While the country’s total land mass is slightly smaller than California and its economy is significantly down from the famed ‘bubble’ period in the late ’80s, Japan remains the expansion territory of choice for many Western and international licensors. Unfortunately, breaking into the highly competitive Japanese licensing market is still akin to breaking into Fort Knox with a paper clip.
‘There is a big commercial market when you combine the kids animation business with broadcasters, toy companies, publishers and interactive companies,’ says Sid Kaufman, Nelvana’s executive VP of worldwide merchandising. ‘That network is very tight, and amongst themselves, they are able to fund locally marketed properties that live in all of those worlds.’ That said, it is possible for foreign properties to succeed in Japan. Nelvana’s Babar has a decades-long history there, and while merch activity has been cyclical, the brand currently boasts product in more than 60 NHK stores and 15 dedicated shops.
Some licensors believe that the key lies in coming to Japan armed with properties that address local market needs. ‘I think there are more opportunities for preschool properties since a lot of the locally produced shows are for older kids,’ says Adam Selly, HIT Entertainment’s VP for Asia-Pacific, Japan, Korea, Australia and New Zealand. HIT hammered out a Japanese broadcast deal for Bob the Builder in April 2000, and the show still airs Wednesday mornings on TV Tokyo 12, opening the doors to a toy-led merchandising program in the territory.
But while Selly believes that broadcast is an integral entrée to the Japanese market, others, like Silver Lining CEO Amory Millard, see value in building programs through other media. ‘Broadcast windows in Japan are very limited for Western programs,’ says Millard. ‘There are many cases of very successful properties that have thrived in consumer products but don’t have any or have very limited television exposure.’
In the case of Silver Lining properties Olivia and Gaspard and Lisa, Japanese awareness grew from publishing. ‘The picture book market in Japan is very small, but by Japanese market standards, our publishers could tell that they had a successful program,’ says Millard. Even with that indicator, Silver Lining decided to hold off on a Japanese Olivia merch campaign, opting instead to focus on the U.S. market first.
In 2002, the prodco signed an agreement with Tokyo-based licensing agency Cosmo Merchandising, and an Olivia program encompassing stationery, plush and gift items launched in Q4 2002 through prominent Tokyo department store group Narui. ‘They did their Christmas window, shopping bags and store signage themed with Olivia, so that created a tremendous amount of awareness,’ says Millard. Gaspard and Lisa also launched in Q4 2002, but in a more low-profile way since Silver Lining was still in negotiations with publisher Hachette (which had two Japanese licensees creating product for department-store retailers at the time).
Regardless of the property entry point, however, licensors agree that setting up local offices, procuring the help of a local agent and maintaining a strong personal presence in Japan are vital to garnering the trust of highly conservative and selective Japanese partners. ‘Understanding that Japan is essential to achieving success in Asia, we made the decision [about 15 years ago] to create a local office and team that value and benefit from the special nuances of the Japanese market,’ says Mark Matheny, executive VP of international licensing, worldwide interactive and publishing for Warner Bros. Consumer Products.
HIT inherited a Tokyo office (and its two-person team) through its Gullane acquisition, but the company also works with local agents on larger programs for Thomas the Tank Engine (Sony Creative Products), Pingu (Sony Creative Products) and Bob the Builder (ShoPro).
Nelvana has a man-on-the-ground in Jim Weatherford, director of sales for Japan, but it also retains agency affiliations with companies like Kodansha. ‘Nelvana’s founders really believed in local opportunities and that you had to be there to understand Japan,’ says Kaufman. ‘We’ve been able to latch on to that [philosophy] in the merchandising world.’
Even if a company opts to work solely through a local agent, it’s imperative that its executives spend as much time in Japan as possible. ‘It’s very important, because the agent is the agent. To be there shows that you are interested in what’s going on in Japan and in your partner,’ says Nelvana’s Weatherford. ‘It should not be about scheduling one-hour meetings.’
