Kris Imai, the head of the international business at U-NEXT, the leading challenger to Netflix in Japan, discusses its content strategy.
Several local heavyweights across Asia are giving the international streamers a run for their money. In Japan, U-NEXT has emerged as Netflix’s biggest competitor, inching up on 5 million SVOD subscribers with a compelling mix of local content, top-tier international sports, and premium American fare. Kris Imai talks to ScreenMDM about how he and his team are resuscitating interest in U.S. content in Japan and plotting for the next stage of growth.
Tell us about the unique position U-NEXT has carved for itself in the Japanese landscape.
U-NEXT is that little Japanese platform that no one knows outside of Japan because it’s fiercely domestic. It’s not available internationally. In terms of our market share, there’s Netflix, and then there is us. We’re coming up close to 5 million subscribers. Again, being fiercely domestic is refreshing because we don’t have to adhere to any overarching international strategy. We can make decisions based on the local market. We are a Japanese platform designed by the Japanese, for the Japanese. We are owned by a holding company, but ultimately, the content strategy is dictated by local market needs.
You previously acquired pan-regionally for Fox. What were some of the key mental shifts you made in the move to a local streamer?
When I first jumped from linear TV to OTT, there were many similar principles for understanding what people want to consume and when. It’s not linear scheduling, but if we have this gigantic inventory of video streaming content, we need to make sure that everything we acquire and program has its moment in the sun and that we’re targeting each taste, not just relying on an algorithm. We’re putting a lot of effort into making sure content reaches the right audience.
The biggest [shift] honestly is from Hollywood studio to local. This has been the most refreshing. I recommend anyone who is lost in the studio world and the uncertainty to seriously consider domestic opportunities. In Indonesia, India, and Korea, we’re seeing fierce competition from local platforms against global platforms like Netflix and Disney+.
What’s guiding your overall international content approach?
Right now in Japan—and this is not dissimilar to several other markets—we’re facing a shrinking appetite for Western content. Twenty years ago, you would see shows like 24 or Lost on free-to-air terrestrial. Now, there’s none of that. When we look at Google search trends for interest in U.S. series, we’re seeing a decline. Trying to combat that tide is critical to our strategy. We need the strongest IP, the strongest cast—what’s going to move the dial in generating interest and resuscitating appetite for Western content. We’re honing in on those specific IPs that are going to generate new subs without having to watch an entire first episode. We have the HBO distribution. There’s a lot of strong content coming through the pipeline. We want to make sure that we’re not just placating an ever-shrinking audience of U.S. series fans but broadening that reach as wide as possible, curbing that trend, and then ultimately look at reinvigorating and multiplying the programming inventory so that it’s satisfying a wider range of tastes. We’re focusing on Hollywood, premium content right now. Once we get to a bigger scale and have a larger reach, we can start expanding into more niche products.
In terms of the shrinking appetite for American content, how do you stem that tide?
The content is strong. If you watch it, you will be hooked. The problem is visibility. You could argue that a person in their 20s in Japan has never had the opportunity to watch Friends or ER. There’s good evidence that aggressive sampling, whether on social or even on free-to-air linear, helps drive visibility. Japan has historically been a pay-averse culture where people are more than happy to watch free-to-air linear or just YouTube UGC content. The hurdles to getting past the paywall remain. The average Japanese user subscribes to 1.7 platforms. That’s a challenge, but ultimately an opportunity as well.
We’re trying to convince our partners to be more aggressive with free sampling and to explore opportunities where it doesn’t have to be: put the pilot episode out for 30 days in preparation for the new season. We should go back further. What if we sample the entire first season for free? On social, we’re trying to engage with local influencers. We haven’t cracked it yet. We don’t own the content. We license for a specific window and a specific set of rights, but we’re trying to convince [our suppliers] that something needs to be done to curb this shrinking appetite. We’ve talked to like-minded partners in Australia and Korea as well, and they’re all thinking along the same lines: it’s about visibility. If you get visibility, you’re going to find an audience. That audience will grow, and you’re going to open the door for a lot more interesting content to come through.
How are you balancing the data you get from your own usage with your gut instincts?
