MITSUBISHI RESEARCH INSTITUTE, INC.

Economic Contribution of the Japanese
Film and Television Industry
ReportOctober 2012
Mitsubishi Research Institute, Inc.

MITSUBISHI RESEARCH INSTITUTE, INC.
Contents
1. Executive Summary ................................................................................................................... 1
1.1 FRAMEWORK AND METHODOLOGY .................................................................................................... 1
1.2 RESULTS FOR ECONOMIC CONTRIBUTION AND MARKET OUTLOOK....................................................... 1
1.3 RESULTS FROM CASE STUDIES ......................................................................................................... 2

2. Framework and Methodology ................................................................................................... 4
2.1 OUTLINE OF THE STUDY ................................................................................................................... 4
2.1.1 Purpose of the study.............................................................................................................. 4
2.1.2 Study items ............................................................................................................................ 4
2.1.3 Study flow .............................................................................................................................. 5
2.2 FRAMEWORK AND METHODOLOGY .................................................................................................... 5
2.2.1 Measures of economic contribution ....................................................................................... 5
2.2.2 Methodology and assumptions .............................................................................................. 6
2.3 DEFINITION OF INDUSTRY ................................................................................................................. 8
2.3.1 Categorizing the subsector .................................................................................................... 8
2.3.2 Structure of the Japanese Film and Television Industry ...................................................... 10
2.3.3 Scope of industry and market.............................................................................................. 13
2.4 APPROXIMATIONS AND LIMITATIONS ................................................................................................ 14
2.4.1 Time frame ........................................................................................................................... 14
2.4.2 Estimated versus actual figures........................................................................................... 14
2.4.3 Unit for Evaluation ............................................................................................................... 15

3. Study results............................................................................................................................. 16
3.1 FILM AND TELEVISION INDUSTRY (OVERALL)................................................................................... 16
3.1.1 Economic Contribution......................................................................................................... 16
3.1.2 Market outlook (2011 - 2016) ............................................................................................... 17
3.2 FILM PRODUCTION / DISTRIBUTION .................................................................................................. 21
3.2.1 Economic contribution ......................................................................................................... 21
3.2.2 Market trend......................................................................................................................... 21
3.3 TV PROGRAM PRODUCTION / DISTRIBUTION..................................................................................... 25
3.3.1 Economic contribution ......................................................................................................... 25
3.3.2 Market trend......................................................................................................................... 25
3.4 FILM EXHIBITION............................................................................................................................ 27
3.4.1 Economic contribution ......................................................................................................... 27
3.4.2 Market trend......................................................................................................................... 27
3.5 TELEVISION BROADCASTING .......................................................................................................... 31
3.5.1 Economic contribution ......................................................................................................... 31
3.5.2 Market trend......................................................................................................................... 31

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3.6 HOME VIDEO.................................................................................................................................. 37
3.6.1 Economic contribution ......................................................................................................... 37
3.6.2 Market trend......................................................................................................................... 37
3.7 ONLINE SERVICE ............................................................................................................................ 43
3.7.1 Economic contribution ......................................................................................................... 43
3.7.2 Market trend......................................................................................................................... 43
3.8 ESTIMATION OF MARKET SIZE ATTRIBUTED TO FILMS ........................................................................ 48
3.8.1 Revenue within each distribution window............................................................................ 48
3.8.2 Trend in number of film/video viewers ................................................................................. 51
3.9 CASE STUDIES FOR ECONOMIC CONTRIBUTION OF FILMS .................................................................. 53
3.9.1 Examples of economic ripple effects ................................................................................... 53
3.9.2 Economic ripple effects of films in the local economy ......................................................... 54
3.9.3 Economic impact of International Film Festivals ................................................................. 55

4. Appendix ................................................................................................................................... 59
4.1 METHODOLOGY AND SOURCES OF DATA ......................................................................................... 59
4.2 DETAILS FOR ESTIMATION OF MARKET SIZE ATTRIBUTED TO FILMS .................................................... 64
4.3 CURRENCY EXCHANGE RATE .......................................................................................................... 64
4.4 RESTRICTIONS............................................................................................................................... 65

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This report has been commissioned by The Motion Picture Association (MPA) in collaboration withJapan and International Motion Picture Copyright Association, Inc. (JIMCA). JIMCA represents theinterests in Japan of major motion picutre companies and the MPA.

Acknowledgements
This report required gathering data from number of sources, including publicly available data fromdomestic industrial organizations. We would like to thank the organizations below for their help in
our understanding of the data, as well as their cooperation with our interviews and discussions.


Foreign Film Importer - Distributors Association of Japan (FFIDAJ)

Motion Picture Producers Associations of Japan, Inc. (MPPAJ)Japan Video Software Association (JVA)The Association of Japanese Animation (AJA)

Japan Commercial Broadcasters Association (JBA)Japan Association of Theatre Owners (JATO)

Compact Disc & Video Rental Commerce Trade Association of Japan (CDV-J)(Japanese alphabetical)

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1. Executive Summary
This study intends to estimate the economic contribution of the Japanese film and television industry.
In particular, direct/ indirect economic impacts were estimated, taking into account market trend
analysis for each defined market. Taking the results into account, forecasts have been conductedbased on market outlook over the next five years. Also, apart from these macro-economic approaches,
this study covers case studies to give a practical illustration of the economic effects originating in films.

1.1 Framework and methodology
In order to assess the economic contribution of the Japanese film and television industry, this study
estimates economic indicators such as Gross Output, Value Added, Labor Income and Employment.
These economic indicators were estimated through direct impact which describes the economic
activity within the defined industries, and indirect impact which describes the economic activity inother industries triggered by the direct impact, as well as induced impact which describes the further
economic impact resulting from increase in income. These are added to derive the total economic
contribution for each indicator.

1.2 Results for economic contribution and market outlook
The economic contribution in 2011 brought about by the film and television industry in Japan are as
follows:


The total gross output in Japan arising as a result of the film and television industry isapproximately 5,436.4 billion Yen ($68.0b) for the direct impact, and 11,664.2 billion Yen($145.9b) for the total contribution including indirect/ induced impact.

The total value added to the Japanese economy in 2011 from film and television industry isapproximately 2,491.2 billion Yen ($31.2b) for the direct impact, and 5,770.1billion Yen ($72.2b)
for the total contribution including indirect/induced impact.

The labor income in Japan generated as a result of film and television industry is 1058.6billion
Yen ($13.2b) for the direct impact, and 2,654.5 billion Yen ($331.9b) for the total contribution
including indirect/ induced impact.

The total value added for the film and television industry accounts for 0.53% of GDP1 for the
direct impact, 1.23% for the total contribution. The former is larger than the automobile
manufacturing industry (excl. auto-parts industry) which accounts for 0.49% of GDP in 2011.

1

Nominal GDP for 2011 : 468.7 trillion Yen (Announced by the Cabinet Office)1

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

The total employment created in Japan as a result of film and television industry is estimated to
be 88,569 for the direct impact, and 264,707, for the total contribution including indirect/ induced
impact, for full time equivalent (FTE) positions.

The 5 year market outlook (2011 to 2016) in Japan is as follows. This forecast covers the
distribution (consumption) market, in particular, film exhibition, TV broadcasting, home video andonline service market.


In overall, the film and television industry is forecast to grow at CAGR 1.5% to reach 4835.8
billion Yen ($60.5b) by 2016, compared to 4479.5 billion Yen ($56.0b) in 2011.

