Young Entrepreneur Challenges Japan's Media Barons

When Takafumi Horie spoke to a packed room at the Tokyo Foreign Correspondents? Club on March 3, the chair quipped that it was the best-attended press conference since legendary Argentine soccer player Diego Maradona visited the club. Horie is no sports hero, but the 32-year-old Internet entrepreneur is rapidly becoming a young superstar of a quite different playing field. Horie had come to discuss his takeover bid for part of Fujisankei Communications, Japan?s largest media conglomerate.

Following his company?s surprise purchase of a controlling stake in Nippon Broadcasting Systems, a radio broadcaster, Horie has quickly found the more austere sections of the media lambasting him as arrogant, greedy and "un-Japanese" for his aggressive business tactics. At the same time, other often younger commentators have showed admiration for his bold challenge to the established "old" media. But, regardless of what anyone thinks of his business style, to judge by the 300 people who packed out the press conference at the Correspondents? Club, few would deny that Horie is a man to watch.

If Horie?s aim was to shock the established media out of their complacency and make them take notice of the Internet, he has surely already won. After a desperate, widely publicized legal battle between Fujisankei and Horie?s Livedoor Internet company, on March 23 Horie prevailed. Tokyo?s High Court ruled the radio station?s blocking tactics illegal, effectively allowing Horie?s takeover bid. The following day, Fuji TV made the surprise announcement that a Softbank (another Internet company) affliate had become the largest shareholder in the TV channel. Fuji TV has saved itself from the disastrous loss of face a takeover by Horie would entail, but in the process may have brought long-delayed synergy between old and new media in Japan a little closer.

The media have pitched their intense and sometimes emotional coverage of the legal battle as a battle between young and old generations. The iconoclastic Horie has done little to dispel that impression. Though the sober gray business suit is virtually the national costume, Horie doesn?t even bother wearing a tie. A regular on TV talk shows and news programs, he consciously flaunts the language and attitudes of Japan?s younger generations.

Having dropped out of Japan?s prestigious Tokyo University, an almost unheard-of thing to do, in 1996 Horie founded a small Internet startup, Livin? On the EDGE Inc. At the time, he has said, he was the only person he knew with an e-mail address on his business card. By March 2004 the company, renamed as Livedoor Co. Ltd., had 1,087 employees, with an average age of 29.

The announcement on Feb. 8 this year that Livedoor had acquired a controlling stake in Nippon Broadcasting Systems, part of the conservative Fujisankei media conglomerate, came as shock news ?- not least to NBS itself. Horie?s company had bought the shares during off-hours trading, which, if not against the rules, certainly stretched them to their limit. It was typical of Horie, who has built much his Internet empire through shrewd acquisitions of other companies. It is not, however, how business is traditionally done in Japan.

The move quickly had much of the Japanese media and business establishment spitting fire; Horie was denounced from on high. Kyodo News quoted Fuji TV?s chairman Hisahi Hieda virtually denouncing Horie as un-Japanese: ?I wonder if this sort of thing is called American-style? I don?t know it because I am Japanese.? (As it happens, Livedoor had funded the takeover attempt by selling convertible bonds to foreign investment bank Lehman Brothers , something that was treated in the Japanese media with a ?disturbing degree of reactionary xenophobia,? according to the London Financial Times.)

Horie was characteristically unrepentant, pledging -- or threatening, depending on your point of view -- to acquire a controlling stake in NBS. By doing so he would potentially be able to have a say in the operations of the Fujisankei Group, Japan?s largest media conglomerate. As well as the popular Fuji Television channel, magazines, radio stations and museums, the Fujisankei Group contains the highbrow and conservative Sankei Newspaper.

The latter has slammed Horie in a series of editorials. The newspaper accused Horie of ?trying to build a media strategy just on the basis of economic rationality.? In other words, just having the money to buy into the media doesn?t give him the authority to run a newspaper or a TV station for the public good. With a palpable sense of horror, the Sankei imagined Horie imposing a new, presumably young and radical, editorial bent upon the publication: ?Our readers, our columnists and history wouldn?t forgive him,? they shuddered. The conservative weekly tabloid Shukan Shincho?s attitude was less restrained. ?Livedoor in the same class as Aum,? one headline sputtered. (Aum is the religious cult responsible for the Tokyo underground gas attacks).