We value data tremendously. We’re looking at retention, what’s driving new subs. Ultimately, that’s going to be [led] by anime, local content, Korean content and sports. What do I feel is potentially the easiest to digest and promote, but extending that web a lot wider? I’m using Google Analytics research. I’m partnering with our web marketing team to see what’s driving click rates. Building up enough confidence to figure out what the right criteria are. Then again, I have 20-plus years of industry experience. I have an idea of what the Japanese people might want to watch. How am I looking to target an anime fan or a Korean drama fan? How do I subtly pull them in? We’ve enlisted top-class anime talent to voice the dubs for some of our U.S. series to bring in some anime fans. And balancing what has historically worked. The Last of Us and The Walking Dead are going to perform well. Every once in a while, there’s an outlier. We know medical procedurals do better than legal procedurals. That might be different from platform to platform. The Hulu demographic is quite different from the U-NEXT demographic.
Amid the uncertainty, what are some of the things that you’re remaining focused on?
It’s all about scaling up. To do that, we need to provide the most premium experience possible, whether that’s new services, better content, strategic acquisitions—all of that. As we grow aggressively compared to global and other platforms in Japan, it’s not the time to relax. We’re about to hit 5 million subscribers. If anything, it’s the time to be aggressive in scaling up. The international business covers a broad scope. Sports is a big part of that as well. What sports are really going to drive the service? It’s not just placating existing subscribers, but also attracting a new set.
The last half year has been a lot more about big deals; instead of scouting the market and finding different series, it’s been about making strategic investments. We’re the exclusive distributor of HBO Max in the territory. Welcome to Derry did tremendously well. That’s a great example of strong IP. The movie did well in Japan, and there’s a horror fan base that is usually pretty loyal and enthusiastic. That’s going to bring in new subscribers and, hopefully, resuscitate interest in U.S. series, even though it’s a niche genre.
Right now, in terms of the Western content, it’s figuring out how to curate it better, marketing effectively, and [looking out for] the strongest IPs. How are we allocating those market energies and resources to ensure as many people as possible see it?
What are you doing in sports and other genres outside of the high-end drama?
We have a lot of sports; we’ve been very aggressive in this. With the Premier League, we’re on the second season of a seven-season exclusive deal. All of our sports acquisitions are driven by what will be relevant in Japan. We’ve locked in the four major golf tournaments. We have UFC. We have tennis. We have these core pillars that are hyper-relevant to Japan, except for baseball, which is available everywhere else. For MMA, European football, tennis, and golf, we’ve got a lot. I can’t overstate enough how important that is to driving subscriptions.
In terms of other genres, our focus is on what’s going to drive subs—the more retention content. We’re still open for business, but it’s not a huge priority at the moment.
We have a dedicated team curating the kids’ zone and producing original content and books. You can’t tell a 4-year-old, “Here’s this great new series that you’ve never heard of.” It has to be something that they’ve watched on YouTube. It’s a very different way of figuring out how to acquire content. A brand-new series from an external vendor is going to take a lot of work in terms of marketing and promotion, but that’s where the social element comes in.
A lot of our kids’ partners are putting a ton on YouTube. Similar to distributors buying slots on terrestrial. PAW Patrol was on terrestrial. That awareness went through the roof. PAW Patrol is arguably no longer a Western IP for Japanese kids. It’s up there alongside pure Japanese animation. To what extent are people subscribing because we have non-exclusive kids’ content on the platform? Less so. But it is important.
In terms of unscripted content, a blue-chip documentary is likely to generate strong ratings. But in terms of driving subs, not so much. There are those opportunities to look at something that’s going to be locally relevant. Let’s say there’s a piece that features a Japanese businessperson or scandal. Everything we can do to make it relevant to our audiences is critical.
Are you looking at co-production opportunities?
Absolutely. We’re a Japanese company. We don’t have the scale of Netflix. The decisions we make about originals and investment are pretty judicious, but getting to 5 million subscribers, we can start producing in greater volume. Before, we were mostly consortium agreements and a minority share; now we’re taking on bigger projects that are really pushed by U-NEXT.
What else are you keeping an eye on?
Right now, we don’t have an ad-supported tier. I don’t know what next year will bring. It’s nice to always be on your toes. I have never said no to any opportunity unless we’ve done our due diligence. I don’t have a five- to ten-year strategy because the business is so dynamic and fluid. We’re growing fast, we’re a target, so we need to be as future-proofed as possible. It’s good to be in an environment where we are making strides against these global platforms. Hopefully, we can come up with something unique by virtue of the fact that we don’t have a global strategy. If a good opportunity comes up and it’s on the table, then let’s go for it. It’s not a start-up mentality, but at least we have the flexibility to look outside the box for new opportunities that will drive the business. υ
