TT-876 -- DeNA and the Economics of (Not) Publishing Trustworthy Content, e-biz news from Japan

An Insider's comments on Japan's high tech business world
* * * * * * * * TERRIE'S TAKE - BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term
technology and media entrepreneur living in Japan.
(http://www.terrielloyd.com)

General Edition Sunday, December 04, 2016, Issue No. 876

- What's New -- DeNA and the Economics of (Not) Publishing Trustworthy
Content
- News -- Lifetime ramen discount for elderly who give up licenses
- Upcoming Events
- Corrections/Feedback -- Chinese tourist behavior
- Travel Picks -- Grave-hunting in Sendai, Lee Ufan in Naoshima
- News Credits

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+++ WHAT'S NEW

With the recent DeNA crowdsourced content scandal (see news section),
the online publishing sector in Japan is at a crossroads. On the one
hand web content publishers are getting killed by "functional" content
sites, like Facebook and Snapchat, and on the other hand they are
expected to maintain high editorial standards that only a few leaders
with pay walls can actually afford to maintain. This is not a new trend and
started with the move from paper to online. It is fundamentally a
challenge to invent a new editorial model.

Now the online content space is so crowded with ex-paper publishers, the
bottom has fallen out of the advertising model as well. To give you some
idea of the economics of this: whereas a 50,000-100,000 copy paper
publication could ask clients for JPY350,000~JPY500,000 for a page of
advertising, a CPM (cost per thousand) of about JPY5,000, that same page
online sold through a programmed ad bidding site now only brings a CPM
of JPY10~JPY100. Obviously a traditional publishing model will struggle
to keep a staff of reporters and editors with this level of income, and
in fact they now need to reach about 1,000~10,000 times as many consumer
eyeballs to earn the same revenues as before.

Practically speaking, then, the reality of online ad pricing pretty much
eliminates advertising as operating income for most niche publishers.

To stay in the game, they have several choices:
1. They can stay in their familiar niche and remain experts, but need to
create a new and somewhat disconnected business to support themselves.
This (continuing to publish) doesn't make sense as a logical business
decision, but if as a publisher you're passionate about your niche, it
is an option. Usually these support businesses will involve consulting
or expert input in some form. As an example here in Japan, we can now
see outdoors magazines managing hiking and adventure tours for their
readers.
2. The publisher can stay in their field but make the niche bigger by
servicing a global audience and charging for premium content. We can see
this model at work in the entertainment news space, with sites such as
Rocket News. The main challenge is that this type of approach requires a
serious investment to support the new languages and markets, and of
course there are only a few front-runners. If you're late to the space,
most likely you'll wind up as an also-ran.
3. The publisher can relentlessly slash human production costs while
building reasonably acceptable content that serves as a database for
future reference (long-tail) usage, coupled with human edited "frosting"
(like a cake) stories that actually pull in the traffic. This approach
can be particularly effective if you have a "functional" website that
doesn't require much edited content, such as a game website, or a hybrid
one that only requires human input once (at the start).

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-----------------------------------------------------------

[...Article continues]

DeNA obviously opted for the third path, taking user-generated content
and doing away with the inconvenience of human editing and checking, but
using human curators to brush up the best material and thus draw traffic.

The DeNA scandal has several dimensions. Firstly there is the fact that
the firm's WELQ website was user generated and not professionally
checked - giving rise to all sorts of semi-fictional health posts. This
progressed to the revelation that the company also apparently encouraged
users to plagiarize existing content when posting. We assume that they
were trying to rewrite content via their contributors, thus increasing
both throughput of stories as well as claiming they were producing
original content so as to earn a better SEO ranking.

