Spotify, Videology reps discuss mobile opportunities in Japan [Panel]

Spotify Japan director Hannes Graah, Videology APAC managing director Kenneth Pao

This is a part of our coverage of B Dash Camp Osaka 2013.

On day two of B Dash Camp in Osaka, we had a chance to hear from two big international companies with their eyes on big market opportunities on mobile, particularly here in Japan. Moderator Tomohiko Kuboto (marketing officer at GCA Savvian Corporation) spoke with Spotify’s Japan director Hannes Graah, and Videology’s APAC managing director, Kenneth Pao.

Spotify has launched its streaming music service in 32 markets, with 24 million active users and 6 million paying subscribers. But the company has yet to launch in Japan, and Hannes tells me that they still don’t have any specific timeline for launch here. But they do have an office here with four employees, and hopefully they can lay the groundwork for the Spotify to enter. As Hannes explained, Japan represents a big opportunity, not just for them, but for the music industry too:

The average spend of a CD buyer was about $50 or $60. But for a year of Spotify, that costs about $120 a year, which is double that. I would say that it is less about losing money, but more about growing the overall pie.

During the Q&A session I could help but ask him how much of an obstacle music industry incumbents are for a company like Spotify. And while Hannes diplomatically declined to rank how much of a nuisance they are on a one-to-ten scale as I asked (perhaps I should have phrased my question differently?), he did underscore the excitement that comes with a big music market like Japan:

Every market has challenges, in many different ways. Japan is less of a challenge than it is an opportunity, because it is the second largest music market after the US. The music industry here has been looking for new solutions for a while now. In the last year we have seen some streaming services emerge from the local market and abroad, so its an exciting time to be here.

He adds that piracy and non-monetized consumers represents a huge opportunity, and he looks forward to Japan moving into an era of more profitability.

Kenneth Pao, Videology
Kenneth Pao, Videology

Similarly, Kenneth Pao explained that Japan represents a huge opportunity for Videology too. He began by explaining a little about their ad technology service, which he describes as the “the pipes under the house” which enables brands and advertisers to complete TV ad spending online. In short, says Ken, they put the right advertising in front of the right person.

Videology is active in 18 countries, and Ken hopes that Japan will be the 19th. They did 13.5 billion yen in revenue last year, with 40% of those revenues coming from TV budgets. They have raised 13.4 billion yen in venture funding, NEA, Catalyst Investors, Comcast, and they work with big name publishers like ABC, NBC, ESPN, ITV.

Kenneth explained that in the Japan, there is just 2 billion yen in online ad video spend, which compares to about 410 billion yen in the US. He noted the importance of using internet and mobile in addition to traditional media:

Many people see digital as a competitor of television. But that’s not necessarily the case. If we look at the London Olympics, we saw mobile and tablets actually complement TV. […]

There are an abundance of people on the internet and mobile, and advertisers are not reaching them. Other areas like print, radio, and TV are pretty much saturated.

He adds that if TV broadcasters don’t take advantage of this, there are many disrupters that will jump into that void. It will be interesting to see how Videology fares in particular as it increases its focus on Japan.