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Why e-readers succeeded as a disruptive innovation in the US, but not in Japan

7 March 2017

From The London School of Economics Business Review:

The concept of disruptive innovation has captured the attention of executives around the world. As explained by Clayton Christensen, a disruptive innovation is initially seen as unattractive by mainstream customers and by the leading firms who serve those customers. Eventually, however, those firms lose their leadership positions to new entrants who are willing to develop and improve the innovation in ways that make it more attractive to mainstream customers.

. . . .

One intriguing example of a bundled disruptive innovation is the e-reader. Many American consumers responded enthusiastically to Amazon’s introduction of the Kindle reader in 2007, in part because, in a relatively short amount of time Kindle customers were able to choose from hundreds of thousands of titles. In contrast, Japanese e-readers introduced both before and after the U.S. Kindle launch received a lukewarm response from Japanese consumers.

One obvious explanation was the relative lack (compared to the US) of best-selling novels and other popular books in e-book form. To try and understand the reasons for the disparity in e-book availability between the U.S. and Japan, we interviewed key figures from both the American and Japanese book industry. Our research revealed a number of interesting insights, which we organise into three categories: organisational, environmental and technological factors.

. . . .

In part, the limited availability of e-books in Japan reflected industry perceptions of Amazon’s critical role in the success of the Kindle. Our informants did not believe any single Japanese company could play an Amazon-like role in Japan, in the sense of developing a Japanese e-reader and securing a supply of hundreds of thousands of e-books for that reader. For this reason, publishers and retailers were unwilling to invest large amounts of money developing e-book editions of popular Japanese books.

The availability of Japanese e-books has also been influenced by the interdependence among book retailers, wholesalers, and publishers in Japan. Japanese wholesalers were most likely to be hurt by the introduction of e-books. Publishers and retailers were heavily dependent on the two major wholesalers for sales of paper books. These concerns were amplified by pricing concerns. In Japan, publishers had the legal right to set the prices of paper books, which eliminated price competition for new books. Although the resale price law does not affect the pricing of e-books, Japanese publishers worried about the potential impact of e-book discounting on the performance of wholesalers and other industry players. For this reason, many publishers were reluctant to offer discounts on e-books, despite the success of Amazon’s aggressive discounting in the US.

. . . .

Another factor that emerged in our research involved differences in the perceptions of Japanese and American consumers. Amazon marketed the Kindle as a “library in one’s pocket.” A number of our informants believed that Japanese readers place less value on this benefit because Japanese publishers already sell paperback books in a size that fit easily in a jacket pocket, and book stores are conveniently located within or near major train stations.

Link to the rest at The London School of Economics

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Amazon, Disruptive Innovation, Ebooks, Non-US

10 Comments to “Why e-readers succeeded as a disruptive innovation in the US, but not in Japan”

  1. The last lines of the excerpt raise an important point in passing. Japanese readers had and have easy access to a wider variety of content and physical format than their US counterparts. There are bookstores everywhere. Most people would pass several commuting to work or school or going shopping. The stock is extremely varied. And actual pocket sized books are common and varied. The Japanese market simply doesn’t have the huge, glaring deficiencies in supply the US market did.

    ETA: And lots are cheap.

  2. Felix J. Torres

    I’m a tad skeptical about the technological aspect cited.

    Dueling standards did not prevent VCRs from taking off and neither did the various fights in the early days of personal computing (Apple vs CP/M, APPLE vs DOS, Windows vs MacOS vs OS/2) prevent the rise of PCs or shrinkwrap software.

    It might have been a contributing factor on top of the other factors but it was hardly a swing factor considering mobi vs epub didn’t prevent mainstreaming of ebooks in the english language markets.

  3. Clayton Christensen’s theories have been debunked over and over again. They only work when you apply them to selectively to the past (Monday morning quarterbacking of cherry picked examples). They never work for predicting the future. He’s been predicting that Apple would fail since the iPod came out. (Remember the iPod?)

    https://stratechery.com/2013/clayton-christensen-got-wrong/

    Likewise, I agree with Felix that the technological mumbo jumbo of the explanation seems strained. One reason Japanese bookstores thrive is that Japan has huge sales of manga alongside regular books and a tradition of manga appealing to adults and children. There are still issues with digital comic viewing. So that might be a large part of why Japanese bookstores remain healthy. US mainstream bookstores are still resistant to stocking a lot of graphic novels and comics.