This rewriting approach will only work if you have a mass-distributed
checking function, the algorithms for which haven't been sufficiently
refined yet, OR, you make it a rule that only original content is
allowed and enforce it with humans. Our sister site www.japantravel.com
took this route and is now able to rely on spot checks to ensure
everyone gets the message. Unfortunately for DeNA, the site managers
were apparently actively encouraging plagiarism, or rewriting, which
puts it on shaky legal ground. Also shaky is the fact that in curating
the content, the company made itself appear to be the "source" of the
content. As a mass-content publisher (as all social media sites are),
this is a very sensitive area and most publishers are meticulous about
maintaining the perception that they are really just a forum for users,
not an officially published site.

Other prolific online publishers have found their own solutions to the
conundrum of how to reduce costs while maintaining human expertise. In
Japan one of the most successful is All About (https://allabout.co.jp/),
which has over 1,600 "Guides" - people who are experts in a particular
interest or activity or region, and who work part-time to create
articles and responses to readers. The term "successful" is a relative
one, though, because All About as a listed company states that its first
half results for FY2016 include a loss of JPY46m on sales of JPY4.5bn.
Probably they will repeat previous years by essentially breaking even -
but it's clear to see that even content companies at the top of their
game are struggling.

And this is why "functional" content sites such as multiplayer
role-playing games, dating, and social apps where you can read about
your mom showing photos of the cat, can make so much money, because
there is no cost of editing involved.

What does this mean for us as consumers in the future? Firstly the
phenomenon of fake news sites in the USA is just a taste of things to
come. If you can't write the truth because it's too expensive, why not
just make it up and sell it as fact-like entertainment? It doesn't take
much to see that this phenomenon of eschewing human editors other
production staff will quickly shrivel up the availability of trustworthy
news sources and therefore our ability to get multiple viewpoints as
well. The DeNA scandal demonstrates that trustworthiness is little value
in the current online economy.

Instead, the future's trustworthy sites will be those that learn how to
monetize you as a visitor without using sponsors, or who have
successfully moved to a secondary source of income related to their
expertise rather than their content. A good example would be our sister
site, www.japantravel.com, which originally was established to monetize
from ads served to high levels of traffic. There is of course income
from inbound travel ads, but it's seasonal and not dependable, so today
the business mostly makes money out of travel writing services and a
travel agency it established. Yes, these are very different businesses
to publishing - but they all have the common denominator of beneficially
serving the million-plus people a month coming to the site - and more
importantly, they allow the continuation of the publishing business itself.

...The information janitors/

***------------------------****-------------------------***

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-----------------------------------------------------------

***********************************************************

+++ NEWS

- Element 113 named Nihonium
- DeNA crowd-sourced content sites in trouble
- Lifetime ramen discount for elderly who give up licenses
- Household spending down again for 8th month in a row
- Lower government tax take in FY2016

=> Element 113 named Nihonium

Japanese scientists who spent the better part of ten years producing a
new lab-only element with a half life of less than 1000th/second were
rewarded for their perseverance when the element was formally added to
the period table, bearing the name Nihonium. The 2012 proof of a 2004
discovery of Element 113, a radioactive substance temporarily named
Ununtrium, started a small "flood" of discoveries of similar temporary
elements around the world, resulting in four new elements being added to
the table. (Source: TT commentary from phys.org, Dec 1, 2016)

http://bit.ly/2gPfIf0

=> DeNA crowd-sourced content sites in trouble

Web publishing company DeNA has been the target of an online backlash
after accusations of false and hyped consumer-generated content. DeNA's
problems started after its WELQ health website was found to have
medically inaccurate information, posted by other users of the site. The
crowdsourced content was curated in large volumes and used to feed
search engines so as to drive traffic. In addition to wrong information,
much of the content was also plagiarized. ***Ed: The problem of how to
quality control crowdsourced content is highly relevant to us, and we
cover the subject in today's Take.** (Source: TT commentary from
asia.nikkei.com, Dec 02, 2016)

