Can corporate governance code re-invent Japanese old media companies and refine their decisions to new market opportunities such as OTT? OTT video consumption will be largely mobile based in Asia, making the region unique but how do you ensure success across different part of the ecosystem?
Before jump into the media industry, I try to find out general corporate governance discussion 101.
First of all, let’s see the corporate governance reform in Japan as a political agenda. This is the top of the growth strategy & the 3rd arrow agenda of Abenomics. Narrow objective is dividend increase and stock price increase. Moreover, broader implication would be an attempt to change executives’ mind toward efficient use of capital. Shortly, the governance reform is to make corporation use resources more efficiently.
During decades, we saw “Japanese management” was in vogue only in 1980's. After lost 2 decades, superiority of Japanese management is gone unfortunately. Shareholders are important. Higher profit and higher dividends are good. We found that lots of resources were wasted in loss-making subsidiaries and projects. Finally, “ the curse of Japan inc” appears to be fading away.
Second, corporate governance reform is about increasing the size of a pie. In another words, it would be the process of overcoming the temptation to blend in with the “village -like”community with their group mentality. In order to have intended effects, corporate executive should embrace and implement the reform itself. Life-time employment may have to be modified. Boards should have one director who thinks like an activist investor and independent directors should participate early in the formulation of strategy.
Finally, we need to engage on the tough questions. Japanese boards traditionally made up of insiders. Strategic decisions are made at lower level of board and high level strategic discussions are absent from boards. Big investment decisions therefore tend to be made in the absence of strategic context. Even though periodic reviews of top 30 -50 executives should take place annually, senior appointment at Japanese firm are CEO’s prerogative.
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From the corporate governance perspectives, we can say that Japanese company needs quick reforms and needs to recover the efficiency of capital. Increasing ROE and ROIC is now acceptable to articulate as a goal.
HOWEVER, I personally believe that main point is the “comply or explain” disclosure system.
Corporate governance code is just a “cord”. If you don’t like the code, you have just to “explain” the reason why you dislike the code. You don’t need to follow even the ROE movement. According to the Dupont ROE analysis, the reason for Japan’s comparatively low ROE is caused by the low profit ratio. You can say clearly, “though I don’t care the short time stock prices, I can make a profit”, if you can keep your company well. The key aim of recent reforms is to create higher level of engagement between boards and share holders. The point is here. “Can you clearly say your management & governance policy to your industry, based on your logics and facts?” If you can find kinds of companies this June, which can declare their policy explanation logically to market, I strongly suggest to buy its stock ASAP.
Let’s move back to media industry.
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Netflix content chief Sarandos says to NPR their data shows people watch TV differently when they use their service.
“Everything that’s watched on Netflix is watched super deliberately,” he adds. “It’s not background noise. It’s not something you turn on and go off and eat dinner. And its watching the same show until you’re done. This is much closer to books, where people say ‘I’m going to start Breaking Bad tonight.’”
At a time when everyone in the TV industry is trying to guess what the future holds including SEA-OTT market, it seems that technology and services which meet viewers’ new “on- demand attitudes” is the surest way to success.
On the BroadcastAsia 2015, I tried to explain our basic strategy. The new challenge especially for global OTT service brings positive feedback to our production team in Tokyo. Since the producer realized the positive side effect of global OTT distribution, our production has stimulated in terms of creativity. As a result, several programs succeeded to acquire the global audiences. The PDCA cycle for meeting viewer’s new “on-demand attitudes” is the main strategy for new environment. That’s the way of adapting to the disruption and of delivering experiential contents especially during the new Japanese managment paladigm era.