Weatherford’s comments shed some light on what is a very different business climate in Japan. While most travel guides contain tips on business and social etiquette, there are some essentials that every Westerner should be aware of when looking to build relationships in Japan. ‘You have to show that you are committed for the long term and not just for this quarter. When you have meetings, plan on those meetings taking double the amount of time they would in the Western world and be prepared to talk about your private life – the people on the other side of the table want to know you,’ says Weatherford. And while working dinners are par for the course for Westerners, work is not discussed at dinner in Japan – this is seen as an opportunity for partners to develop their personal relationship.
Licensors caution that it is necessary to pad travel time between meetings in Japan, since the Japanese believe that it’s rude to be late. When accepting business cards (or meishi in Japanese), one should hold the card with both hands, read the information presented on it, bow and thank the person for the opportunity to meet them. And don’t stash the card away immediately – this is also considered rude. Never write on a business card.
While entire books could be written on the subject of Japanese business nuances, licensors uniformly identify trust as the major connection key. ‘A good relationship can make the difference,’ says Warner Bros.’ Matheny. ‘Inconsistency and overly aggressive behavior are unwelcome.’ Weatherford concurs, adding: ‘More than in any other territory, you need a credible hook, whether it’s a big local publisher or toy company. It’s very hard to break into Japan as an outsider without a relationship that brings you tightly into the market.’
When Silver Lining’s Millard was considering a Japanese market entrée, she traveled to Japan, met with potential partners, shopped retail and called colleagues in the licensing business who had relationships with some of her hit-list partners. ‘I think that anyone who is thinking about developing a business in Japan should have a really long-term point of view in terms of establishing relationships,’ says Millard. ‘Meeting one day and shaking hands over a deal a couple of hours later is not something that happens in Japan.’
Because Japanese business people are extraordinarily polite and formal from a Westerner’s perspective (and study a person’s business card closely to find out about them and their business associations), Millard found it helpful to have her cards printed in Japanese on the reverse side.
Of course, established and fruitful relationships with local partners don’t necessarily clear the way for merch success in Japan, as there are other hurdles facing Western licensors. Target demo considerations can present a challenge in Japan – but also a highly lucrative opportunity if you get things right. ‘When licensing characters in Japan, the obvious target isn’t necessarily the one you want to go after,’ says Nelvana’s Weatherford. ‘High-school girls, young women and mothers can often be the driving force or ignitor of a character’s popularity.’
Indeed, Silver Lining found itself appealing to much older and younger age demos with Olivia in Japan than it does in the U.S. Olivia’s primary target in Japan is young women, with a secondary infant market range. The decision to create a baby program stemmed from the level of competition in the preschool market, where brands like Babar, Thomas and Sesame Street are very entrenched.
Once you have your partners and demo strategy set, there is often another (but by no means insurmountable) roadblock to successful market translation: Properties often need to be tweaked slightly to meet the discerning tastes of Japanese consumers. The Japanese interpretation of ‘cute’ is unique, as Hello Kitty and her ultra-cute counterparts have proven. ‘Characters must have a bit of shyness and a bit of vulnerability to them,’ says Weatherford. ‘And if you look at Snoopy, Hello Kitty and the Sesame Street characters, there’s a little bit of that in them.’
While Silver Lining made no adjustments to Olivia’s illustrated form, the company found it necessary to modify the character’s look (though almost imperceptibly) for plush. ‘Olivia has a very large and pointy snout, and we softened her snout a bit to make her a little cuter.’
As far as product category hierarchy goes, Japan is really not much different than other highly developed markets such as the U.S. and Britain. Toys are a tent-pole category there, along with publishing, stationery (which tops toys in terms of sheer number of products), apparel and interactive.
But since there is a significant market for licensed product aimed at teens and young women, programs tend to take on a slightly different product split and profile. Cell phone straps are big business in Japan, as well as the rather non-conventional product category of handkerchiefs. ‘Someone once told me that the average Japanese girl has between 50 and 100 handkerchiefs,’ says Millard. ‘While this is just not on our radar screen in the U.S., we do a very good business in handkerchiefs with Olivia in Japan.’
As tough as it may be to elbow into a crowded market such as Japan, licensors have discovered that if you manage to break in and create a success, then you have a greater chance of fostering long-term brands. The major payoff is that sometimes you ‘see brands become more successful in Japan than they are in their home countries,’ says Weatherford.