The Japanese economy as a whole experienced a reduction during 2011 due to the Great East
Japan Earthquake Disaster in March 2011. However, the market is expected to resume its paceto an increase base toward 2016, mainly pulled by the broadcasting market which accounts forover half of the industry revenue.

The key factors for growth in the Japanese film industry are creating a basis to widen consumer
demand, through development in digitization, and new trends such as ODS (Other Digital Stuff/
Online Digital Source).



In addition, diverse distribution channels in the broadcasting sector, which has been fully digitizedand channel re-allocated, as well as the penetration of next generation fixed / mobile broadband
network, should trigger revitalization in the audiovisual market as a whole.

1.3 Results from case studies
The findings through case studies, focusing on economic ripple effect of films, are as follows:

Quantitatively assessing the market size attributed to movie content, in 2011, film exhibition
revenue was 181.2 billion Yen ($2.3b), and secondary distribution market (broadcasting, home
video, online service) was 560.3 billion Yen ($7.0b), a three-fold over film exhibition revenue inprimary distribution market. It accounts for approximately 10% of the direct impact in gross output
for the corresponding industry (4,479.5 billion Yen: $56.0b).

The number of film and home video viewers is growing. To add, we can see tremendous growthin number of online video viewers. This indicates the potential demand for audiovisual industry.



It is essential for the industry to adapt to these structural changes, and to deliver diversity of
products and services, so as to benefit not only to existing customers but also to new customers.



According to the external studies, there are films that created an economic ripple effect, such as
on tourism and transportation, in the local economy, which is almost the size of its film exhibition
revenue (e.g. “Hula Girl”).

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

For example, Disney maintains box-office hits every year, and related business which accounts
for almost 500 billion Yen per year. It is assumed to have a large impact in terms of economic
contribution.



In 2011, Tokyo International Film Festival (TIFF) was responsible for the 0.95 billion Yen ($11.9m)
of direct economic effect. Also, external studies have found that winning an international filmaward has a major economic effect. For example, the economic impact of the Japanese film
“Departure” doubled by winning the Academy Award for the Best Foreign Language Film.



The results of the case studies imply that the film industry contributes to the overall economy aswell as to the local economy, such as tourism, in various ways, and that it holds an important rolefrom a social/economic perspective.

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2. Framework and Methodology
2.1 Outline of the study
2.1.1 Purpose of the study
The aim of this report is to analyze the contribution of the Japanese film and television industry to theJapanese economy, quantitatively and qualitatively. In particular, this study measures the direct andindirect economic impact derived from production, distribution and exhibition/ consumption of film andtelevision content. In addition, this study includes industry outlook with forecast over the next five
years, considering the recent market trends in each subsector, which is defined in this report.
Also, apart from these macro-economic approaches, this study covers case studies to give a practicalimage of the economic effects originating in films.

2.1.2 Study items
This report covers the study items shown below.

Table 2-1 Description of the study items
Study items

Description

ArticleEstimation of Economic

The results describe the economic impact of film and

3.1 –3.7

Contribution

television industry as a whole as well as for each subsector forthe year 2011. This is the main purpose of the assignment.

Market trend analysis

The results include the past and recent market trend for eachsubsector within the industry, by explaining time series ofimportant statistics, and/or examples of major services.

Industry

Outlook(Market Forecast)

The results explains the industry outlook and estimates for

3.1.2

market forecast for major subsectors taking into account themarket trend analysis.

Estimation of market

The study item intends to focus on the film content, andsize attributed to films

results include estimates of the market size (direct impact)

3.8

attributed to it.
Casestudiesfor

The study intends to describe the “ripple effects” originated on

economic contribution

films and international film festival based on case studies. Theof films

results include survey results of external studies andestimates of direct economic impact.

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3.9

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2.1.3 Study flow
This study was conducted based on the following steps:

Note that this report should be read in conjunction with the Restrictions stated in Appendix.
2.2 Framework and methodology
2.2.1 Measures of economic contribution
This study estimates the economic contribution of the film and television broadcasting industry in four
indices. Table 2-2 describes each index in details.

Table 2-2 Economic index measured in this study
Index

Definition

Gross Output

Total amount of production concerning value of goods and services based on laborand capital within the industry. This represents the total amount of revenue of allparticipants in the industry. Gross Output includes the intermediate inputs, which isthe value of all goods and services used as inputs to generate that output.

Value Added

Value that was added by activities within the industry, which excludes the value ofintermediate input from the Gross Output. It consists of production surplus, labor
income and net indirect tax. Value Added is often described as the gross domestic
product (GDP) contribution of an industry. It is the most commonly used measure of
the value generated by an industry or by the economy as a whole, and can be used
to compare with national GDP statistics.

Labor Income

A subcomponent of Value Added which is distributed to the employer, who offered
labor within the industry. It represents the value of output generated by the entity’s
direct labor inputs, as measured by the income to labor.

Employment

Total of number of employees in each industry. In this study, in principle, Full Time
Equivalent (FTE) jobs are estimated, rather than total jobs which includes part-time.

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Economic contribution estimated in this study represents the contribution of film and televisionindustry to the domestic economy. In particular, it is the total of direct, indirect, and induced impacts
concerning economic index shown in Table 2-2. In this study, these are defined as follows:

Direct impact: Gross Output, Value Added and Employment that arise based on capital and labor
attributed to a specific industry, which in this study, film and television broadcasting industry. It
represents the direct economic activities in the industry, which includes, for example, production anddistribution of film and television broadcasting content as well as film exhibition.

Indirect impact: Gross Output, Value Added and Employment that arise as a consequence ofchanges in the level and value for suppliers of goods and services to that industry. It represents
economic activities that are brought to other industries which provide goods and services to film andtelevision broadcasting industry. For example, it includes revenue in industries which provide
materials to location for film production.

Induced impact: Gross Output, Value Added and Employment that arise as a consequence ofincrease in the level and value of expenditure on goods and services due to the increased labor
incomes, within film and television industry and the industries that supply them.
The impact mentioned above are added together to present the total economic impact.

2.2.2 Methodology and assumptions
2.2.2.1 Estimation of direct impacts
We estimated the direct component of the film and television broadcasting industry’s economic impact
in terms of its contribution to the four indices (Table 2-2). The estimation flow is as follows:First, we estimated the total revenue for each subsector, which we defined it as Gross Output.
The figures our based on industrial statistics published from the government and industrialorganizations. Also, we gathered the data for Employment (number of employees : FTEs) fromthese statistics, and conducted necessary estimation to meet the definition of each subsector.



We selected an industry sector that best describes each subsector, from the national
Input-Output transaction table. Input-Output transaction table is a format that describes thetransaction between goods and services of economic activities during the year. This study used
“Information and Communication Industry Input-Output transaction table” published by the
Bureau of Statistics of Ministry of Internal Affairs and Communications. It categorizes industries
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that are relatively comparable to the industries defined in this study.


We then used the Input-Output transaction table to estimate the ratios of Value Added to Gross
Output, Gross Output to Employment, and Gross Output to Labor Income in the selected industry
sector, to derive the three indices from the Gross Output.

