Tuesday, March 8, 2011

Japanese Government Preparing for Broadcasting Companies' Bankruptcy

Last year, in 2010, for the first time in the history of this country, two major broadcasting stations were allowed to go bankrupt. Those stations were Radio-I in Nagoya and Love FM in Fukuoka. Those two events shook the Japanese broadcasting industry to its bones as the old school broadcasters have always thought that no matter what happened, the government would bail out the stations.

"It's just the same old show... On my radio..."

There have been times in the past when stations got themselves into serious financial troubles, but, when push came to shove, either the Japanese government bailed the stations out or they guaranteed loans for the stations or arranged a group of companies to cooperate to buyout or support the station.

With the current poor economic situation and the Japanese government in debt over 200% of GDP, the well has run dry. There are no more funds to bail out these businesses.

This is actually the way things should be. The government should not be bailing out insolvent businesses as that just causes distortions in the market and causes management to continue with their incompetent practices.

A bankruptcy allows for the bad management to be washed out and replaced with new management. Bailing out a business (in this case a broadcasting station) or arranging loans, etc. allows bad management to continue in their positions and creates a false security for them. This creates a situation whereby the stations continue in their old and tired ways of failure.

I can give you a shocking example of this. In 2006, when a major Tokyo TV station took over a FM station, I was at a meeting where the guy who had been Program Director at that FM radio station for over ten years (ten years and lost $140 million USD) actually said to the TV station president - who had no become the president of the radio station;

"We don't have to get good ratings or make money as, even if we lose money, some other company will come in - with government support - and bail out the station and we'll all get to keep our jobs as we can't be fired under the labor laws (of Japan). So there's no reason to make any money." 

He said this like an excited boy who wanted his new friend in on his "secret." Both the new president of the radio station and I were surprised. No, surprised isn't the word I'm looking for here. I think my jaw dropped and bounced on the table top. It was a shocking admission.

If the kids want to hear new, cool music in Japan, 
it's not on the radio. They have to read magazines! 

The new president was also dumbfounded to hear this sort of thinking direct from the horse's mouth from a person in management. I had worked with this guy and that station for years and knew that they were incompetent and not interested in making money or getting good ratings. But I was completely surprised that he was so foolish that he'd so readily volunteer such information - so innocently - as if it were common sense - and as if it were useful knowledge. Did this Program Director actually think that the new president had bought this radio station for his fun and not to make money?

Of course, it goes without saying, that this Program Director was removed from his position quite soon after that.    

It had always struck me as amazing how someone like that could keep their job in the decade or so that I knew this gentleman. He was a nice guy, for sure. But a completely and totally clueless and incompetent businessman. 

As an aside, for those of you who live in Japan and have always wondered why, say, Japanese FM radio is so bad, then there's your answer: The management of these stations all think like the Program Director above; there's no reason to worry about your station brand, ratings, sales or making good programs. The station management only have to worry about protecting their own personal positions. This is how the situation is on the ground in these broadcasting stations. This is the reality for these people.

That's why, in a nutshell, Japanese TV and radio are so bad. It is also just one more symptom of why several of these stations will not survive the digital conversion. I've written about that here, here and here.

Now, if you read between the lines of the latest headlines, you can see that the Japanese Government is setting up the system for a collapse of radio stations.

The Associated Press reports: 

The Ministry of Internal Affairs and Communications said Friday it plans to allow one company to own up to four radio stations by relaxing its ordinance on the principle of banning multiple ownership of mass media.

The amendment is designed to permit a company to hold an entire equity stake in each of four radio stations, whether they are AM or FM stations.

The current ministry ordinance bans a company, which has a 10 percent or larger stake in a radio station, from holding more than 10 percent of shares in another station in the same service area.

On a nationwide basis, a company is allowed to hold a stake of more than 20 percent in no more than two stations.

The ministry decided to relax the principle in order to help radio stations as the widespread use of the Internet has caused many of them financial difficulties by eating into their advertising revenues.

The drafted amendment, which would also allow radio stations to merge with each other, is expected to be put into effect in late June after being examined by an advisory panel to the communications minister.

The Japanese government recognizes the writing on the wall. Most of these stations under the current system are insolvent and cannot survive much longer. The economy is so bad - and the Internet has changed the game so much - that industries outside of broadcasting (the ones that the government traditionally went to for money) are no longer able to afford it, nor are they interested in broadcasting anymore.

Traditional broadcasting is a dinosaur. All the FM radio stations in Japan are seriously bleeding money even now - even J-Wave in Tokyo. When digital broadcasting starts and they lose all their sponsors, they are dead. I explained that in detail here.


Well, actually, no. No one in Japan remembers any rock & roll
radio because Japan has never had any.

FM stations in Tokyo cannot survive past 2015 in their current configuration. The government can change the rules all they want to try to keep them breathing but the fact remains the same: Traditional broadcasting days are numbered. FM radio in Japan is already at death's door. 

TV stations like TV Tokyo, TBS and TV Asahi are not far behind.

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