http://s.nikkei.com/2h1rjHj

=> Lifetime ramen discount for elderly who give up licenses

Aichi-ken is trying something new to get elderly residents to surrender
their licenses - a lifetime discount of 15% at any Sugakiya ramen
outlet. The move is an attempt to reduce the surge in traffic accidents
being caused by elderly drivers with borderline dementia. Currently 17m
senior citizens aged 65 or older have valid driver's licenses and
presumably are using them. In contrast, only 270,000 people (2% of
seniors) have given up their licenses. ***Ed: Rather than a 15% discount
on an unhealthy food, maybe the government should just bite the bullet
and make public transport completely free for all seniors, providing
they give up their licenses? A good portion of them live in the cities
anyhow.** (Source: TT commentary from munchies.vice.com, Dec 2, 2016)

http://bit.ly/2gChKRV

=> Household spending down again for 8th month in a row

In a disappointing set of economic figures for October, the nation's
household spending fell for the 8th month in a row, dropping about 0.4%
from October 2015. The previous month, September, was far worse, with a
fall of 2.1% over the same month last year. Economists say that the
depressed spending is linked to poor weather hurting consumer demand.
***Ed: We don't think this is rocket science. Tight-fisted Japanese
companies are not increasing wages and so families are stuck on the same
rates as last year. In the meantime, fresh food, which is not included
in the inflation numbers, has risen considerably in price and people
need to eat. As a result, there isn't much left for discretionary
spending.** (Source: TT commentary from bloomberg.com, Nov 28, 2016)

http://bloom.bg/2h73eTp

=> Lower government tax take in FY2016

The Ministry of Finance is forecasting a reduction in its FY2016 tax
take, from JPY57.6trn to JPY55trn or less. This is the first estimate
cut since 2009, and comes from the unexpected strengthening of the yen
for most of this year. The drop is not enough to derail the governments
pump priming plans, and indeed it expects to cover the shortfall with
money originally allocated for servicing debt, which has now become
cheaper to repay. ***Ed: The problem isn't so much the tax take these
days, it's the unstoppable rise in social welfare costs for Japan's
swelling aged citizens.**. (Source: TT commentary from
the-japan-news.com, Dec 03, 2016)

http://bit.ly/2gPpjTh

NOTE: Broken links
Some online news sources remove their articles after just a few days of
posting them, thus breaking our links -- we apologize for the inconvenience.

***------------------------****-------------------------***

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-----------------------------------------------------------

+++ UPCOMING EVENTS

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Dates: January 13, 1:00pm, January 14, 3:00pm, January 15, 11:00am & 3:00pm
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Price: ¥2,000 (B-rank seats)
Tickets & Reservations: https://goo.gl/ElZtvZ

Reservation Deadline: Wednesday, January 4th, 2017
-----------------------------------------------------------

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Details: Complete event details at http://www.icajapan.jp/
Date: Thursday, December 15th, 2016
Time: 19:30pm to 22:30pm - Doors open. The set menu will include a
multitude of food and Beers, Wines, Juices, Shochu and Soft Drinks etc.
Cost: 5,500 yen - Open to all. No sign ups at the door! First registered
will secure places, as seats are very limited.
RSVP: By 10am on Monday 12th December, 2016, venue is Andy's Shin
Hinomoto at Yurakucho.

http://www.andysfish.com/Shin-Hinomoto/Finding-Andy-s
-----------------------------------------------------------

***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

=> In TT-871 we wrote about a possible foreigner backlash in Japan as a
result of the flood of tourists entering the country. We received a
(welcome) flood of email responses as a result. One of the best
responses was the following:

*** Reader says:
My two cents on this topic: this past summer we returned to Japan as
tourists for the first time since moving away five years ago, after a
15-year stint living and working there (my family actually had permanent
visas for the last few years of that period). We visited friends in
Koto-ku, Tokyo, where we used to live, and like you, observed a clear
increase in foreign tourists around the general environs, particularly
Ginza and to a lesser extent in other busy districts like Omotesando and
Aoyama (there still weren't so many in deepest shitamachi, such as
Asakusabashi)...