2.2.2.2 Estimation of indirect and induced impacts
The indirect and induce impacts were estimated by basically multiplying certain multipliers to thedirect impact. The multipliers were obtained from the “Inverse matrix table” contained in the
Input-Output transaction table mentioned in the previous section. Inverse matrix table is a table which
describes the value of economic activity required to meet the demand, when additional demand in acertain industry is assumed. The sum of inverse matrix coefficient (“Multiplier”) is the total volume ofeffect in all the industries within the economy, when there is 1 unit demand in a certain industry sector.
Therefore, the multiplier describes the “pump-priming effect” (scale of impact on own industry as wellas on other industries) and is represented in figure of 1 or more. For example, when a multiplier is“1.5”, “1” equals the value attributed to its own industry and “0.5” to the other industries.
The induced impacts were estimated by first obtaining the portion of the estimated labor income fromthe direct and indirect impact, attributed to consumption. This value is attributed to each industry
based on average propensity of consumption, which is the average percentage income spent, anddistribution ratio of private final consumption expenditure to every industry. Finally, the multiplier ismultiplied to that expenditure and added up to derive the induced impact.
For the indirect and induced impact of Employment, this study focuses on employment based on
FTEs. However, the “Information and Communication Industry I-O table” mentioned above, does notdistinguish FTEs from the total number of employees. Therefore we combined the national
Input-Output table “2005 Input-Output table” compiled by Statistics Bureau of Japan, which
aggregates the FTEs for all industries. In particular, we derived the ratio for FTEs to total employees
for each industry from the 2005 I-O table, and multiplied the ratio to the employment table contained in
the “Information and Communication Industry I-O table”. Next, employment coefficients (ratio of FTEs
to gross output) for each industry are derived in order to estimate the multiplier for indirect andinduced impact for employment, taking into account the increase in gross output mentioned above.
The multiplier is them multiplied to the direct impact (employment).
Details of the methodology are provided in the Appendix.

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2.3 Definition of industry
2.3.1 Categorizing the subsector
In this study, we categorized individual subsectors within film and television broadcasting industry by
the following two aspects:
Types of output

Stages in the value chain

Breaking the industry down in these aspects helps understanding the value added in different stagesof the economic activity in the industry. This section explains the industry and subsectors covered inthis report in terms of the two aspects.

2.3.1.1 Types of output
Types of output refer to the output of content in products or services within the industry. In this study,
the following outputs are included:- Films (Japanese and foreign)- TV programs (domestic and foreign program distributed domestically, including commercials)- Other audiovisual content
The categorization of the above is adopted from statistics published from government organization,
hence lowering the barriers in estimations. It currently represents the key output of the industry.
However, when economically evaluating the content industry, it is difficult to distinguish the value
added within the flow from production to final consumption. Moreover, taking into account the recent
trends in the market environment, its range of outputs is increasingly transformative. To give examples
relating to film and television broadcasting industry; convergence among different types of content,merchandizing originated in film/ television programs, and increasing demand in multi-screen (TV/PC/ mobile) provision over broadcast and communication network. The framework and industry
categorization used in national statistics do not currently reflect these trends. Consequently, analysis
of outputs based on traditional film screen and television screen will not reflect the whole industry.
This is why we have covered market trend analysis for each subsector to assess in a wider view,
given that the estimates are bound by available statistics.

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2.3.1.2 Stages of Value Chain (subsectors)
The value chain of the type of outputs, described in the previous section, which are produced andprovided to consumers, can be broken down into the following six subsectors:- Production- Distribution- Film Exhibition- Television Broadcasting（Terrestrial /satellite / CATV）

Distribution(Consumption)- Home video (retail and rental)- Online service (Internet distribution to TV/PC/Mobile)

In this study, we analyze each subsector in terms of economic impact as well as market trend analysis.
The definition for each subsector is explained in Table 2-3.

Table 2-3 Definition of the each subsector
Subsector

Definitions

Production

Production subsector refers to producing the type of output defined in this report(film, television program, and other visual/ video content), which includes
development, photography and related technical process.

Distribution

Distribution subsector refers to distributing the produced or completed content. It
does not include retail distribution.

Film Exhibition

Exhibition subsector refers to displaying the distributed films to the public, throughlocation such as cinema and theatres. The revenue is generated from admission
fees paid by the audience. Revenue from merchandising in theaters is not included.

Television

Broadcasting subsector refers to distributing of content through broadcast television

Broadcasting

media. In this study, terrestrial, satellite, and CATV is covered as these are the main
television media in Japan. The revenue is generated from subscription fees andadvertisement.

Home video

Home video subsector refers to selling or rental of content on physical format suchas DVDs/Blu-ray discs. In this report, the figures used to derive the economic
impact, are wholesale-based, which is the sale to retail shops or rental shops.

Online service

Online service subsector refers to distributing of content through internet media,
viewed on multiple platforms (e.g. PC, TV, and Mobile). Internet Protocol TV (IPTV)
is included here and its market trend is explained within this subsector.
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Out of those listed above, film exhibition, broadcasting, home video and online service are generally
referred to as “distribution” in a broad sense or “window”, which films or TV programs are delivered toconsumers. Film and television broadcasting industry is one of the most advanced areas in thecontent industry in terms of multi-use / multi-window. Especially, film industry is remarkable in thattrend. When a produced film is released, in general, revenue is generated from admission fees paidby the audience through exhibition in the cinemas and a portion of the revenue is paid to film
production / distribution companies. After a certain period, the same film is delivered to consumers
through multiple windows, such as pay-tv, home video (retail and rental) and terrestrial television
broadcasting. Hence, revenue is generated from retail sales or advertisements. In addition, in recent
years, internet media and devices such as mobile phones / tablets are penetrating at an enormous
rate, leading to diversity of windows. Business model tend to diversify also, as well as choice in pricing
for consumers such as metered-rate (traditionally, Pay-Per-View) or flat-rate. This implies that themeans to deliver film and television content to potential viewers is widening.

2.3.2 Structure of the Japanese Film and Television Industry
2.3.2.1 Japanese Film Industry
Industry structure of Japanese film is shown in Figure 2-1. In the case of Japanese films, production
company, distribution company and exhibition company each play a large role. Production company
produces film, and distribution company reserves screens in theaters and also rolls out sales
promotion. Exhibition company basically operates and manage movie theaters. The major domestic
film companies, which is the four member companies of the Motion Picture Producers Association ofJapan, Inc. (Shochiku, Toho, Toei and Kadokawa), integrates production, distribution as well as
exhibition. As for the exhibition companies, other players include independent companies as well as
foreign-affiliated companies which mostly manage the cinema complex. Also, many of the Japanesefilms are now produced by the “co-production committee”. The committee consists of film companies,
publishing companies, video retailing companies, advertising firms and broadcast operators.
Co-production committee scheme raises the recognition (of the film) relatively in a short term andcontributes to the increase in exhibition mobilization, since fund-raising, risk-avoidance andsynergistic effect can be expected.
In the case of foreign films, there are mainly two ways to distribution. One way is when major foreign
studios distribute through affiliated distribution agencies2 and the other is for the Japanese distribution
2

Warner Entertainment Japan, Sony Pictures Entertainment Japan, Walt Disney Japan, ParamountJapan G.K., Twentieth Century Fox Film Corporation, and Universal Pictures (Toho-Towa is
responsible for distribution). As for the other independent distributing agencies of foreign films,
Toho-Towa, GAGA Corporation, Asmik Ace Entertainment Inc., and others can be listed.
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agencies to purchase a film through foreign market. The member companies also purchase anddistribute foreign films. Film exhibition does not depend on the players categories (major domestic
companies, independent, foreign-affiliated), and are released in various movie theaters such as
cinema complex.

