WW-21 -- Characters Create Cash

J@pan Inc Magazine Presents:
Commentary on the week's wireless news from Japan

Issue No. 21
Monday, August 27, 2001

+++ Viewpoint: Characters Create Cash
- Japanese Test Waters With Songs For Cellphones
- Japan's KDDI to Launch Mobile Commerce
- 4G Cell-Phone Users To Change Carriers Easier
- Japan Mobile Carrier Expands Reach


Next Generation Mobile Content Strategies
11-13 September 2001, London

Next Generation Mobile Content Strategies goes straight to the heart
of mobile content development. By examining case studies from
industry leaders, delegates will gain invaluable insight into the
mobile market today.

Email: karineb@marcusevansuk.com


+++ Viewpoint: Characters Create Cash

We've been asked several times recently, What makes money on mobile
in Japan? One answer is characters -- which fast appear to be
morphing into the killer apps on mobile here. Animated characters,
static characters, famous Disney characters, soon-to-be famous
characters; all kinds of characters. There're everywhere! Further,
characters aren't just being used to idly occupy mobile users' time
and screen space -- they're actively being used to flog products and
services, build brand image, generate sales (of characters
themselves, among other goods), and market everything from mail to
console games.

Bandai, for one, appears to be putting a lot of effort into
leveraging its existing stable of characters, which includes Hello
Kitty and Tarepanda. Naoko Kino, a Bandai staff member working in
international business development, says that reusing existing
characters is important. "We've got lots of characters based on manga
and animation [which] come from the Bandai group of companies."
Java-using i-moders can now download a Hello Kitty calculator, alarm
clock, screen memo pad, or event timer, for example.

Co-branding characters and other animated icons between console- or
PC-based games and mobile Java is also key. Bandai provides mobile
mini-versions of its popular Gundam- and Yamato-series, versions of
which already exist for PlayStation, Dreamcast, and other media
(there's a cartoon series on VHS and DVD as well). There's also an
aquamode fish game. Oh yes -- revenue. Bandai charges JPY100 to
download 3 characters per month, while its Devil Man Java game goes
for JPY300 per month, for example.

And talk about making money: Kazuhiko Hachiya created the first
versions of PostPet in 1996, and the service was a hit almost from
its November 1997 launch on Sony's So-Net ISP portal. In PostPet,
users select an animated character (choose from Momo, Mini-Rabbit
Mippi, Penguin Ushe, and Mysterious Machine Shingo, among others) to
fetch and deliver mail. Your PostPet might decide to hang around on
the recipient's PC, asking to be fed and petted.

When the recipient answers the email, the original PostPet carries
the message back to you, along with a report on how well it was
treated while gone. "PostPets make everything about e-mail
emotionally interactive," says Hachiya in a story this month in the
new B2.0 (see link below). The story also says the service is "wildly
popular," with nearly 3 million desktop and another 110,000 wireless
users in Japan.

US-based FunMail (character-based mail) and Animobile
(character-based games, mail, social networking, etc.) are two
character-based plays that are also enjoying some measure of success
-- on wireless in Japan, that is. Tokyo-based i-Chara is another
character-based play that uses social networking to earn marketing
revenue. Cybird, the original generator of B2C contents on Japan's
wireless Web, also offers mobile games.

All of these services have one thing in common: they are, or soon
will be, profitable. Two are based outside of Japan, and four are
startups. What's the lesson for other i-modes elsewhere in the
universe? Character-based services earn real revenue, and they earn
**early** revenue. Such services don't require high-res graphics to
be successful, and they appeal to people of all ages across
demographic lines.

The other key point is that, while mobile enterprise applications
("serious" mail, like access to Lotus Notes or Exchange) are still in
the concept stage, character services earn revenue -- and that's a
revenue stream that can support the creation and deployment of those
business apps.

--Daniel Scuka

"This Man's Secret to Turning a Profit on the Web: A Dancing Pink
Bear Named Momo"

Cybird's English listing of mobile contents:


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+++ Noteworthy News
(Long URLs may break across two lines.)

--> Japanese Test Waters With Songs For Cellphones
Source: Dow Jones on Yahoo, August 27

EXTRACT: This year, the country's top-two cellular-phone companies
launched services allowing subscribers, for a fee, to download songs
directly into their handsets equipped with headphones. Their
conclusion: the gadgets work. The sound is good and the machines are
easy to use. The new services have only a small following now, but
they are an important sign that despite the doom and gloom in the
wireless industry, this marriage can last. The result of Mr. Hioki's
work is a service called Keitai de Music (Music by Mobile Phone), run
by Japan's No. 2 cellular provider, KDDI, with help from Hitachi,
Fujitsu, Sanyo and German chipmaker Infineon Technologies. The
service allows cellphone subscribers to choose among 1,900 songs
supplied by 35 content providers, including several major record

COMMENTARY: Further answers to the question, What earns revenue on
mobile? Karaoke is clearly another way to get peripatetic surfers to
part with a few yen -- and that's all it takes if you've got several
million subscribers. On Keitai de Music, each song costs JPY200 yen,
and to quote the story above, "It's not that you're paying JPY200 for
the music; you're paying JPY200 for the mobile convenience" (being
able to download the music on the fly).

