Case Study: niwango (Japan)

Based on the interview made on 05.04.2011 with Seiji Sugimoto

The name of the publication and / or company

nicovideo

Established

2005/11

Web Address

www.nicovideo.jp

Form of the company

Business corporation (joint-stock company)

A joint business between Dwango and Niwango. Dwango is an internet entertainment company that launched Nico Nico Doga, a downloadable music website and online gaming site available on mobile phones. Niwango is a company belonging to Dwango, which runs Nico Nico Doga and its own information service.

Describe your site or business in few words.

Nico Nico-doga is a video-sharing site operated by Niwango.  The website’s most well-known feature is its commenting system, which allows user comments to stream across the screen as a video is being played, creating a new way to watch videos.

The site offers a wide range of content, including videos, silent videos, and audio clips, encompassing genres such as music, anime, video games, communities, and politics. Music, anime, and games take up 80 per cent, while politics and sociocultural topics take up 10 per cent each.

In 2007, the website started a “Live Nico Nico Broadcasting (nico-nico nama housou)” service, which just like normal Nico Nico videos, allows comments to be attached onto live streaming. The service has become increasingly popular over the years, and now offers a wide range of content from online game playing between users, to music performances and movie press conferences.

More recently, the website has been putting more effort into its news reporting, including headline news reports, streaming live footage from press conferences, inviting politicians to hold debates, and has been collaborating with Japan’s public broadcasting station NHK. These projects have shown the website is capable of delivering something more than just entertainment.

Users are mainly individuals in their late 20s with men outnumbering women 7:3. When the website opened for business, many of the first members were members of Japan’s largest internet message board site “2-Channel”, therefore leaving a permanent “2-Channel” imprint on the site’s style.

Staff numbers

Who’s creating the content

Not available.

– Engineer posts 80% programmers, 10% network engineers, 10% SE

– Planners About half-half planners (editors) and operators (reporters). Only a few specialize in project management.

 

How they make money

Revenue models and sustainability

Only members are able to watch videos.  Signing up to become a “general member” is free, and the site also offers a more exclusive “premier membership” for a 525-yen ($6) monthly fee.  Currently the site has more than 23 million members, and this number continues to grow.

Revenue sources

70% from membership fees, 25% from advertising, 5% from affiliates.

Sales (Earnings for fiscal year ended September 2011)

Sales made by portal businesses Nico Nico Doga run: ¥10,081,000,000 (about 123 million USD) (Last year ¥6,344,000,000) The portal businesses run by Nico Nico Doga continue to show steady growths. There have been increases in sales thanks to, most importantly, premium members, advertising revenue, affiliate revenue, and point revenue. ・Yearly Revenue ¥67,000,000 (Last year ¥23,000,000)

Charging system

525 yen ($6) each month for premium membership (the latest figures released in 2012 say the company has hit a milestone of 1.5 million members).

There are many other charging systems, including a 500 yen fee and booking for anyone wanting to stream a live video, or even supporting other users by helping to pay for their videos.

Nico Nico Point A virtual currency service usable in Nico Nico Doga and services linked to it. General members and premium members are both able to use this service, where now 1 yen is the equivalent of 1 Nico Nico point (tax included in total tax). Points can be bought in amounts of those corresponding to 1000, 2000, 3000, 5000, and 10,000 yen. Previously, consumption tax had been excluded and 500 points had been sold for 525 yen. The points can be used on a wide range of services.

What kind of advertisement you sell

Nico Nico Market Products from amazon or yahoo, even Dwango’s mobile phone content are advertised in the space below videos in the Nico Nico Doga website. What makes it different is that video viewers are able to sign up any product to the market that has something to do with the video. It is even capable of showing the number of people who have clicked on the product or have made a purchase.

Selling products or services (digital or virtual)

Sales of a variety of merchandise.

Hold concerts (carried out in a concert hall, and it can also be streamed live)

What would be the most important thing on your road to sustainability?

The funds accumulated by charging members is steadily growing bigger, and we believe we can rely on these funds to stay in business. We do not have any plans to change our business model that depends on advertising revenue. Although the average spending per customer is small, we have had the advantage of not being unstable on the market, and plan to increase membership numbers in order to keep this business going. We also plan to raise the added value of the service itself by raising the whole service up another level. This includes the monthly 500 yen membership fee for premium members, and will ask users to find components on the website that could be worth a few thousand yen, raising the amount of royalties for the user. For the past few years the company has hosted an ever-growing variety of events, including musicals and live events such as “The Nico Nico Dai-kaigi”. The cost to send a team to these events is covered by advertising revenue.

However, focussing on content is not a good idea because the more we concentrate on it, the bigger the pressure to create better quality content, which would drive costs higher. It will be more important to increase the number of premium members. Nico Nico Doga has been used as a place to communicate, and many users today use it to interact with each other. Our ideal future would be to become a place where people can communicate online, a place that is part of their daily life. Therefore, we have no desire to raise the quality of our journalism nor the quality of our content.

EXTRA: Coverage of the Japan earthquake

– After the earthquake struck on March 11, 2011, Nico Nico Doga’s innovative approach was to continuously stream live footage from news stations reporting on the disaster.

– Japan’s public broadcaster NHK streamed their coverage of the disaster live on their video channel (1ch) through Nico Nico live stream (from March 11 – 25), and from the day after the earthquake, made it available for portable wireless terminals (from March 12 – 25).

– Commercial broadcaster Fuji TV also streamed their coverage of the disaster live through their video channel (8ch) on Nico Nico live stream (from March 11 – 14), and a day after the earthquake, made it available for portable wireless terminals (from March 12 – 14).

– Other channels streaming video footage on Nico Nico live stream included NHK’s English channel “NHK WORLD TV”(March 14 – 25), and commercial broadcaster TBS news channel “News Bird” (March 16 – 18).  A joint effort with local TV stations and radio stations within the disaster zone helped Nico Nico live stream to feed information to disaster victims.

– In response to the nuclear accident, Nico Nico live stream started feeding live video footage from TEPCO and nuclear safety agency press conferences from March 13.  On March 17, Nico Nico live stream provided live video footage from the prime minister and chief cabinet secretary’s press conference.

– Other activities included streaming special reports for three days following the earthquake, and live reports from their own reporters sent into assess the damage in Miyazaki and Fukushima prefectures.

– Nico Nico Doga was able respond to the triple disaster, Japan earthquake, tsunami, and Fukushima nuclear accident, in a way no one else would have thought – by working together with TV stations to stream their programs on the internet.  The number of people who viewed Nico Nico live stream’s NHK footage shot up to 11 million in the first two weeks following the earthquake (March 11 – 25).  It is thought that Nico Nico Doga’s efforts helped bring out the best in internet media coverage of the disaster by borrowing content made by broadcasting stations.