Figure 2-1 Structure of domestic film industry(Source： Mitsubishi Research Institute, Inc. based on multiple sources)

2.3.2.2 Television Broadcasting Industry
Figure 2-2 shows the structure of the Japanese television broadcasting industry. In Japan, television
broadcasting is broadly divided into terrestrial broadcasting, satellite broadcasting and CATV. In
recent years, IPTV (Internet Protocol TV) and 1 SEG broadcasting provided for mobile phones havepenetrated to a certain level. The terrestrial broadcasting consists public broadcaster NHK andcommercial broadcast operators. NHK collects subscription fee and commercial broadcast operators’
business is basically based on advertising revenues. Commercial broadcast operators conclude“Network Agreement” to build cooperative relationships such as programming, news report,
production and sales business among local stations. Currently, there are five commercial broadcast
operators.
For satellite broadcasting, there are two categories; BS (Broadcast Satellite) broadcasting which
utilizes broadcast satellite, and CS (Communication Satellite) which utilizes communication satellite.
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The former has been developed as semi-quasi-media and the latter has developed as multi-channel
specialized media. In 2002, CS broadcasting utilizing communication satellite, which is at the same
orbit as BS broadcasting (110°East), has started. However, due to a revision in the regulatory
framework, BS broadcasting and CS broadcasting (110°East) are currently categorized as are
categorized as “Primary Broadcasting”, which is the same as terrestrial broadcasting, and are referred
to as “Satellite Primary Broadcasting”. Other satellite broadcasts are categorized as “Generalbroadcasting”, which is the same as CATV, and are referred to as “Satellite General Broadcasting”. As
for the CATV, there are two categories. One is which CATV provides retransmission of terrestrial
television broadcasting programs. The other is which CATV provides pay multi-channel packages thatbundle retransmission of terrestrial and BS broadcasting with specialized channels. Moreover, someprovide services with VOD services or internet connections and telephone services.
As of April 2012, there are 229 terrestrial commercial broadcast operators (255 of them are operatorsthat provide community broadcasting), 108 satellite commercial broadcasters, 556 CATV operators(operators that have wired electronic communication facilities that provide their own broadcasting)and 5 of them are IPTV operators (broadcasting by IP multi-cast scheme).

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Figure 2-2

Structure of Domestic Television Broadcasting Industry(Source： Mitsubishi Research Institute, Inc. based on multiple sources)

2.3.3 Scope of industry and market
Based on 2.3.1- 2.3.2 and the scope and categories of the available statistical data, we have set thetarget scope of this study as shown in Figure 2-3. The economic contribution of each window in
distribution (consumption) includes all visual content other than film exhibitions, as sum in general,and as for the films, revenues related to the film content are described in section 3.8.
For the market outlook, we have set distribution (consumption) market, as whole, for forecast.

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Figure 2-3 Scope of the industry and market

2.4 Approximations and limitations
2.4.1 Time frame
The economic contributions stated in this study are basically based on the economic activity of theyear 2011. However, note that the size of economic activity of film and television broadcasting industry
relatively tends to change year by year, similar to other content industries such as music/ books, andthat the cycle goes beyond one year and spans multiple years.
To add, as for the economic measures throughout the industry, although there are some differencesamong subsectors, the Great East Japan Earthquake of March 2011 should be considered as a
reduction factor as a whole. The industry outlook which forecasts the next five years (2012 to 2016) isbased on past trends taking into account this reduction factor.

2.4.2 Estimated versus actual figures
Numerical values of 2011 were based on the latest data available, by using the actual value of thecorresponding year or estimated by taking into account the trend in the market and related measured
index. Also, for some subsectors, the available statistics do not fully specify the component parts ofthe subsector defined in this report, therefore a number of assumptions were made in order toestimate the most approximate results. In particular, approximations from the similar or broader
industry categorization have been used.
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The figures for Employment, we used the actual value for the year 2010 or estimated taking into
account the ratio of the number of employees to the gross output in the industry that best describes
the subsector in focus. However, note that taking into account the labor-intensive employment
structure often seen in the film industry, there is a limit in estimating the snapshot of the current
employment status.

2.4.3 Unit for Evaluation
When considering the flow of added value along the value chain in the industry, there are important
aspects such as to avoid double counting and to reflect the actual structure in each subsector. In
particular, we need to define the unit of evaluation, whether it is based on production or demand(consumption), or other aspects such as usage scenes.
For example, when evaluating based on production, in general, there is an advantage ofunderstanding the value added in the content (film or TV program) production stage. Therefore, it canbe said that it is a valid evaluation unit in understanding the cross-window or value added within
indirect economic effects to other industries, before the produced content is consumed. However,compared to the general consumer goods where value added can be understood from differences
between production and retail sales, it is difficult to discriminate the value added, due to its intangible
nature and mixed distribution channels such as broadcasting or internet. On the other hand, whenevaluating based on demand (consumption), the value added includes all the value added in the
distribution process. However, it is likely to double count the value added and be over-estimated,since it is difficult to distinguish between Business to Business and Business to Consumer relationship.
Therefore there are limitations in understanding the value added flow from content production to
consumption, with a single evaluation unit. Moreover, there are limitations in available data acrossevery subsectors defined in this report.

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3. Study results
3.1 Film and Television Industry (Overall)In this section, we present the total estimated economic contribution for 2011 concerning all theindustries defined in this report, as well as five year industry outlook to 2016.

3.1.1 Economic Contribution
The economic contribution in 2011 brought about by the film and television broadcasting industry inJapan are as follows.


The total gross output in Japan arising as a result of the film and television industry isapproximately 5,436.4 billion Yen ($68.0b) for the direct impact, and 11,664.2 billion Yen($145.9b) for the total contribution including indirect/ induced impact.

The total value added to the Japanese economy in 2011 from film and television industry isapproximately 2,491.2 billion Yen ($31.2b) for the direct impact, and 5,770.1billion Yen ($72.2b)
for the total contribution including indirect/induced impact.

The labor income in Japan generated as a result of film and television industry is 1058.6billion
Yen ($13.2b) for the direct impact, and 2,654.5 billion Yen ($331.9b) for the total contribution
including indirect/ induced impact.

The total value added for the film and television industry accounts for 0.53% of GDP3 for the
direct impact, 1.23% for the total contribution. The former is larger than the automobile
manufacturing industry (excl. auto-parts industry) which accounts for 0.49% of GDP in 2011.



The total employment created in Japan as a result of film and television industry is estimated to
be 88,569 for the direct impact, and 264,707, for the total contribution including indirect/ induced
impact, for full time equivalent (FTE) positions.

3

Nominal GDP for 2011 : 468.7 trillion Yen (Announced by the Cabinet Office)16

MITSUBISHI RESEARCH INSTITUTE, INC.
Table 3-1 shows the detailed estimated results for economic contribution and Table 3-2 shows thecomparison results with other industries.