What troubled us is when, on an outing to Odaiba/Fuji TV area, our
friends then took us to the new Daiba City Mall and I was using the
men's washroom nearest the food court. To my surprise, in front of me a
male Chinese tourist urinated into the sink instead of the proper
wall-mounted urinal. I looked on incredulously, but having lived for a
couple of years in Taiwan subsequent to leaving Japan, I was aware of
and unfortunately familiar with numerous highly publicized cases of the
bad manners displayed by some Chinese tourists... defecating and
urinating misdeeds and whatnot. Unfortunately I didn't have the presence
of mind to recall the appropriate Chinese language to point out his
transgression. In a perfect world, he should have received attention
from local law enforcement as well!

I exited the washroom and what I did do is point out the Chinese perp to
my family and friends, explaining what I had just witnessed, and we all
proceeded back to the Yurikamome train at the end of our day out.
Coincidentally, the Chinese fellow had rejoined his family and was also
walking to catch the same train, blissfully unaware of (or maybe simply
conveniently avoiding) my reaction to his misdeed. I have to say that
I've never seen anything like this during all my years of living in
Japan, where the only Chinese people I knew were similarly long-term,
acclimated residents like myself.

From this story, I don't mean to come off as bigoted or be promoting
stereotypes, this is just something I personally witnessed. However, if
this is indicative of what we can expect to see and experience more of
in the future thanks to loosened visa restrictions, then I imagine that
it won't be long before Japan will have to take appropriate and reactive
measures.

***------------------------****-------------------------***

+++ TRAVEL DESTINATIONS PICKS

=> Grave Hunting in Kitayama, Sendai
History, art, and culture... from beyond the grave!

One place I went grave hunting recently (it is becoming a kind of hobby)
was the Kitayama area of Sendai, Miyagi Prefecture. It is a treasure
trove of tombs with many interesting things to see and discover. There
are so many graves and so many stories to share. The grave of the mother
of Sendai founder and feudal lord Date Masamune is here. It is a rather
small, pathetic grave which is overshadowed by a distant third son's
because he hated his mother for harassing him about his missing eye.

Another is the possible resting place of Hasekura Tsunenage, a samurai
and Date clan vassal, who led a mission to Rome and back through New
Spain (Mexico). The first non-Japanese president of Tohoku Daigakuin
Christian university, David Bowman Schneder (1857-1938), along with
Christian missionaries are remembered here. Perhaps the most surprising
is the grave of Iinuma Sadakichi behind Rinno-ji. He is the only
survivor of a group of teenage boys that committed ritual suicide during
the infamous Byakkotai incident at Mt. Iimoriyama in Fukushima.

http://bit.ly/2fZ5bMH

=> Lee Ufan, Time Out in Naoshima
A reflection of time and space

A moment in time. What does it mean? While art and sculpture can express
itself in three dimensions, how do we articulate the fourth dimension,
something as intangible, yet essential to nature and the human existence?

At the Lee Ufan Museum, part of the Benesse Art Site Naoshima, Lee Ufan
tries to articulate the fourth dimension in a single brush in the work
With Winds (1990) as if this is all you can see in a second of elapsed
time, with the wind itself making a brush stroke across the canvas. In
the same way that the wind will leave a trail by blowing some leaves,
Lee imagines the paint strokes as if the wind had painted on the canvas.

For people brought up in the West, who had always thought that nature is
inanimate, the stories that underline these art works can be a pleasant
surprise. Devoid of the other three dimensions, it is a meditative piece
with a supposedly blank center drawing us in. How do we distil time, or
life itself into a single brush stroke? We may not understand the
complexities or the lifetime of thinking and reflection that went into
this work, but we can meditate on it in this space.

http://bit.ly/2g7lQkC

***------------------------****-------------------------***

***********************************************************
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+++ ABOUT US

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Written by: Terrie Lloyd (terrie.lloyd@japaninc.com)

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