* Debut of Kobo e-reader fills new product need
* Others tried without success for Japan e-reader
* Publishers see Rakuten as better fit than Amazon
By Jeremy Wagstaff and Mari Saito
TOKYO, July 17 Japanese ecommerce giant Rakuten
Inc looks set to steal a march on rival Amazon.com
when it launches its Kobo e-reader and e-book service
in Japan on Thursday.
For CEO Hiroshi Mikitani, it's the first salvo in a wider
war that the ebullient Harvard MBA, called Mickey by everyone
including his staff, hopes will transform Rakuten into a global
player in digital commerce.
Mikitani founded Rakuten in 1997 and has built it into
Japan's largest online retailer, employing more than 8,000
people and boasting a market capitalization of about $13
The company has a travel business, a securities company and
its own bank and in the past two years has acquired or bought
stakes in companies in the United States, France, Indonesia,
Brazil, Germany, the UK and Canada.
But the launch of an e-reader and e-books in Japan, the
world's second-biggest publishing market, is a pivotal move.
Rakuten has reached a saturation point in Japan and needs to
find new products to sell.
The launch also tips the company further into the
fast-moving world of digital content, a global space where
Amazon, Apple Inc and Google Inc are fighting
it out and where Japanese giants like Sony Corp have
largely failed to make their mark.
Merely launching an e-book service in Japan is no mean feat.
The past decade is littered with big-name initiatives that have
languished or failed. They include devices from Panasonic,
Toshiba and Sharp.
Amazon on its Japanese website this month added a link for
users to sign up for updates about Kindle's local availability,
but declined to give details about when the device and service
would be launched.
Rakuten's secret? Print publishers, analysts say, may be
afraid of losing a lucrative business, but they're even more
afraid of Amazon. And, says Mikitani, "although we are an
aggressive company by Japanese standards, we are still a
He said he's spent much of the past month persuading
publishers to join him and says "about 95 percent" of the
Japanese industry has done so.
"In the last two months their attitude has completely
changed," Mikitani said. "Before they were skeptical of worried
about the negative impact for their business. Now they have
changed their mind. This is their opportunity."
This marriage was symbolized earlier this month when
Mikitani appeared alongside Yoshinobu Noma, CEO of Japanese
publishing giant Kodansha Ltd, on a panel at Tokyo's annual
e-book fair. He presented his fellow panelist with a t-shirt
with the words "Destroy Amazon" in Japanese emblazoned on its
SUCCESS NOT GUARANTEED
Success of the Kobo e-reader is by no means guaranteed. The
key, said Daisuke Kono, an editor at Tokyo's Internet Media
Research Institute, is going to be just how many titles Rakuten
Mikitani said his staff were busy digitizing content, but he
is not sure how many would be available on the day of launch.
His goal is 300,000 titles by the end of the year. An initiative
by a government-supported company would add at least another
million, he said, but industry players are sceptical so many
books can be digitised so quickly.
Kobo's launch in Japan marks a significant advance for the
Canada-based e-reading platform, spun off from retailer Indigo
and bought by Rakuten last year for $315 million. It
now claims 9 million registered users in 190 countries, but
outside of places like Canada and France it's not well known.
This means Kobo has a chance to get a headstart in a significant
"Mickey-san really wants to make a big success of Kobo in
Japan," says Robin Birtle, a publisher of ebooks in Japan. "In
terms of the big heavyweight players, it's the only virgin
market with any size to it."
It's also an important step for Rakuten itself. More than 80
percent of Japan's 94 million Internet users already have an
account on Rakuten's ecommerce site, the company says. That
means that while Rakuten dominates online commerce, it needs to
find growth, not in new users but in new things to sell to them.
"Rakuten's domestic e-commerce business has maintained a
growth rate of 15 to 20 percent," said Yuki Nakayasu, a research
analyst at Credit Suisse in Tokyo. "This is strong for now, but
it will be difficult to maintain this type of growth. And when
the growth declines, they will need another revenue source and
this is where Kobo fits into its strategy. So, Rakuten is
essentially planting the seeds for its future revenue right
NOT JUST JAPAN
But it's not just about Japan. Mikitani's success in
persuading publishers to sign up was partly by promising them
new markets. Japanese content, he says, has a global audience,
whether it's Japanese manga, TV or magazines. Most of the
Japanese content available on Kobo will also be available
overseas, Mikitani said.
"If you go to China or Singapore the most popular fashion
magazine is Japanese," says Mikitani. Publishers aren't
profiting much from this opportunity, he added. "With this
format, they can," he said. "This is a global opportunity for
Rakuten's ability to deliver on this rests in part on its
partnerships with carriers, device manufacturers and book
stores. In the UK, for example, the device and e-books are
available through book chain WH Smiths, while Kobo's website
lists partnerships with HTC, Acer, HP and Research in Motion.
Kobo's e-book store has been included as part of Samsung's
Readers Hub preloaded on some of its Android-phones, although a
Kobo spokesperson was not sure whether this agreement was still
This approach, Mikitani says, extends beyond books to his
Kobo Vox, a media tablet not unlike Amazon's Kindle Fire and
Google's just launched Nexus 7. Vox is also compliant with
Google services, meaning that users can access content on
Google's Play store as well as Kobo's own.
Trying to take on the big players in every segment would not
be possible, he said.
"It's going to be competitive and that's why we're not
trying to compete everywhere if it's smarter to have more
cooperation and collaboration rather than trying to dominate
everything. If you can integrate that's great, if not we are
still competitive," he said.
Mikitani believes Rakuten's open approach, using as many
platforms as possible, using more open e-book formats, gives him
an edge, but he also believes he can weave in some of the
elements of his ecommerce business.
Rakuten's Internet-based loyalty point system, for example,
ties in users by offering them credits that can be used across
the group and is widespread and popular.
"It's a national sport to collect as many Rakuten points as
possible," says Serkan Toto, a Tokyo-based consultant, who calls
it the company's "secret sauce."
Mikitani declines to go into detail about how the points
program would be integrated with Kobo.
"It's not just about money but how to make it interesting,"