Table 3-1 Estimated economic contribution (overall)[Unit: 100M Yen, person]
Industry

Gross output

Value added

Labor income

Employment

DirectTotal

DirectTotal

DirectTotal

DirectTotal

contribution

contribution

contribution

contribution

contribution

contribution

contribution

contribution

Film Production

1,380

2,787

626

1,399

309

683

8,013

23,659Film Distribution

1,398

2,823

634

1,417

313

691

1,535

4,531

TV Production

3,560

7,190

1,614

3,608

797

1,761

13,071

38,595

TV Distribution

3,230

6,524

1,464

3,274

724

1,598

2,503

7,391

Film Exhibition

1,812

3,835

666

1,785

356

891

15,37931,352

TV Broadcasting

39,52986,403

17,88042,2706,644

18,59243,093148,024

Home video

2,611

4,920

1,775

3,032

1,337

1,898

2,243

4,955

Online service

844

2,160

253

916

106

431

2,732

6,200

54,364

116,642

24,912

57,701

10,586

26,54588,569264,707

Total

Table 3-2 Comparison between film/ television industry and other industries[Unit: 100 M Yen ]Film Industry andAutomobile Manufacturing Industry

Television Industry*excluding auto-parts industry

DirectTotal

DirectTotal contribution

contribution

contribution

contribution

Value added

24,911

57,701

23,192125,032

GDP Contribution

0.53%

1.23%

0.49%

2.67%

* The figures for automobile industry (excluding auto-parts industry) is estimated based on data published by Japan Automobile
Manufacturers Association, Inc (JAMA), and 2005 Industry Input-Output table

3.1.2 Market outlook (2011 - 2016)
The 5 year market outlook (2011 to 2016) in Japan is as follows. This forecast covers the distribution(consumption) market, in particular, film exhibition, TV broadcasting, home video (retail, rental) andonline service market.
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

In overall, the film and television broadcasting industry is forecast to grow at CAGR 1.5% to reach4835.8 billion Yen ($60.5b) by 2016, compared to 4479.5 billion Yen ($56.0b) in 2011.



Japanese economy as a whole had a reduction impact during 2011 due to the Great East Japan
Earthquake Disaster in March 2011. However, the market is expected to resume its pace to anincrease base toward 2016, mainly pulled by the broadcasting market which accounts for overhalf of the industry revenue.

The key factors for growth in the Japanese film industry is creating demand to widen consumer
basis, through development in digitization, and new trends such as ODS (Other Digital Stuff/
Online Digital Source).



To add, diverse distribution channels in broadcasting sector, which had been fully digitized andchannel re-allocated, as well as penetration of next generation fixed / mobile broadband network,
should trigger revitalization in the visual content market as a whole.

Figure 3-1 shows the market forecast for film industry and Television broadcasting industry.

Figure 3-1 Market forecast (2011-2016)* The figure for broadcasting sector in 2011 is estimated.

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MITSUBISHI RESEARCH INSTITUTE, INC.
The basis of the forecast for each market is as follows.
 Film exhibition market: The market most recently marked the highest figure in its history, reaching
220.7 billion Yen in 2010. We assumed that the market trend observed in 2000s will continue forthe next five years. In particular, adopting a trend forecast method for the total revenue (domestic
and foreign films) during 2000 and 2011, we forecast the market to maintain 200 billion Yen as anaverage. Demand creation to widen consumer basis, through development in digitization, and new
trends such as ODS are essential for growth in this sector.
 Television broadcasting market: For terrestrial and satellite broadcasting markets, we adopted the
mid-term forecast results published by the Japan Commercial Broadcasters Association (JBA)4,
which covers advertisement forecast toward 2020 based on the Japanese economy outlook5 andrelationship among advertisement media. According to its results, during 2011 and 2015, television
advertisement market will grow ranging from 0.4% to 3.4% per year, and growth will decelerate
after 2016. Also, satellite media advertisement will see strong growth toward 2015, and also
decelerate from late 2015. The CAGR for television and satellite media advertisement is 1.4%,
4.1%, respectively, which we have adopted in our forecast. For CATV, considering the past trend,
we forecast its growth toward 2016 at CAGR 1.6% which is derived from the growth rate of theabove two broadcasting media. The television broadcasting market is entering a new era, due tofull digitization which was completed during 2012, and channel re-farming have been put forward
including high definition channels. In mid-term, with strong growth in the number of viewers for
multi-channel TVs such as satellite, advertisement revenue is also expected to expand.
 Home video (retail, rental) market: We assumed that the market trend observed in 2000s willcontinue for the mid-term. In particular, adopting a trend forecast method for the total revenue (selland rental) during the past decade, we forecast the market to continue to reduce at CAGR 5.1%.
However, the market anticipates demand increase resulting from distribution of Blu-ray discs,
which is already gaining concrete market share. Note that the forecast for home video market iswholesale based figures.
 Online service (TV/ PC/ Mobile) market: We forecast its growth toward 2016 at CAGR 2.6% which
is derived from the growth rate of internet advertisement, based on the JBA forecasts mentioned
above. This market is gaining momentum on the basis of consumer demand in visual content
viewing over next generation fixed and mobile network, a highly penetrating infrastructure in Japan.

4

MINPO KEIEI SHIKIHO (Commercial Broadcasters Management quarterly), June 2012.
JBA sets the Japanese economy’s preconditions based on “The 38th mid-term economic forecast(interim report), released on March 2, 2012 by the Japan Center for Economic Research (JCER). It
considers economic average growth of 0.8% for 2011 to 2015, and 1.1% for 2016 to 2020.
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MITSUBISHI RESEARCH INSTITUTE, INC.
In particular, multi-channel broadcasting and Video-On-Demand (VOD) market will continue togrow. To add, high-capacity/ high-speed mobile network and high-spec devices has realized
long-length streaming such as movie in full package, therefore it is anticipated that advanced
multi-screen would bring new style of visual content viewing for the consumers.

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3.2 Film production / distribution

3.2.1 Economic contribution
The estimated result of the economic contribution of the film production/ distribution industry isoutlined in Table 3-3. The film production industry has brought the economic effect of 278.7 billion Yen
in total for the gross output, 139.9 billion Yen in total as the value added, and 23,659 employees.
Likewise, the film distribution industry has brought the economic contribution of 282.3 billion Yen in
total for the domestic production, 141.7billion Yen in total as the value added, and 4,531 employees.
Especially, since the production industry mobilizes a large scale of the staff ranging from projectplanning to location, film shooting, editing and so on, it can be said this is a labor-intensive industry
that creates much employment compared to the distribution industry. In particular, it is estimated thatthe revenue per capita is 1.72 million Yen per person, and 9.11 million Yen per person in the
production industry and the distribution industry, respectively.

Table 3-3 Economic contribution- Summary of results[Unit: 100M Yen, person]

Industry

Gross output

Value added

Labor income

Employment

DirectTotal

DirectTotal

DirectTotal

DirectTotal

contribution

contribution

contribution

contribution

contribution

contribution

contribution

contribution

Production

1,380

2,787

626

1,399

309

683

8,013

23,659Distribution

1,398

2,823

634

1,417

313

691

1,535

4,531

Total

2,778

5,610

1,260

2,816

622

1,374

9,548

28,190*The figures above show results for 2010, due to data availability.

3.2.2 Market trend
3.2.2.1 Revenue
The revenue from film production and distribution industries is shown in Figure 3-2. This industry
tends to be influenced by a degree of prosperity of the produced works such as numerous box-officehits and so on. However, in recent trends the revenue in domestic production and distribution
industries tend to expand due to the popularity of the domestic films. As for the revenue, in addition to
the revenue from the main production and distribution of films, revenue from various rights
management, including TV broadcasting rights, has increasingly accounted for the percentage. It
accounts for 24% of the entire revenue for FY 2010.
The revenue from production industry and that of the distribution industry cannot be separated in the21

MITSUBISHI RESEARCH INSTITUTE, INC.
current statistics. However, according to the statistics published by the Ministry of Economy, Tradeand Industry in 2004, the annual revenue of the film production industry (including the rights revenue)
was 122.9 billion Yen, and 124.4 billion Yen for the film distribution industry, which was approximately
equal to one to one.

