Thursday, October 6, 2011

The Smartest (and Most Profitable) Business in Japan?

Today, you won't read about the company I am going to tell you about in magazines about business or the economy... You won't see news reports about them on TV shows about profitable businesses...Why? Well, as I've written many times before, the mass media is not interested in the truth. The mass media are only interested in filling the spaces between advertisements. That's all. 

Besides that, as a more than 30 year veteran of the mass media, I will tell you that the business of most in the mass media is: kissing businessmen's a*ses in the hopes of getting paid advertising for their media...

While the Internet and Social Media are all the rage today (Hint: when things are "popular", they are already out of fashion) there's still a few "traditional" business models that blow the rest away.

You won't read too much about this company in the mass media... Yet... But you will someday soon (the mass media are always a day late and a dollar short.) But this company blows the socks off of Groupon, Twitter and these other flash in the pan "Social Media" darlings of today. 

I'm talking about a publishing company. That's right, a publishing company. You know, printing press and all. Ink and paper....

Gutenberg would be blown away that a company, so many centuries later after his invention, could use his idea and still make a massively successful and profitable business in the age of the "Internet", in the age of "digital media."

Remember that it wasn't that long ago when people were saying that the Internet was going to destroy books and magazines? Ha! Laughable. Remember that it wasn't that long ago when they said that children today needed to know about the digital age in order to survive? Ha! Laughable. 

As it was 2,000 years ago and as it will be 2,000 years from now, the wealthy, the intelligentsia, the church and the movers, shakers and leaders of society will be people who read books. It has always been that way, it always will be. 

To think otherwise is just plain stupid.   

You know, I'm talking about one of the most profitable companies in Japan today...a publishing company that puts out old fashioned things like books and magazines... And, no, you can't get their products on Kindle.

I'm talking about Deagostini. Specifically Deagostini Japan...(If that link doesn't work, see here:

Look out Internet businesses! Your business models are far too often a scam (or full of scams or SPAMS!) I think so because if your online business doesn't translate into something tangible or real-world, then you are headed for a fall.

Move over Groupon. I've railed on you over and over. But your business model is a joke. Who could possibly think that there would be a potential for a business that survives on SPAM? And you want a 60% sales commission!? Any good business model has to be good for all parties concerned... I don't see where you are getting any repeat customers in Japan... Maybe that's why your advertising here has disappeared. Gee! Does Groupon save me time from having to clip coupons? I never really had a problem with that before. Did you?

Twitter? You kidding me? I get more messages from Twitter that are SPAM than anything that I would ever want to read... And who needs to read idiotic nonsense on Twitter like, "How to get more followers on Twitter for only $5?"

Jeez! Who wants a bunch of "followers" who are people who know absolutely nothing about you nor do they care about you excepting that you are another digit in their masturbatory dreams of having a large "Twitter following"?

What a joke!

But old fashioned publisher Deagostini is no joke.

Deagostini sells a product that you can hold in your hand. Deagostini sells a product that kids can look forward to like Christmas or a birthday. Deagostini sells an "event" and a "limited edition" item... Once they are sold out, they are gone forever...

People in a consumer society have a history of going crazy over stuff like that.

I know I'm artificial
But don't put the blame on me
I was reared with appliances 
In a consumer society 
When I put on my make-up 
The pretty little mask not me
That's the way a girl should be 
In a consumer society 
Deagostini Japan was founded in 1997. Because of the Internet, 1997, was called the beginning of the end for the traditional publishers and old school mass media. 

Deagostini's late entry into Japan was considered by many a joke. All the traditional big Japanese publishers laughed at this upstart foreign company and their ridiculous ideas for penetrating the already overly-saturated Japanese market... A market that was the most profitable with the highest literacy rate in the entire world...

They all said that Deagostini's products were cheap and poor quality. Then, Deagostini were the laughing stock of the Japanese publishing world. It was thought that there was no way a foreign company could come here and survive... 

That was then.

They aren't laughing anymore...Last year, of the top 15 publishing products sold in Japan, 13 of them were Deagostini products. I got the sales figures for Deagostini Japan yesterday. These figures are not public yet, but I have quite dependable inside information. 

Deagostini sales in Japan for 2010 (still not public information) were....are you sitting down? ¥28,400,000,000! That's ¥284 BILLION YEN! (about $370 Million USD!) Not only is that just incredible, but of those sales about 30% is pure profit of ¥842,000,000 (about $110 million dollars!)

Deagostini Japan's newest model... Think kids go crazy
for this stuff? Yes. They do! I know even adults who buy
these items... Heck! I've even bought them before!

How does Deagostini do it? It's so simple that when I first heard this idea, I slapped my head and thought, "Of course! Everyone knows this idea!"

How do they do it? Deagostini releases their products in a limited edition series. Like the Gundam advertisement above, they will release a quality model of a toy product (anime, war plane, car, ship, etc.) in a series of editions to be released once a month or so. There could be anywhere from 12 to 50 or 60 items in a series.

The first editions are really cheap. They get more expensive as the series progresses.

I bought a Zero Fighter for my son last Christmas at the book store because I couldn't believe how cheap it was and the quality was awesome for the price.

This model was high quality metal cast. It had moving parts.
It came with a huge book, and other great things that boys love... 
I think it was about $4.00.... 

Then, regularly, Deagostini releases the rest of the series in succession. As the issue go along, after a certain point, the items grow slightly in price.

If you are a real collector, you will buy each item until the series is over. Trust that there are tons of collectors with the disposable income to buy this stuff in Japan... Not just Japan! All over the western world. 

In, say, a twenty series set, by the sixth issue, Deagostini has broken even on the cost of production and logistics of the entire series and each item sale after the sixth issue is pure profit.

Get that? In the series, after the sixth issue or so, every item they sell is 100% pure profit.

It's an incredible success story and an incredible business model.

So much so that Deagostini is a model for future businesses in Japan and the world over... How many other businesses can claim that 30+ some percent of their sales is pure profit?

Certainly not Facebook or Twitter, which have no sales; nor Groupon who keeps doing the switcheroo on accounting methods.

Kids want something to hold in their hand and play with. The child's imagination is a powerful thing. Social Media offers no real tangible items....

Deagostini not only offers a product to hold and play with, they sell a dream and something to look forward to every month.

With Deagostini products, kids get Christmas not once a year, but 12 times a year... Adults too.

What's having something to look forward to everyday worth to the average person? Well, judging from Deagostini's Japan sales, it's worth well over $370 million US dollars and growing. 

Nah. No big deal, right? Let's talk about Social Media.... Yawn!

UPDATE: My friend Brenda chimes in:


Not only that, they re-issue same series years down the line - all profit! I did some marketing for them in UK years ago.


Andrew Joseph said...

Hey Mike.. great blog! How big is that Mitsubushi Zero airplane? I love model airplanes! In fact, pioneer aviation is one of my hobbies of interest... like comic books (the ones made of paper that you can feel), like the ones I write. I also spend my days writing for a magazine - a real paper one! We make a profit... just not the way the most profitable business in Japan does. Is there a way to translate their success into what I do?

Anonymous said...

Pft... I disagree: DeAgostini's success has something to do with the strong materialist mentality in Japan.

DeAgostini's business model is already DEAD in Europe: no more collections, nor limited editions.

Anonymous said...

Anonymous is completely talking out of his arse. I can't speak for the rest of Europe but Deagostini has plenty of titles in the UK... They are in the Top 3 publishers in the country. You call that DEAD? Doubtful:

Anonymous said...

well, one thing that is pretty much dead here in the states is groupon. has been for a while now too. no need to rail on them. they're a sinking ship...boat...dingy...