WORLD: MEDIA ANALYSIS - Media in Japan gets ready to grow up and be accountable

Clients are leading change at their media agencies in Japan, Richard Lord writes.

Unilever's Japanese business, Nippon Lever, last week consolidated its £55 million media planning and buying business into Initiative Media.

Initiative uses Hakuhodo as its buying partner in Japan, whose media scene is starting to change. The world's second-biggest ad market, worth almost $33.5 billion, has long been dominated by a few massive, full-service domestic agencies and media owners, with a couple of pre-eminent terrestrial TV stations and newspapers.

The emphasis has traditionally focused on buying cheaply at massive volumes.

Strategic media planning doesn't get a look-in. So it can all seem surprisingly primitive, especially when you consider that the emphasis in Japan has always been on media rather than creative. Indeed, many big agencies frequently throw in creative work for free, so Japan punches well below its weight when it comes to international awards shows.

Yet the Japanese ad industry works in a unique way. The majority of TV spots are 15 seconds long so it's difficult to communicate meaningful brand messages. This shifts the emphasis to buying in primetime at high frequency, for maximum impact. Access to the media with the highest reach is paramount, and the agencies with access to those media are the likes of Dentsu, Hakuhodo and Asatsu. Indeed, in many cases there's an element of cross-ownership between agency and media owner.

James Gover, the managing director of Initiative Media Tokyo, says: "One of the greatest strengths of those agencies is their access to media owners and ability to block out other agencies."

Jun Imada, the deputy group manager of the ad sales planning department at Nikkei Business Publications, goes even further: "Dentsu controls all of Japan's ads. The system never changes unless Dentsu agrees to do so."

While the big agencies have that leverage with the media owners, they know that clients will come to them anyway, so there's not a great incentive for them to start offering more efficient media services. This results in a lack of transparency.

"It's a fairly widely known and acknowledged cartel, and it's stifled growth," MindShare Japan's chief executive, Andrew Meadon, comments.

"Clients have paid higher commissions here, and it's all handled on an untransparent basis: there's no third-party billing, so clients don't know what commissions they're paying. But a lot more has changed in the past three years than in the previous 30. People look at ways to get more for their money. But it's still slow - years behind Australia or the UK."

There's also inertia. As Imada puts it: "Japanese businesses don't like drastic change, regardless of the benefits."

The importance of tradition in Japan cannot be over-stated. It's a hyper-conservative business culture, where preserving traditional business practice is far more important than finding the most efficient or cost-effective practice.

However, economic circumstances may force that to change. Foreign media agencies are still tiny, but their emphasis on strategic planning and accountability is beginning to have an effect.

Chris Beaumont, the president and chief executive of Grey Global Group Japan, says: "Media planning is becoming more strategic, with clients being more open about wanting to feel as if a media buy has been optimised."

Hakuhodo, Daiko and Yomiko, respectively the country's second-, fifth- and sixth-largest agencies, recently unveiled plans for a consolidated media agency. Evidence of unbundling at last? Probably not, according to Beaumont. "Media buying in Japan is a commodity, and it has been dominated by Dentsu," he says. "The recent union of Hakuhodo, Daiko and Yomiko is a media-centric force that is ultimately about competing against Dentsu. Ironically, HDY becoming more like Dentsu is likely to maintain the status quo."

Gover demurs, believing that change may eventually come about. "The reasons for an agency like Hakuhodo setting up a separate media agency are buying-related," he says. "It wants to increase its volume, the same reason media agencies were set up in the west. But then, as happened in the west, buying will become a commodity, so planning will fill the gap. It's not happening yet, though."

The commoditisation of buying may eventually change that, but with the big agencies' buying power, and their relationships with media owners, that alone may not be enough. The 15-year recession gripping Japan's economy may turn out to be its saviour here. For the first time, foreign corporations are buying into Japanese companies, for instance in the tie-ups between Renault and Nissan, and Ford and Mazda.

Yet it's only when a critical mass of Japanese clients start to ask for strategic, accountable media, however, will it become the norm. As Starcom Japan's managing director, Julie Raddon, says: "One of our biggest clients is P&G, and it is most interested in buying effectively, and that starts with strategic thinking."

JAPAN'S BIGGEST AGENCIES

DENTSU

Established: 1901

Employees: 5,600

Clients include: Toshiba, Sega, Sony, Matsushita, Toyota, Mitsubishi,

Fuji Film, Canon, Coca-Cola, Procter & Gamble, Philip Morris

Billings: (Apr 2001- Mar 02) 1,789 billion yen (£9,515 million)

HAKUHODO

Established: 1895

Employees: 3,300

Clients include: Suzuki, Nissan, Disney, McDonald's, Coca-Cola

Billings: (Apr 2002 - Mar 03) 710 billion yen (£3,776 million)

ASATSU-DK

Established: 1956

Employees: 1,900

Clients include: IBM, Unilever, Nikon,

Billings: (Jan - Dec 2002) 335 billion yen (£1,782 million)

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