Figure 3-2 Revenue from film production and distribution industries6(Source: “Survey of Selected Service Industries”, Ministry of Economy Trade and Industry)

3.2.2.2 Number of distributed films
The number of Japanese and foreign films released in Japan is shown in Figure 3-3. Reversal
phenomenon in numbers of Japanese films and foreign films was seen twice, in 1987 and 2006.
Currently, the number of released Japanese films tends to be larger than that of foreign films.

6

The index related to the film production and distribution business is extracted from the “Survey of
Selected Service Industries (Production and distribution of video content)”
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MITSUBISHI RESEARCH INSTITUTE, INC.
Figure 3-3 Number of distributed films (Japanese and foreign)(Source: Motion Picture Producers Association of Japan, Inc.)

3.2.2.3 Television’s role in the film industry
The film industry in Japan, especially for the Japanese films, leaped forward due to the extensive
promotion (i.e. advertisement in a spot time and in television programs) of films led and produced by
the commercial TV broadcasters in the 2000's. For example, in 2006, when the most recent reversal
phenomenon between Japanese and foreign films was seen, 45 out of 404 Japanese films weremainly produced by the TV broadcasters. As previously stated, co-production committee scheme is
the mainstream in Japan, and films produced mainly by the TV broadcasters are increasing as they
had become one of the key players in the committee.
Revenue from film business of major 5 commercial TV broadcast operators as well as its contribution
to the overall revenue is shown in Figure 3-4. In 2011, it earned nearly 30 billion Yen, which was alarge contribution, considering the fact that the Japanese film revenue is approximately 100 billion Yen
per year. (However, it should be noted that the revenue includes film related business). TV
broadcasters devote themselves to making entertainment films, and have become a driving force tocreate successful ones. It can be said this also contributes to the revitalization of local cinema
complex where local affiliated stations have contributed.
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MITSUBISHI RESEARCH INSTITUTE, INC.
Figure 3-4 Major commercial broadcast operators' revenue from film business**The total revenue of 5 broadcast operators: Nippon Television, Tokyo Broadcasting System, Inc., Fuji
Television Network, Inc., and TV Asahi Corporation(Source: Financial results from commercial broadcast operators)

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MITSUBISHI RESEARCH INSTITUTE, INC.
3.3 TV program production / distribution
3.3.1 Economic contribution
The estimated result of the economic contribution of the TV program production/ distribution industry
is shown in Table 3-4.
The TV program production industry has brought the economic contribution of 7,190 billion Yen in total
for the gross output, 360.8 billion Yen in total as the value added, and 38,595 employees. Likewise,
the TV program distribution industry has brought the economic contribution of 652.4 billion Yen in total
for the domestic production, 327.4 billion Yen in total as the value added, and 7,391 employees.

Table 3-4 Economic contribution- Summary of results[Unit: 100M Yen, person]

Industry

Gross output

Value added

Labor income

Employment

DirectTotal

DirectTotal

DirectTotal

DirectTotal

contribution

contribution

contribution

contribution

contribution

contribution

contribution

contribution

Production

3,560

7,190

1,614

3,608

797

1,761

13,071

38,595Distribution

3,230

6,524

1,464

3,274

724

1,598

2,503

7,391

Total

6,790

13,713

3,078

6,882

1,521

3,359

15,57445,986* For the direct contribution, 2011 figures are estimated based on trend analysis, 2010 actual result is used
for employment.

3.3.2 Market trend
3.3.2.1 Revenue
Production and distribution of TV programs has the most highest share in terms of revenue within“Motion Picture and Video Production/ Distribution "(Industrial Classification) in Japan. Revenue fromthe TV program production and distribution industry is shown in Figure 3-5. Similar to the film
production and distribution industry, the increasing tendency in revenue can be seen in this industry
as well. As for the revenue breakdown, in addition to the revenue from the main business of the
production and distribution of TV programs, the revenue from the commissioned production has
increasingly accounted for the percentage in the breakdown.

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MITSUBISHI RESEARCH INSTITUTE, INC.

Figure 3-5 Revenue from the TV program production and distribution industry7(Source: “Survey of Selected Service Industries”, Ministry of Economy Trade and Industry)

7

The index related to TV program production and distribution is extracted from the "Motion Picture
and Video Production/ Distribution "section in Survey of Selected Service Industries (Ministry of
Economy, Trade and Industry).
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MITSUBISHI RESEARCH INSTITUTE, INC.
3.4 Film Exhibition
3.4.1 Economic contribution
The estimated result of the economic contribution of the film exhibition industry is shown in Table 3-5.
The film exhibition industry has brought the economic contribution of 383.5 billion Yen in total for gross
output, 178.5 billion Yen in total as the value added, and 31,352 employees.

Table 3-5 Economic contribution- Summary of results[Unit: 100M Yen, person]

Industry

Gross output

Value added

Labor income

Employment

DirectTotal

DirectTotal

DirectTotal

DirectTotal

contribution

contribution

contribution

contribution

contribution

contribution

contribution

contribution

1,812

3,835

666

1,785

356

891

15,37931,352

Film Exhibition

3.4.2 Market trend
3.4.2.1 Revenue and Number of Attendance
Revenue from film exhibition, number of attendance, and average admission fees at the movie
theaters is shown in Figure 3-6. In 1950s, the number of Japanese film productions has exceeded 500(see Figure 3-3). Production and distribution were active and the revenue from Japanese films
continued to increase. Movie attendance exceeded 1 billion annually from the late 1950s to thebeginning of 1960s. Later, as television rapidly became popular and widespread due to Tokyo
Olympics in 1964, inversely, film industry started to decline. 1 billion in attendance dropped toapproximately one quarter by 1970s.
In 1970s, with the background of this sluggishness, average attendance fee rose and the expansion of
the box-office revenue was seen. In 1970s, although the percentage of foreign film revenue increased,from the late 70s to the mid-80s, with the entry of KADOKAWA films, Japanese films, which were
overpowered by the foreign films and television broadcasting, became thriving and the revenue fromexhibition increased rapidly. In 1980s, although it turned into declining tendency again due to growth
in rental market, the film exhibition market saw an increase tendency with the development of cinema
complex and the rapid increase in screen numbers (see 3.4.2.2), after 1993. The number ofattendance gradually recovered and film became once again gained its position. In 2000s, due to thecontribution TV broadcast operators, Japanese film exhibition market maintained its condition and therevenue size of 200 billion Yen and 160 million attendances. It should be especially stated that therevenue from the film exhibition in 2010 marked the highest record in the Japanese film exhibition

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history. In this way, the film exhibition in Japan is comparatively stabilized now, in spite of a little up
and down, and it has established its position at a certain level in consumer market.

Figure 3-6 Revenue from the film exhibition and number of attendance(Source: Motion Picture Producers Association of Japan, Inc.)

3.4.2.2 Number of screens
The number of screens in the Japanese movie theaters is shown in Figure 3-7. The number of movie
theaters once was 7,457 in 1960, continued to decrease due to the penetration of television. The
number of movie theaters in 1993 decreased to 1,734, around 20% compared to the highest. However,after 1995, the increasing tendency was consistently seen for the number of movie theaters.
This is supported by the development of the cinema complex that has two or more screens in one
facility8. Since one preferable film can be selected within the same cinema complex from many others,
the choice widened for the audience, resulting in the increase in number of the attendance. Moreover,it can be said that the cinema complex has boosted demand among residents in the suburb area,
because the location of the cinema complex is usually within a shopping mall in the area. In 2010, 267
8Motion Picture Producers Association of Japan defines cinema complex as “Theaters that hold morethan 5 screens at one location, managed by the same organization under a uniform title (ex.
1,2,3…A,B,C..)”