This service, by the way, like NTT DoCoMo's M-Stage Visual mobile
video service, is provided via a PHS network. PHS is ten-year-old
technology that many had written off as under-powered two years ago.
We don't think so.

--> Japan's KDDI to Launch Mobile Commerce
Source: Reuters on Yahoo, August 22

EXTRACT: To expand revenue sources, Japan's number two telecoms firm,
KDDI, said on Wednesday it will launch a trial service that allows
mobile phone users to shop in conventional stores using their
handsets. By adding a special credit card function to mobile phones,
the service will be the first to let users shop at actual stores, not
just virtual ones, the company said. KDDI, which has 15.7 million
subscribers, said 10,000 individual users will take part in the trial
service between November and January, with the aim of launching a
commercial service early next year. Under the trial service, users
will attach a match-box-sized module to their cellphones. The
detachable device will be used to pay for items when the user shops
at stores or pays for services, such as taxis, connected to icePay's
Web site (icePay is the security partner for the system; the other
two are eBank and Itochu Techno-Science).

COMMENTARY: Payment-by-keitai is tougher than it looks. This is at
least the third such mobile e-com experiment we've heard of. KDDI got
into a big one last year with Citibank and Fujitsu, but, we gather
due to the thundering, post-experiment silence, came to nothing.
Likewise, DoCoMo has also been trying to get something going.

The Citibank-Fujitsu-KDDI system (it was DDI back then) underwent a
600-user trail last summer; the system was to allow a user to
purchase an item off a catalog or Web site by selecting the item's
code number and then choosing a payment method, like their credit
card, debit card, or line of credit. The user would also enter a PIN
number, and the merchant would receive immediate payment from the
supporting financial institution, listed together with a transaction
serial number. The system was never put into commercial service.

DoCoMo has been talking about payment-enabled smart cards for at
least two years. Finally, on the 3G trial phones now in use, there is
an updated SIM card, called a WIM card, which, we guess, can be
programmed with e-cash functionality.

It looks like even the highly mobile-savvy Japanese can't get all the
right factors to come together at once and spark ignition for mobile
e-payments. You need customers, technology, security, merchants,
products, and a really slick network (tied into as many financial
institutions as possible) to meld into a working, revenue-generating
system. So far, cash is easier -- way easier. Maybe some ministry
needs to get involved (see 4G item below)?

See J@pan Inc story: "Cash, Credit, or Keitai? -- Japan Braces for
the Cell Phone as Wallet"


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--> 4G Cell-Phone Users To Change Carriers Easier
Source: The Nikkei on Yahoo, August 27

EXTRACT: Users of post-3G cellphones will be able to choose different
telephone carriers for each call they make, to take advantage of the
best rates, Telecommunications Ministry sources said, according to
the Monday morning editions of The Nihon Keizai Shimbun. To achieve
this goal, the Telecommunications Ministry will set unified standards
for mobile phone handsets so as to create an environment in which
mobile operators and information service providers all compete on a
level playing field. Currently, most operators set their own handset
standards, which are incompatible with those of other firms, often
limiting subscribers to only accessing online content available via
each firm's network. 4G standards will allow subscribers to dial a
code to choose the carrier they want to use to make overseas
long-distance calls and Net connections, just as today's fixed-line
users do.

COMMENTARY: An excellent illustration of why Japan is the world's
test lab for mobile. Someone comes up with an idea, the bureaucracy
gets behind it, a ministry mandates a course of action (doubtless
with prearranged industry support -- at least from the bigger
players), and the regulated industry -- in this case wireless --
jumps into line. Beginning in fiscal 2002, the former MPT will ask
NTT DoCoMo, KDDI, Japan Telecom, and handset manufacturers (such as
Fujitsu and NEC) to jointly develop the project. The government will
also fund it -- to the tune of JPY5 billion. And that's how Japan

--> Japan Mobile Carrier Expands Reach
Source: AP on Yahoo, August 23

EXTRACT: Japan's top mobile carrier, NTT DoCoMo, has agreed to
provide three major European carriers with the company's high-speed
data transmission technology, a company official said Friday.
Thursday's agreement with Germany's E-Plus, KPN Mobile of the
Netherlands, and Belgium's KPN Orange is the first time that DoCoMo
has licensed technology to foreign companies, said a DoCoMo
spokesperson. The technology NTT DoCoMo will provide to the three
European companies is called "multimedia messaging protocol," which
will enable users to more efficiently send and receive images and
other data via mobile phones. It is already used for Internet
services provided through cellphones in Japan.

COMMENTARY: Finally, a "licensing agreement" worthy of the name. And
just in time, too. We were about to scream if we saw any more press
releases touting that DoCoMo would "license" its i-mode "technology"
to some hapless carrier somewhere desperate to boost its bottom line.
There's no way the term "licensing" can be applied to anything
related to i-mode -- there's nothing to license. i-mode's standards
(cHTML delivered over TCP/IP) are open, and you don't need DoCoMo to
build a packet-switched network. In fact, when it comes to i-mode,
you don't need DoCoMo to do anything that DoCoMo does. We understand
that in this case, there really is some proprietary technology
involved -- a way to attach media files (sound, etc.) to email
messages and deliver same to mobile handsets.


984 (as of date of publication)

Written by Daniel Scuka (daniel@japaninc.com)

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