Part 2: Why the Digital TV Conversion Will Kill TV Tokyo & TBS ...

Analogue TV will end broadcasting in Japan on July 24, 2011. I have written before that this will signal the end - and quick collapse - of TV Tokyo and TBS TV in their current configuration here in Japan. This is part two of why I firmly believe that TV Tokyo and TBS won't survive, in their current form, past 2015 and my proof for believing so.

On the surface, the reason that TBS TV and TV Tokyo won't long survive a digital conversion is that they are last in ratings even now. Sometimes, TV Tokyo gets a mere 1% of total TV viewers. That's terrible for a city like Tokyo that has 35 million households and only 5 terrestrial private TV stations.

They certainly will get even lower ratings when there are, not just 4 other private TV stations competing with them, but over 300 stations competing with them. I wrote about that in a previous blog:

...the stations like TV Tokyo and TBS are all crowing about their new digital channel... The content is still the same. Only the broadcasting platform has changed. What makes them think that just by changing platforms that their ratings and income are going to increase? Good question. If anything, their viewership is going to decline due to more choices being offered and some people opting out of buying an expensive new TV (at my home, we opted out of TV over seven years ago and haven't missed it once. I wrote about not having a TV and the benefits of that here and here.)

Today, TV Tokyo's ratings are dead last and they are losing millions of dollars a year and having to borrow massive amounts of money from banks to stay afloat. How long will banks keep lending them money?


...What makes TV Tokyo management think that, when digital goes online, and the competition increases one-hundred fold, that their fortunes will get better? 

Once the digital conversion happens, I estimate that TV Tokyo and TBS TV will lose at least another 30% of their audience. I also believe that my figures are conservative. Read on and I'll show you how I come to that conclusion using existing government, NHK and private company statistics as evidence.

From the Japan Times (July 30, 2010):

According to a survey conducted by the Ministry of Internal Affairs and Communications last March, 83.3 percent of Japanese households now receive digital TV signals. However, an NHK survey carried out two months earlier found this number to be only 63.7 percent, and a private research company quoted in the Yomiuri Shimbun said it was “less than 70 percent.”


Get that? The government says, "83.7 percent" of all households receive digital TV signals; NHK (a branch of the government) says "63.7 percent" and Yomiuri Shimbun says "less than 70%"! There's a huge difference between 63% and 84%. Something has got to give here.

I think this government figure of 83.7% is pure and complete nonsense. I think the private research is probably the closest to the truth but still exaggerrated...

In Japanese, this is called the "Minami Kanto Mondai" (Southern Kanto area problem). The Southern Kanto area problem is due to a very low percentage of homes having digital equipment (due to being  very low income and not being able to afford luxuries like digital tuners).

Besides the above consideration, in recent reports, it has become common knowledge around the world that Japan has a serious economic problem and that more than 15% of the people live below the poverty line. This is another critical factor in considering what is going to happen once the digital conversion is complete.  As the NY Times reported:

Many Japanese, who cling to the popular myth that their nation is uniformly middle class, were further shocked to see that Japan’s poverty rate, at 15.7 percent 

Just with that information, you know the government statistics are complete and totally cocked. People who are out struggling to make ends meet everyday are not out buying digital equipment that costs thousands of dollars a set. If 15.7 percent of the people are at "poverty line" then that means that, if you believe the government stats, then nearly every single person in Japan who is not on the poverty line has a digital tuner!?

What a load of rubbish!

In my own "Mike in Tokyo Rogers" informal survey, I registered 6 homes out of 10 that have satellite - I went around and knocked on doors and asked - and I took my survey in an upper-class neighborhood. If I include the one 10 unit apartment building that only has 2 satellite dishes, then we have 8 homes out of 20 (40%).

Consider these figures with the fact that more than 50% of the Japanese population lives in apartments - that do not normally have satellite TV (and are TBS and TV Tokyo's core bread and butter audience) - you can see where TV Tokyo and TBS are about to shut the spigot on possibly half their viewers.

Don't forget the fact that upper-middle class income families have been demonstrated to watch less TV per person, per week, than their middle-class income family counter-parts and you have TBS and TV Tokyo setting themselves up for a serious crash.