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MITSUBISHI RESEARCH INSTITUTE, INC.
out of 527 movie theaters were complex facilities with shopping centers9. In addition, it can beassumed that the development of cinema complex brought change in film distribution structure, as it
lowered the barrier of film releasing without the support of the major distribution companies. Therefore,
the number of released films has increased, which had led to the increase in number of attendance. At
present, more than 80%of the screens are occupied by the cinema complex.
On the other hand, on the contrary of the increase in number of screens, the revenue from film
exhibition per screen has been declining since 2000, thus placing small-scale theaters to a severemarket condition. Most recently, the number of screens has turned into decreasing for the first timesince 1993, when the cinema complex was first opened in Japan, due to fierce competition.

Figure 3-7 Number of screens(Source: Motion Picture Producers Association of Japan, Inc.)

9

Based on “Survey of Selected Service Industries (Cinemas)”, Ministry of Economy, Trade andIndustry
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3.4.2.3 Recent trends
At present, the audiences in Japanese film exhibition seem to consist of a certain segment ofmoviegoers, and the industry is supported by the fact that one person attends several times a year.
Therefore, various measures have been taken such as "Senior" discount" intended for a person who
is at the age of 60 or more, "50% discount for a married couple", and "Ladies' day discount", "Movie
day discount", and "High school student friendship price". These measures had achieved a certain
level of effect, however it had not led to an impact on overall demand. Also, there are views regarding
the decrease of interest in watching films among young age group, therefore the market must solvethese subjects as well as continue to create demand and attract new audiences.
Demand boost can be expected in respect to new trends as follows:(1)

Development of digitization

Progress in the digitization of films is one of the recent major trends. Digitization means that films aresupplied digitally (DCP: Digital Cinema Package) without using prints. To realize digitization, movie
theaters need to add digital projectors and the implementation proceeded since 2010, which is said tobe the first 3D year with the big hit of the film Avatar. To implement digital facilities is a cost of about 7
to 10 million Yen for movie theaters, while distributors experience a print cost reduction. Thus, theVPF (Virtual Print Fee) mechanism has been introduced, where the distributor pays a virtual print fee
towards the theaters facility investment cost. In 2011, out of 3,393 screens, digital screens were 1,911
which amounts up to 60 % and 951 screens are 3D ready.

(2)

Deployment of ODS

ODS (Other Digital Stuff/ Online Digital Source) which is screening content in theaters other than films,
such as live music, live sports, theater arts and storytellers is worth noting. As digitization proceeds,
development occurs to take advantage of a movie theater’s unique features such as the powerful
impact of the big screen and live viewing. Through screening content related to each field, theaters
can expect to attract various audience segments. In addition, they can promote movies to thesevarious segment of audiences who don’t usually go to the theaters by screening the preview of themovie. On the other hand, as host of the ODS events, they can deliver services to the fans or
customers who couldn’t get the tickets or to people in distant areas as well as expanding theircustomer base. Although the ODS provision is still limited, we can expect that the role of movie
theaters would change in terms of flexibly in distributing contents as the range of entertainment
widens and one can also expect that the number and audience segment would expand in the future.

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3.5 Television broadcasting
3.5.1 Economic contribution
The estimated result of the economic contribution of the television broadcasting industry is shown in
Table 3-6. The television broadcasting industry has brought the economic contribution of 8,640.3
billion Yen in total for gross output, 4,227 billion Yen in total as the value added, and 148,024
employees.

Table 3-6 Economic contribution- Summary of results[Unit: 100M Yen, person]

Industry

Gross output

Value added

Labor income

Employment

DirectTotal

DirectTotal

DirectTotal

DirectTotal

contribution

contribution

contribution

contribution

contribution

contribution

contribution

contribution

Terrestrial

27,47061,691

11,63329,412

4,941

13,63424,317

107,010

Satellite

6,580

13,010

3,711

7,210

1,652

3,419

4,097

8,950

CATV

20,89048,681

7,921

22,202

3,289

10,215

14,67932,064

Total

39,52986,403

17,88042,2706,644

18,59243,093148,024

3.5.2 Market trend
3.5.2.1 Revenue
Total revenue of the major broadcasting media is shown in Figure 3-8. The operating revenue of theterrestrial broadcasting has been sluggish in accordance with the declining tendency in the advertisingexpenditure. However, it is forecasted that it will turn to increase trend after FY 2012.10 On the other
hand, revenue is steadily increasing for satellite broadcasting and CATV. One reason for this is due toincrease in households upgrading a TV set and tuners to receive terrestrial digital broadcasting. As for
BS broadcasting, number of subscribers continues to increase by providing program menu to different
market segment compared to free-to-air terrestrial broadcasting and thus contributing to the overall
advertising market. As for CATV, the shift to HD (High Definition), expansion of channel lineups,
bundled service offers (with internet and/or telephone services), resulted in increase in subscription
leading to revenue growth. It is now common that CATV broadcasters offer 30 to 50 channels for basic
packages including various channels such as films, sports, news, animations, documentaries, andadditional option channels. As shown in Figure 3-9, especially satellite broadcasting and CATV’s
subscribers are steadily increasing. Due to the transition to terrestrial digital broadcasting, the market
10

Based on the simulation result by the Japan Commercial Broadcasters Association (JBA) (theformer NAB).
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has seen the penetration in BS/ CS 110°E broadcast hybrid antennas and multi-band receivers,
subscribers to CS 110°E (Sky PerfecTV! e2) are increasing as well. Therefore it can be said that the
replacement of receivers for terrestrial broadcasting has also made the BS/ CS 110°E to penetrate
widely.
According to the Japan Cable and Telecommunications Association, the number of households that
subscribe multi-channel service was 7,652,000 (as of FY 2010).

Figure 3-8 Revenue from terrestrial broadcasting, satellite broadcasting, and CATV

(Source: "Revenue and expenditure of general broadcasters and cable TV broadcasters",
Ministry of Internal Affairs and Communications)

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Figure 3-9 Number of subscribers (CATV / Satellite Broadcasting)

3.5.2.2 Development on digitization
In Japan, 44 prefectures (excluding Iwate, Miyagi and Fukushima Prefectures which suffered a great
deal of damage from the Great East Japan Earthquake) completed transition to the terrestrial digital
broadcasting in July 2011. In 2012, the remaining three prefectures completed its transitions. By this,following the CS digital broadcasting which started in 1996, digitization of television broadcasting wascompleted with the transitions to BS and terrestrial digital broadcasting.
Especially, the satellite broadcasting is entering into a new era as a broadcasting platform. Followedby the termination of BS analog broadcasting, new channels have been allocated and transition fromthe conventional standard definition (SD) broadcasting to high definition (HD) broadcasting haveaccelerated. BS formerly provided programs under general programming, however from October 2011,
full roll out of Pay TV (partly specialized channels) has been developed. At present, as the Table 3-7
shows, multi-channel broadcasting through high definition (and 3D broadcasting) are being provided
over BS broadcasting and CS (Long. 110°E) and the number of subscribers for HD services is steadily
increasing.

