February 11, 2013 Why Japanese readers don't like e-books By Michael Fitzpatrick Japan has some of the

fastest internet connections in the world, but physical me dia such as books and DVDs still remain popular. FORTUNE -- Despite Japan's "default-setting-for-the future" status, coined by Sc i-fi writer William Gibson, time on this rocky archipelago appears to be headed backwards. Kerosene is replacing nuclear energy; deflation, not inflation, is st ill rife; and, publishers are clinging energetically to print when, in neighbori ng South Korea, it seems to have been abandoned altogether. Why have Japanese consumers not fallen in love with digital reading? "So far the Japanese have failed to be moved by e-readers from home or abroad, mostly owing to a paucity of content," says editor and publisher of Japan's E-book 2.0 magaz ine Hiroki Kamata. Sony (SNE), for instance, has been in the market for more tha n seven years but has sold only 500,000 e-readers in Japan. Other manufacturers' tablets have begun to sell here, but overall the category is still way behind e -reader take-up in the U.S. or Europe. Tablet sales have tripled since 2011, wit h market research firm IDC estimating tablet sales in Japan to be 3.6 million un its. Japanese consumers still seem dead set against adopting e-books, showing less in terest in them than even the print-worshipping French. According to an R.R. Bowk er study, 72% of Japanese consumers said they had not tried e-books and did not want to try them. That compares with 66% of French respondents polled. Overall a doption rates in Japan remain the lowest in the developed world. Only 8% of Japa nese readers have downloaded and paid for an e-book compared with 20% in the U.S . Tokyo based e-publisher Robin Birtle notes that Japan is at least five years beh ind the West in terms of digitization. He says Japanese tastes may simply be dif ferent. "The Japanese do like to have something physical," he says. That might e xplain why although Japan has some of the fastest Internet connections in the wo rld and on-demand services, packaged, physical media such as DVDs still remains popular. Japan has also been slow in getting the machinery of Japanese e-books whirring. There are just 40,000 titles available in most digital bookstores. "Publishers a re indifferent to, or even hate, digital things. Mainly because of excessive com mitment to traditional print book distribution," explains Kamata. Japanese publi shers are said to fear losing their long-held privilege of dictating prices. Ama zon's (AMZN) arrival -- its first Japanese Kindle arrived late last year -- notw ithstanding, the publishing revolution appears stalled. Aya Murota, an analyst f or the Tokyo office of the Hong Kong Trade Development Council, says it is diffi cult for Japan to change. "Japanese publishing companies are very traditional. M any of them are reluctant to change their whole business structure," she says. Much as elsewhere in the world, the battle over Japanese books is shaping up alo ng conventional lines. Amazon is feeling pressure from Google (GOOG) and Apple ( AAPL), both of which are poised to open e-bookstores for Japanese readers. The l aunch of Kobo e-reader, which is owned by Japanese company Rakuten, last July wa s marred by software issues. Competition may emerge from an unexpected corner. "Whether or not a significant

third player emerges is an interesting question. Apple are always a threat, and Microsoft's (MSFT) investment in Barnes and Noble (BKS) may be enough to underwr ite overseas expansion beyond Europe," explains Birtle. "The company to watch, t hough, is NTT Docomo (DCM) -- Japan's leading mobile network provider." Recently the telecom giant announced it would be going head to head with Amazon in March with its own tablet the "dtab" - priced lower than the Japanese Kindle. So, so far it's tablets galore for the Japanese market. But with such meagre off erings in the way of content from the Japanese publishers, it will take more tha n shiny new gadgets to lure Japan's avid readers away from their paper. http://tech.fortune.cnn.com/2013/02/11/why-japanese-readers-dont-like-e-books/?i id=obnetwork