Oh, yes, I think TBS and TV Tokyo are in for a big surprise in their annual report to shareholders in mid 2012. I think current management are going to be out of jobs very soon.

Once you understand the above, you can see how - using simple math - TV Tokyo and TBS will lose at least 20% of their current audience from July 2011! They are losing money now. What are they going to do when 20% of their viewers disappear?

This 20% drop figure also has nothing to do with an increase in competition from other TV stations. It has to do completely with the fact that, in spite of the government spin, most likely, less than 80% of all Japanese households have digital equipment! In fact, the real numbers are far worse.

Depending on who you believe, I'd estimate that at the most, only 60% of the Japanese public has digital equipment. Go to any middle or lower class neighborhood that has huge apartments or "Danchi" and consider that fact that these dwellings do not have satellite TV! Even if it were an 80% penetration... TV Tokyo's ratings are last today. What's going to happen when they voluntarily throw away at least 20% ~ 30% of their audience?

At a "danchi" (apartment) in  Aizuwakamatsu, Fukushima You can count that only  4 of 24 apartments have digital TV.  That's only 16%

You might be saying now, "Those fools!" (there are more than a few of us who have been saying this for a few years) but it is too late. There's no turning back now. They've sold the farm on this digital bet. They've borrowed more money than they could ever pay back (sound familiar?).

The Japan Times reports:

NHK and the commercial stations have together spent ¥1.5 trillion to convert to digital, and the nation has contributed another ¥200 billion to the project. 

$1.5 trillion yen is about $17,000,000,000.00 (17 billion dollars!) NHK can get away with this because they are a blood-sucking parasitical publicly owned broadcasting station; no matter what happens to them, the tax payer will be forced to bail them out... But the private stations? Ha! Good luck with that!

With the economy in the doldrums and no relief on the horizon, people are not about to fork out several hundred dollars for digital equipment.

Why would they? Why would anyone think that they will? The digital equipment has already been available for years already in Japan and, still, to this very day, some surveys show that less than 70% of all households have digital equipment. Everyone has known for at least 10 years that the best TV is on digital, yet they didn't buy the equipment.

Why didn't people buy the equipment before? I figure it's because of one of six reasons (or maybe a bit of all six):

1) TV sucks, er, I mean, TV is boring

2) Digital equipment is too expensive for TV (see #1)

3) The Internet is much more interesting

4) DVD rental and things like Youtube are killing TV (and are much cheaper and more satisfying)

5) Young people want to play computer games and Internet and have no time for TV

6) Cell phones are more fun and personal for youth

It seems obvious to me that there's no doubt about it...  Basically:

1) People with money do not watch TV
2) The only people who do watch a lot of TV have either no money or too much time on their hands; they are not active
3) Advertising to people with no money and who are not active is a waste of money.
4) When digital goes online fully, then the only people who don't have the digital equipment are poor people
5) Poor people are the only ones who watch TV Tokyo and TBS now (see #2 above)

6) Internet TV is going to dominate the vewers habits.

I'd like to touch on that last point #6. I totally believe that the Internet is going to spell the death knell for the TV stations as they stand now. And that includes Fuji TV and NHK. Why? Because these old TV stations (and FM stations) are dinosaurs.

Someday soon, Podcasting is going to become super popular (the seeds are being sown now) and the big difference is that, no matter what, TV costs money to watch (not just electricity) but also TV Tokyo has more than 1000 employees at this very moment.

Some Podcaster is coming and is going to blow them away with viewership and that podcaster will have only himself and perhaps one other person to pay for. How in the world can a company compete with a lone individual with millions of viewers and basically no overhead when the TV stations have to pay the salaries of 1000 people? They won't.

They cannot possibly pay that money. The sponsors will have their own Internet TV or pay 1/100th the cost of regular TV advertising.

The countdown has begun. The digital TV conversion will put the TV stations in the coffin. The Internet will nail the coffins closed.
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Keywords: TV Tokyo, TBS, Mike Rogers, Marketing Japan, Digital, digital conversion, NHK, Yomiuri, analogue, Mike in Tokyo Rogers