Japan's Netflix contender bets on youthful viral hits

AbemaTV's staff prepare for filming at its studio in Tokyo, Japan. — Reuters

TOKYO — On a Friday night at a downtown Tokyo television studio, 12 teen models with cutesy nicknames like Ayamin and Kyokyo are waiting nervously to find out who has won coveted spots on the cover of Popteen magazine, a Japanese fashion bible.

The girls, sporting a range of trendy styles, are the stars of "Popteen Cover Girl War," a hit show from internet upstart AbemaTV that may signal a new direction for Japanese television.

Eschewing the pricy serials and star-studded films that have helped companies like Netflix upend the traditional TV business in the US, AbemaTV is betting on low-budget, reality-based fare with colorful graphics, relatable young faces and a relentless focus on generating social media buzz.

The approach has pulled in millions of young viewers, convincing some advertisers and industry analysts that AbemaTV has found a lucrative new model.

"It's a generation used to rapidly processing information," Tatsuhiko Taniguchi, head of AbemaTV, said of his young viewers. Dramas are put together "as if we are stuffing in twice the amount of screenplay," he added.

Japan's traditional broadcasters, boxed in by government regulations and concerned about upsetting their regional stations, have mostly left the internet field clear for upstarts like AbemaTV and foreign players like Netflix and Amazon.com .

Yet AbemaTV remains an unproven bet for its biggest backer, online ad agency CyberAgent, which launched the network three years ago with TV Asahi. CyberAgent spent 20 billion yen ($179.73 million) on the venture in the fiscal year that ended in September, much of that on programming, against revenues of just 6 billion yen. CyberAgent's stock price is down 40 percent from last July's all time high at a time when its advertising and gaming units are also under pressure.

And the overseas players continue to make inroads: In addition to subtitling their large back catalogues, they are offering a growing library of local-language content such as Netflix's "Terrace House."

But CyberAgent founder and CEO Susumu Fujita, who at age 26 became the youngest CEO ever to take a company public in Japan, remains confident.

"We are not rushing to reach profitability," said Fujita, 45, who estimates that revenue will double this year on the same amount of spending.

AbemaTV has around 8 million viewers each week. Goldman Sachs analyst Masaru Sugiyama sees the venture turning profitable next year and hitting 164 billion yen in revenue in 2024.

With big consumer brands looking for online advertising opportunities, "there's a huge need for professional content on the internet, but there is a scarcity of that, especially in Japan," Sugiyama said.

AbemaTV viewers can watch about 25 ad-supported channels showing everything from 24-hour news to anime to Korean dramas to fishing via an app or in a browser.

Along with an ad-supported catch-up service for recently aired shows, for more hardcore fans there is also a 960-yen-per-month service providing access to every show AbemaTV has aired.

Japanese TV shows use lots of explanatory on-screen text, designed to capture viewers zapping between channels, along with wide shots of terraced rows of entertainers.

By contrast, AbemaTV's smartphone-focused approach features a cleaner look with frequent close-ups. — Reuters