Philip Brasor, writer of a media column in The Japan Times, is skeptical of the established media?s dash for the moral high ground. ?They just don?t want to change. They don?t want anybody to come in and tell them that they can do something different or perhaps do something better,? he wrote. While public broadcaster NHK may lay some claim to serve the public good, the same can hardly be said of Fuji TV?s output of game shows and entertainment programs, Brasor suggested. ?But what does Fuji TV do that is for the public good? For me, that is hypocritical, or at least self-important.?

At the moment, Horie is playing his cards pretty close to his chest. Despite his constant TV presence since the beginning of the takeover battle ?- with the notable exception of Fujisankei?s channel -- he has yet to reveal his exact plans for Internet and old-media synergy. ?He has obviously got a strategy; he just doesn?t want to announce it on public television. We will just have to wait and see what it is,? said Tim Clark, analyst and author of the Japan Internet Report. In any case, Horie may have already achieved his first objective. Having failed in a recent attempt to buy into Japanese baseball, Horie could have been looking for an even bolder way to force his Internet company onto the offline consciousness. ?It is definitely a symbolic gesture. It is a branding move,? suggested Clark.

Nevertheless, many analysts in Japan and abroad have been skeptical of Horie?s plans. He has had huge success as an Internet entrepreneur, but some doubt whether he has the business know-how or media sense to become a Japanese media mogul in the leagues of Rupert Murdoch or Barry Diller -? especially in a media world as resistant to newcomers as Japan?s.

?Arguably what we are seeing is an exercise in financial engineering rather than a revolution in the mediascape,? suggests Bruce Arnold of Caslon Analytics, an Australian Internet research, analysis and strategies consultant group. Others speculate that Horie may have his eye on the Fujisankei Group?s extensive entertainment assets, perhaps to move into online video and music.

Speaking at the Tokyo Foreign Correspondents? Club, Horie argued that Japan has an opportunity to succeed in creating synergy between the Internet and traditional media where attempts like the AOL/Time Warner merger failed. He has argued that Japan?s extremely high broadband uptake and the success of subscription-based services offer an opportunity to build a successful online content business. Skeptics point to the limited success of similar attempts elsewhere and question whether Horie really has a new business model.

Whatever Horie?s ultimate aims, he is quickly becoming a popular icon of a new breed of young business leaders. The left-wing Aera magazine, perhaps indulging in a touch of schadenfreude at the expense of the conservative Fujisankei Group, has been enthusiastically touting Horie as a model for Japan?s youth. One recent feature on Horie?s early life was titled ?I want to be a Horie.?

Horie has many supporters among those hoping to see change in Japan. ?If Horie destroys the existing media structure, it is an opportunity,? says Kenichi Asano, a professor of journalism and mass communication at Kyoto?s Doshisha University. But Asano and others are disappointed that Horie has shown few signs of wanting to change Japan?s hidebound media in any fundamental way -? such as breaking up the press club system or introducing more diverse content. ?I think Horie is trying to destroy [the existing setup],? said Asano. ?We need such a person in this era -? but I don?t think he really understands journalism. It?s a pity.?

In the long run, the battle between Japan?s energetic Internet wizards and the gray-bearded mandarins of the established media has barely begun ?- and the public is entranced. For freelance journalist Hiromichi Ugaya, the affair has opened the public?s eyes to who runs their media. ?It is amazing that even Fuji TV, which makes programs for Japanese young people, is run by these old men,? he said. ?The final result of Horie?s attempt will be that people realize how hard-headed the Japanese media [are].?

On March 12, not for the first time, the Fuji-Livedoor saga was covered by The Asahi Shimbun?s widely read and respected tensei-jingo column. Recounting Aesop?s fable of the oak and the reed, the columnist noted similarities with the ongoing battle between the established media and Horie?s new media. The column somehow neglected to say which of the two was the proud oak tree that broke in the gale, and which was the supple reed that survived, but then again, perhaps it didn?t need to.