Shanghai: Fuji TV Exec Talks Growing Japan-China Business, "Incredible" Success of 'Terrace House'

Courtesy of Fuji TV
Fuji TV's Takayuki "Taka" Hayakawa

Taka Hayakawa, the head of international business at one of Japan's biggest networks, discusses beating pirates, the growth of streamers, creating stories for smaller screens and a "golden age" for East Asia.

After 14 years at Japanese public broadcaster NHK, during which time he produced more than 150 documentaries, Takayuki "Taka" Hayakawa moved to Singapore to establish a venture capital firm that invested in media, tech and telecoms.

Returning to Japan in 2010, he joined television giant Fuji TV, where in 2012 he cooperated with Ridley Scott on Japan in a Day. The film was based on user-generated footage from around the world in memory of the March 2011 earthquake, tsunami and nuclear disaster in Japan's northeast, of which Hayakawa is a native.

Hayakawa is currently head of Fuji TV's international business and in 2016 led the company's investment in Niantic, creator of the smash hit Pokemon Go mobile game.

Before heading to China for the Shanghai International Film Festival, he talked to The Hollywood Reporter in Tokyo about the growing importance of the Chinese market, geopolitical risks and the "golden age of storytelling in East Asia."

Why has Fuji TV been so focused on expanding its international presence?

Fuji TV's strength since the 1980s has been in attracting younger audiences, but one of the problems we face is that there is no young generation now in Japan (laughs), a shortage of youngsters. So we have two choices strategically: to focus on the older audience in Japan or stick to the younger generation, but outside of Japan. We choose the latter one. We see the young audiences in China are eager to watch good shows.

How has Fuji TV's business with China grown in recent years?

2018 was the most profitable year for Fuji TV's international business, and one of the main reasons is China. From 2013 to 2018, the [compound annual growth rate] was 15 percent. Fuji TV has sold the remake rights to 50 of its series overseas, and roughly half of those are to China. But China is aiming to reduce the number of remakes, so we have shifted our strategy to co-producing content for Chinese audiences.

How does China now compare with the U.S. market from your perspective?

China and the U.S. are now about the same size market for us. Thanks to the shows we've sold to Netflix, including Terrace House and some anime series such as Ingress, revenue from the U.S. is also increasing.

Does having hit shows on Netflix boost your profile in China?

The success of Terrace House has been incredible, it was chosen as one of the top 10 shows of 2018 by Time magazine. It's an all-Japanese show that has become a global phenomenon. So now the guys from the Chinese platforms say, "You've made a strategic alliance with Netflix and produced a lot of shows for them, let's do the same thing for the Chinese market." It's a good thing; they can use the Japanese way of thinking and our resources as showrunners. Sometimes we can create a show for Netflix, and sometimes we can create a show for Alibaba. That's the way we survive in the 21st century as a small country (laughs).

In what areas of the entertainment industry has Japan-China collaboration become most fruitful?

Co-productions are the biggest business for us, followed by selling completed productions and then selling IP and formats. We also do some post-production of our Japanese shows in Beijing because the cost of 4K technology is very reasonable.

In terms of selling content or distributing, what are some of the biggest challenges?

We sell our finished products to China, but it takes up to six months to get approval before it can be distributed. That delay is a key issue because in the meantime pirate sites will produce very fancy translated versions in 4K quality. In fact, sometimes those pirate versions will go up within hours of the broadcast in Japan. So the value of our content drops, and it's the same problem for our Chinese partners. Last year, we announced a strategic partnership with Youku, which is like a Netflix of Alibaba, and we provide our content to them. We produced a drama co-financed between Youku and Fuji TV called Shosetsu-oh, which began broadcasting in April. We actually finished production at the end of last year, so we could take that time to get approval in China and then simultaneously broadcast in both countries. This is our strategy to eliminate copyright infringement of our content.

Have you seen shifts in the Chinese market or audiences' tastes recently?

The audience for Japanese shows is not huge, it's a niche market. The big VOD platforms aren't profitable companies by themselves. But they are part of larger groups with profitable e-commerce and advertising businesses, and the VOD services have been customer acquisition tools for the last few years. But this is changing, and they are now conscious of [average revenue per user] and need to provide premium content that audiences will pay for. Younger audiences care less about the nationality of the content than the quality, so they will watch a Japanese drama with Mandarin dubbed over a Japanese story. This is a change that has taken place since last year.

Do you notice cultural differences in the kinds of stories that resonate?

[This is] not so much a culture issue, but Chinese audiences prefer straightforward storytelling because they like watching on smartphones. We are used to creating stories for bigger screens with more complicated storylines. Too complex is not so good on smaller screens. So now we are thinking about crafting more succinct and more emotional stories that are better suited to smaller screens, a kind of convergence between our and their way of thinking.

China-Japan relations have improved recently, which helps business, but are you concerned that could change again?

In terms of geopolitical relations between China and Japan, I think this is the best period since 1945. In 2012, the number of deals between Fuji TV was China was zero. We don't know the exact reasons, but we can guess there was a causal relationship with the political issues. Some people in my company tell me not to take too much risk on the Chinese market because there's a country risk. But I think we have to take a long-term perspective. Over recent years the number of deals has grown incrementally. We could have another year where there are no deals, but it's an opportunity cost of making deals with our very close neighbor.

Do you have an exit strategy if things do deteriorate?

I should have some sophisticated strategy and back-up plan, but frankly speaking, no.

Have you seen any impact from the current U.S.-China trade issues?

We haven't felt any effects of the trade frictions between the U.S. and China. There should have been some opportunities for us when South Korean content lost favor in China, but actually we didn't see any.

How do you see the cross-border entertainment business developing in Asia?

When I started my career in 1994 we only thought of making shows for domestic audiences. Now, every day we get contacted by big Chinese investors or Korean producers saying, "'Let's make a show together for Amazon Prime or Netflix." I could never have imagined this kind of cooperation between East Asian countries. I think this is the beginning of the golden age of storytelling for East Asia.