    • Distinguo: The article you cite clearly says that only one of Christensen’s two principal theories has been debunked – the one about the relative advantages of proprietary vs. modular systems. His original theory of disruptive innovation remains robust, with the caveat that it has limited applicability to consumer markets.

      In fact, ebooks are a classic example of disruptive innovation and have generally followed the trajectory Christensen describes, though with a complicating element of drag due to publishers’ exclusive control over individual products. Whereas Amazon‘s continuing market dominance with a proprietary platform is a classic example of why his second theory was wrong.

  4. “Japanese wholesalers were most likely to be hurt by the introduction of e-books. Publishers and retailers were heavily dependent on the two major wholesalers for sales of paper books.”

    It seems to me that the main reason e-books failed to capture readers in Japan is because the publishing ecosystem is stronger over there. Publishers and distributors have a greater ability to control the market without having to resort to price fixing and other means to protect their territory.

  5. just my .02 having been in Japan last year, the young are draped with gadgets of all kinds, I would imagine if it was compelling and new the young would definitely take it up.And agree with Mackay, if there are still probs with anime and manga showing up properly on a device, that wouldbe a prob. We bought such cool small palm sized books of manga however, that are easy to carryand voila, you just open the covers and there is the art. One second or less. No password. No search. lol

  6. Suburbanbanshee

    Um… ebooks in Japan are definitely a thing. The “phone novel” and “web novel” formats are very popular. Most of the big new anime and manga franchises seem to come from web novels.

    OTOH, these are usually indie and free, or supported by fans, unless/until picked up by a big company. (Like Train Man, Sword Art Online, GATE, or Log Horizon.)

    It is the publishing companies who have trouble selling ebooks.

    But the Japanese almost all have had smartphones already, and already were reading books on them for years, before Kindle came along. So no need for an ereader.

  7. Suburbanbanshee

    Forgot to mention that indies in Japan in most of the arts have more obstacles, thanks to the government being cozy with corporate keiretsu conglomerates, as well as with the Yakuza control of almost all live entertainment and venues.

    But my understanding is that Japanese indie ebooks are doing pretty well, despite all this.

    Also, bookstores are not something accessible to rural Japanese. But if you have a phone, you can download books off the Internet.

    As for bestsellers… Well, the big publishers may not be publishing them in eformats, and the penalties for pirates are substantial; but you can probably find unofficial eformats, all the same.

  8. Suburbanbanshee

    I think the main change is that, in the past, indie projects were regarded by publishers and media companies much as they once regarded fanfic and dojinshi. They were cute, and they were the minor leagues where you found new writers, but they were nothing to fear.

    Now publishers in Japan are getting nervous. You get these designations of indie ebooks. Probably the author of this article has been listening to big publishers and believing them.

  9. A few random comments (not necessarily true in all circumstances):

    1. Japanese bookstores sell on consignment (returns are allowed), under a resale price maintenance (RPM) system. Nevertheless, books in general are priced to be affordable (unlike CDs and DVDs in Japan).

    2. The YA novella (“light novel”) is alive and well.

    3. The author retains copyright and is rarely bound by a non-compete clause. Advances are equally rare and royalties have traditionally been based on the size of the print run.

    4. The MMPB is printed in the A6 (4×6 inch) format, with wrap-around glossy dust covers and flexible spines that last forever.

    5. For the MMPB edition, “doorstop” novels are often split into multiple volumes for portability. As Gordon Horne mentioned above, they’re truly pocked-sized and inexpensive.

    For example, the MMPB of Daughter of the Murakami Pirates (over 900 pages in the original edition) was released in four A6 volumes of around 350 pages and 680 yen ($6) each.

    6. Amazon and its competitors are pushing their respective ebook formats hard. I use Honto (honto.jp) and am always getting enticing emails promoting the latest free emanga and ebooks.

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