Japan’S Character Products Market In 2008

Japan’ s C haracter P roducts M arket in 2008

by CHARACTER DATABANK, Ltd., Tokyo, Japan

(This article is based on an annual comprehensive report originally published in Japanese covering the character licensing industry in Japan. For the first time, an English-language version of the report is being made available to LIMA members at a specially discounted price of ￥45,000 (non-LIMA members ￥65,000). More information on the report and online ordering are available at the following URL:

rver.jp/~charabizform/charabizform.xsrv.jp/jcl2009/ i ndex.php .

Market overview

■ Media and communication environment changes drive industry restructuring

The character products business in Japan is at a major turning point due to changes resulting from the spread of the Internet and other digital media and the growing importance of high volume and chain retailers. Character licensing, a business whose largest market segment has been kids, is also impacted by continuing declines in Japan’s birthrate. An even more severe issue, however, may be lack of investment in new character development in an industry driven by risk hedging and pursuit of greater efficiency. This trend blocks efforts to reinvigorate the market, leaving the industry trapped in a vicious cycle.

That trend is also manifested in moves to restructure the industry. The year 2008 saw a continuing stream of capital tie-ups between major players, the setting up of new companies, and the consolidation of management teams. In a trend continuing from the previous year, many major overseas licensors are closing down their Japan operations. This restructuring is driven by a struggle for survival.

■Market concentration and market diversification

The character product market environment in 2008 was even more severe than in previous years. This was clear in responses to our licensor/licensee questionnaire, to which 138 firms replied. Adding licensor royalties to respondent estimates of other licensee income based on interviews yields a total of 62.4 billion yen. Assuming that royalties account for 4.5% of retail price and that retail accounts for 90% of the total market, we estimate that character products market scale in 2008 was 1.5406 trillion yen, or 96.7% of the total in the previous year. We also see an accelerating concentration on the most popular characters in the students and kids segments. In contrast, in other segments the market shares of individual characters are contracting as the market becomes more diverse.

The lack of change in popular characters in the industry’s largest segment, the students and kids market, particularly in the male kids segment, may be due in large part to the declining media power of television; but the launch of the Nintendo DS portable game player has also had a large impact on lowering the age of the user segment. To today’s Japanese boys, the only character products of interest are game software and card games.

The DS game player has also had a strong impact on girls. For both boys and girls in the lower elementary grades, DS software has become the primary form of character consumption. Girls, moreover, are maturing more rapidly and abandoning these characters more quickly. For those in the upper elementary grades, these characters seem childish. Those girls tend to prefer the same characters that adult women do.

■ Value generated by the spread of Yuru-Chara characters

In contrast to commercial character trends, the one thing that everyone in the character industry talked about in 2008 was as the “local character” boom. Commonly referred to as “Yuru-Chara,”* these are characters used by public organizations and local governments in PR for local events. In this phenomenon, we see both the emergence of a fully fledged Internet-driven society and the future form of the character licensing business. Until now the pattern has been for information to flow from Tokyo to other parts of Japan. Another factor is the incompleteness of these characters, the gaps that create an environment in which it is easy for users to participate. Here we see prime examples of user-generated content (UGC) and consumer-generated media (CGM). We see a real possibility that, if this trend accelerates and content created by new creators and novices is incorporated in corporate PR, it will, inevitably, affect the character licensing business.

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