TT-406 -- Tamagotchi takeoff, ebiz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, January 28, 2007 Issue No. 406


- What's new
- News
- Candidate roundup/Vacancies
- Upcoming events
- Corrections/Feedback
- News credits

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-------------------- IT Solutions -------------------------
How do you spell IT in Japanese? Answer: NTT.

Without NTT you have no connection to the world, so no
functional IT. But dealing with NTT can be hugely
challenging for Japanese natives or foreigners alike;
soaking up time, money, and productivity.

If you need an IT solution in Japan that fits your
company's global policy, contact us and we'll do the heavy
lifting for you.


What small Japanese electronic toy created in 1996 has sold
more than 40m units around the world, and within its target
age group of under 15's purportedly has a 100% consumer
recognition rate? Hint: when it went on sale in 1997, at its
peak it sold at a rate of one unit every 4 seconds in
North America.

If you said "Tamagotchi" you would be right.

After the Tamagotchi fad had done its dash by the late
90's, merchandising experts thought that was it and maker
Bandai (now Namco Bandai) would have to come up with
something else. Certainly the world had become flooded with
cheap copies so it seemed like the market for Bandai had
been spoiled for good.

But fans kept hounding the company to improve the little
critters and make them smarter. This finally resulted in
the re-release of the Tamagotchi in March 2004, in the form
of the Tamagotchi Plus. Apart from better graphics and
processor, the new product also sported an infrared sensor
that allowed it to be connected to other "pets" and
interact with them. The Plus was so successful that store
shipments were mobbed by fans and indeed, the first
production run sold out in just two days.

Now, two and a half years later, the second generation of
Tamagotchi's is going strong and the latest version is
Connection version 4 -- released in Japan in April 2006,
and in the USA in December. The new unit has some great new
features, including 53 characters, over 140 surprises,
better intelligence and game development -- including being
able to influence the personality and education/employment
of your character -- and most importantly, an online
connection for fans to see their favorite characters in
full resolution and vivid color. Cute little Memetchi looks
OK on an actual Tamagotchi, but so much better in an
arcade-style game on a PC.

[Continued below...]

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The JIC Advisors team already has a number of deals to its
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also of Japan.

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For more information, contact:

[...Article continues]

The Tamagotchi is still a phenomenon. Over the two years
from 2004 through 2006, Bandai has sold 20m units, around
8.1m in Japan and another 11.9m elsewhere. 6.1m alone were
sold in FY2005. This type of volume equates to roughly
JPY8bn a year -- a respectable bread-and-butter
contribution to the group's P&L. In addition, though, the
company also made another JPY4bn (approx.) by merchandising
the brand through accessories and cross-branding with other
products -- clearly a more profitable activity than
electronics manufacturing, and in fiscal 2006, the total
sales of the Tamagotchi and related products are expected
to jump around 45%, at JPY22.5bn.

The Tamagotchi sales are somewhat bucking the trend in an
otherwise depressed toy industry in Japan. The falling
number of children and lack of new hit products have caused
the Japanese retail toy market to shrink 1.7% from 2004 to
2005, to around JPY697.5bn. Even recently, it fell another
15%-20% in the first half of fiscal 2006.

Given this background, the Tamagotchi is incredibly
important financially to Namco Bandai Holdings. Together
with its Gundam and Power Rangers lines, the toys account
for about 30% of group sales and 50% of its profit. Many of
the other Namco Bandai divisions appear to be in trouble
and management is having difficulty figuring out how to hit
the right buttons in the consumer market.

So is the Tamagotchi Connection version 4 good enough to
save the company?

We can tell you that it IS pretty amazing -- particularly
how well the unit integrates with the Web site. You see,
somehow, the Bandai engineers have been able to create a
3-button system and a system of input codes that allow
thousands of combinations and possible story lines. To the
user, the game experience is deep and compelling, and
because characters typically only live for a few weeks at
most, there is always another story line to follow.

