set up limited partnerships for each animation project, without giving up control of intellectual property such as characters. Nor does it need to maintain a permanent stable of animators and creative talent. Indeed, this is exactly how movies are produced in Hollywood, but only recently has this legal structure been available so easily in Japan. This trend will continue to break the stranglehold of traditional content providers and distributors in Japan.

So the bottom line, is not only does Japan have the talent necessary to generate creative and original content that is becoming a larger export industry every day, the underlying forces will continue to support this trend and indeed threaten to breakdown some of the traditional impediments to innovation in Japan.

Changes in both technology (e.g. the Internet) and structural impediments (the Commercial Code) are unleashing creative potential in ways that are creating intellectual property for export. The ultimate potential is likely quite significant.