When you go online, you can play the various arcade games
to earn points. These can be used to "buy" virtual tools
and souvenirs, as well as codes to enter into your egg to
make the same objects appear in the egg. The inventory of
objects is so large, that you would swear that somehow what
you won online was being communicated into the device --
which is probably how engineers in a Western game company
would have done it.

However, instead, by manually entering one of the thousands
of possible codes, not troublesome to little fingers, what
seems like a random result on the web site correlates
exactly to the same result occuring on the device. This
makes for an incredibly transparent experience for kids,
without the hassles or costs of hooking the device to the
Internet. It's a really smart design move, and one that
allows the company to keep producing online hooks for
little consumer tykes to reward themselves with despite the
actual lack of electronic sophistication of their pets.

What about those users who have grown up (well, sort of),
and for whom the blocky graphics are not good enough any
more? Here in Japan at least, where the adult toy market is
estimated to be around JPY50bn and growing 20% a year,
Bandai's answer is the Primopuel doll. Originally
introduced in 1999, the latest versions are sort of a mix
of a cute cabbage patch doll, some robotic movements, and
an IQ a bit lower than Furby's. But clearly it's the right
mix, because the Primopuel is a hit with Japanese single
women and has sold over 1m units.

Just as with the rewards and merchandising offers that are
layered on to kids buying Tamagotchi's, the owners of
Primopuels can buy a never-ending line of fresh accessories
and season-based clothes outfits. Apparently one 56-year
old woman in Yokohama spends about JPY10,000 on new outfits
for her eight "children" every month. The media is calling
the Primopuel line Bandai's "three-dimensional Tamagotchi".

While this back-handed compliment may not say much for the
sophistication of the owners, Bandai is happy churning out such
character gizmos and is smiling all the way to the bank.

Indeed, if there was ever a character to represent how Bandai
senior executives must be feeling right now, over the
excitement that the Tamagotchi Connection 4 is making in
North America and Europe coupled with Primopuel results
here at home -- it would probably be "Kuchipatchi" doing a
banzai pose!

Lastly, the first Entrepreneur Seminar of the year by
Japan Inc's Terrie Lloyd will be held on February 24th. If
you plan to set up a company in Japan, this seminar will
help you scope out what is needed and how to make it
successful. More details in the EVENTS section below.

...The information janitors/


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+++ NEWS

- Part-timers pensions legislation diluted
- Consumption tax to reappear on agenda in fall
- New copyright cooperative
- Corporal punishment back on the school menu
- US$4m monkeypod tree

-> Part-timers pensions legislation diluted

An announcement last year by the Ministry of Health, Labor,
and Welfare that it would seek legislation to require
employers to register all part-timers for pension
contributions was significantly de-fanged by the LDP this
week. The original bill sought to have all part-timers make
pension contributions that would be subsidized by
employers, but the new version of the bill limits the
definition of "part-time" to those working 30 hours a week
or more, not the 20 hours-plus that the ministry was
seeking. ***Ed: This 30-hour rule is how English schools
are able to keep their teachers out of the pension program.
Technically, they consider that only actual teaching time
is paid work, and do not include lesson planning and
preparation. Thus, a typical teaching load of 28-29
hours is considered a part-time job. Ethical or not, these
and many other small-to-medium sized companies
in the nation will be sighing a breath of relief at
present. There are an estimated 3m part-timers in Japan.**
(Source: TT commentary from, Jan 28, 2007)

-> Consumption tax to reappear on agenda in fall

The Finance Minister, Koji Omi, says that the government
will reintroduce debate on whether or not to raise the
nation's consumption tax (sales tax) this fall. Many
politicians doubt that Japan can deal with the twin
challenges of a pension blow-out and servicing the huge
national debt without increasing taxes. The ratio of
national debt to GDP will be 148% by March 31, 2008, the
worst among the OECD. ***Ed: Most observers expect that the
government will increase the consumption tax rate from 5%
to 10% sometime in 2008. We believe that this is one of the
reasons Japanese companies are holding on to their profits
rather than paying out increased salaries. They all expect
a huge economic turn-down when the new rate kicks in.**
(Source: TT commentary from, Jan 27, 2007)

-> New copyright cooperative

Apart from JASRAC, the organization that manages music,
there are at least 16 other copyright organizations in
Japan, each representing painters, photographers,
scriptwriters, manga artists and many others. The plethora
of groups makes it hard for commercial interests to find a
copyright holder to negotiate terms with. Now, the 16
organizations as well as JASRAC have agreed to create a
unified online database that will contain information on
art that copyright holders are willing to licence out for
a fee. The group expect that the service will be in place
sometime in fiscal 2008. (Source: TT commentary from, Jan 25, 2007)

-> Corporal punishment back on the school menu

In the name of combating bullying, a government appointed
panel has come up with a report that says teachers need to
regain control of their classrooms, and that the
re-introduction of corporal punishment may be necessary.
The report has come on the heels of admission by the
Education Ministry that youth suicide caused by bullying is
a major problem. There have been at least 14 such suicides
in the last 6 years, and the ministry has received dozens
of letters from other distressed students threatening
suicide. The same report suggests that schools increase
lesson hours by 10% to fight the academic decline, and
compulsory public service to change students attitudes
towards discipline and social responsibility. ***Ed:
You gotta feel sorry for the kids if this legislation goes
through. One major reason for bullying is stunted social
skills, which are often the result of too much studying, not
a lack of it.** (Source: TT commentary from,
Jan 24, 2007)

-> US$4m monkeypod tree

If you've seen a Hitachi ad in the last 33 years, it's
likely that you will have noticed a richly foliaged,
symmetrical tree being used as one of the company logos.
This tree is actually a 100-year old monkeypod tree located
in the Moanalua Gardens in Hawaii. This last week, Hitachi
agreed to pay the new owners of the estate $400,000 a year
for the next 10 years to be allowed to continue using the
tree in its advertising -- probably the most anyone has
paid for tree photo rights! ***Ed: If you ask us, it would
have been more sensible for Hitachi to buy the 22-acre
ranch itself -- something the current owner did last year
for a mere US$5.05m. Perhaps Hitachi's foreign shareholders
might have something to say about this "investment"...?**
(Source: TT commentary from, Jan 27, 2007)

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


================= You're Vending What? ====================

Japan is home to the highest density of vending machines in
the world, with about 5.6m machines, or one for every 23
people. You can buy almost anything, and the Japanese do,
with about JPY6.67trn (US$56bn) being spent every year.

Yet, apart from the obvious players such as major soft
drinks companies, there have been no foreign owners of this
massive direct sales medium - until now.

Market Pioneer Japan is proud to announce that as of
October, 2006, it has built a network of 1,000 vending
machines placed nationwide, selling stickers and print
logos. We invite owners of licenceable characters to
contact us with a view to distributing your IP assets into
the Japanese market.

Web:, email:



=> The following position is for a new non-profit
organization seeking a manager.

-------------- Living Dreams Coordinator ------------------

Looking for an opportunity to make a difference in the
lives of orphans in Japan?

Living Dreams NPO is seeking someone to collaborate with
orphanages (Children's Homes) in discovering their needs
and organizing corporations to meet their needs.
Paid position with flexible hours.

Check out our website at
to learn more or contact Patrick Newell at
for more information regarding this position or Living


The first Entrepreneur's Handbook seminar is coming up on
February 24th. Everything you ever wanted to know about
starting your own business in Japan, presented in a
detail-filled 5 hours by Terrie Lloyd of Japan Inc.

Location: Hongo Tsuji Tax & Consulting
31F, Shinjyuku Center Bldg, 1-25-1 Nishishinjyuku,
Shinjyuku-ku, Tokyo (Map)
Cost: 15,000 yen per person
Or email:
IT events announcements are priced at JPY50,000 per week.
For more information, contact sales at



In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to

-> No corrections/feedback this week. Must be all the

...The information janitors/


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