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Table 3-7 Number of Satellite Television Programs (as of April 2012)
Satellite

HD broadcasting

SD broadcasting

Total

BS broadcasting (Long.

28 Programs *1 Program

29 Programs

19 Programs

34 Programs

53 Programs

89 Programs

156 Programs

245 Programs

110°E)
CS broadcasting(Long. 110°E)
CS broadcasting(Long. 124°E/ 128°))* Including public broadcaster (NHK), pay TV, free-to-air

3.5.2.3 Recent trends
Through digitization, broadcasting services on mobile phones and devices (“1 SEG” service) was
launched in April 2006 and mobile phone users now enjoy terrestrial digital TV broadcasting outside
their homes. Also, under the enforcement of the revised Broadcasting Act in April 2008, obligations ofsimultaneous broadcasting has been withdrawn, therefore 1 SEG original broadcasting program has
started11. In addition, multi-media broadcasting (V-High) for mobile devices utilizing the reallocatedband for terrestrial analog television broadcasting has drawn significant attention, and the first
country-wide commercial service “NOTTV” (provided by mmbi, Inc.) was launched in April 2012. The
features of this service is that it has higher resolution than 1 SEG, and in addition to (1) real-time
broadcasting, it provides (2) storage type broadcasting, (3) convergence between communication andbroadcasting which was not realized in conventional broadcasting. For (2) and (3), time-shift viewing
as well as various types of content such as music, newspapers/ journals, e-books and games are
expected to be distributed. Also, recent trend in watching videos on smart phones with large screen
has motivated its promotion in “Mobile/ Smart TV”. Moreover, to take in the new scheme ofprogramming other than that of the conventional broadcasting, the following things are considered towiden business opportunities: utilizing internet content production method and professionals,
cooperation with other media such as TV broadcast operators and publishing companies, mechanism
to generate synergistic effect as well as provision of billing system for premium content. With thedevelopment of these new broadcasting platforms, distribution channels that deliver more content to
consumers are diversifying.

11

Simultaneous broadcasting is broadcasting of programs or events across more than one medium,or more than one service on the same medium, at the same time34

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3.5.2.4 Films broadcasted on air
The number of films broadcasted by the major terrestrial and satellite broadcasting channels is shownin Figure 3-10. Especially the number of broadcast of foreign films has increased since 2000. Most
recently, the number of movie programs in terrestrial channels tends to decrease, but the average
audience rate at households (approximately 5.5% per day) has remained unchanged since 2001.
Figure 3.10 shows the breakdown of each genre related to airing time of BS channel WOWOW’s
digital broadcasting as of 2011. Out of annual broadcasting time (total 11,561 hours and 1 minute),
films is the highest with 47.2% followed by dramas and sports.

Figure 3-10 Number of films broadcasted (terrestrial and satellite)*Count of major terrestrial channels + WOWOW (Satellite channel)(Source: "Statistics for TV broadcasted movies ", Federation of Japanese Films Industry, Inc.)

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Figure 3-11 Breakdown of genres over aired time (WOWOW)(Source: "2012 Information Media White Paper", Dentsu Communication Institute Inc.)

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3.6 Home video
3.6.1 Economic contribution
The estimated result of the economic contribution of the home video industry is shown in Table 3-8
home video industry has brought the economic contribution of 492.0 billion Yen in total for gross
output, 303.2 billion Yen in total as the value added, and 4,955 employees. Note that due to limitationin available data, the figures are wholesale (shipment) based where it covers the distribution between
video distributor and retail and rental shops. For instance, number of employees that work at retail andrental shops is excluded.

Table 3-8 Economic contribution of Home Video Industry[Unit: 100M Yen, person]

Industry

Gross output

Value added

Labor income

Employment

DirectTotal

DirectTotal

DirectTotal

DirectTotal

contribution

contribution

contribution

contribution

contribution

contribution

contribution

contribution

2,611

4,920

1,775

3,032

1,337

1,898

2,243

4,955

Home video

3.6.2 Market trend
3.6.2.1 Revenue (wholesale-based)
Revenue from home video sales is shown in Figure 3-12. Note that this figure is based onwholesale-based, which covers the revenue from shipment to video retail stores and video rental
stores, and is the basis of our estimate on economic contribution.
Revenue from sell market (shipment to video retail stores) expanded steadily after 2000 as DVD
penetration accelerated. However, it turned into a decrease in 2005, and a sloping downtrend wasseen since. Most recently, the revenue surpassed that of the previous year in 2010, but in 2011, it
remained at the same level (180.6 billion Yen) as of 2009.
On the other hand, the revenue from rental market (shipment to rental stores) has constantly
maintained the size of around 100 billion Yen for nearly 15 years, and a stable market has been
formed in this field. However, a little later than the sell market, it began to turn into a declining
tendency around 2008. The declining tendency found in the sell market is not seen in this field,
because the inventory is fortified due to the price reduction caused by the fierce competition in therental market.

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Figure 3-12

Revenue from home video sales (wholesale to retail and rental shops)(Source: Japan Video Software Association)

3.6.2.2 Revenue (retail-based)
Revenue from home video sales from final consumer market (retail-based) is shown in Figure 3-13.
The ratio has been generally maintained between sell (retail) and rental market, however thedecreasing tendency is seen as a whole. In 2011, sell market was 247.9 billion Yen and rental market
was 254.2 billion Yen amounting up to 502.1 billion Yen. According to Japan Video Software
Association, in recent sell market, the decline of purchase amount (volume, unit cost) by the so-called
heavy users, who supports the market in terms of revenue, has had an impact to the substantive
decline as a whole. On the other hand, the change in the purchase by light users cannot be seen andtherefore the consumer basis is at a stable stage. Also, as for the means of purchase for home videos(DVDs as well as BDs), according to the JVA’s consumer survey, 60.1 % of consumers purchase fromonline shops, followed by 14.6% from electronics retail store and 12.1 % from CD shops.
As for the rental market, there have been declining tendency in terms of annual usage percentages
and annual average rental expenditure, however the total amount of volume has increased comparedto the previous year. To add, the average purchase and rental of BDs are in the rising trend and it may
become a driving force for market growth.
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Figure 3-13 Revenue from home video market (final consumption)(Source: Consumer survey conducted by Japan Video Software Association)

3.6.2.3 Number of rental shops
As one can understand from the fact that approximately the half of revenue in the home video market
is occupied by the rental market (retail based), Japan is one of the very few countries whereshop-based rental market is flourishing. However, most recently, as shown in Figure 3-14, the numberof shops is in downtrend since 2002, when it reached the peak, due to the increasingly intensifiedcompetition. Especially, as major rental-shop management companies have shifted to price reduction
strategy, the idea of small profit and quick return tend to accelerate. For this purpose, major
companies are strengthening their inventories, hence small and medium-sized companies is difficult
to correspond due to limited space in shops. Therefore the structure of market revenue by sales
volume has shifted, and the market revenue is largely occupied by shops with medium-volume sales.
Moreover, one of the trends in this sector is that the major retail and retail chain now accommodate awide range of products, where not only video and music, but also other products such as games andbooks, in order to attract more customers. Other efforts to increase the number of customers havebeen seen through various measures targeting a particular segment, such as discount campaign for
elderly users.

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Figure 3-14 Number of rental shops*Since this is a number of JVA rental system joining shops, it is different from an actual number of video rental shops.
(Source: Japan Video Software Association)

3.6.2.4 Transition in home video media
Revenue for each home video media is shown in Figure 3-15. DVD has substituted former major
media rapidly after 2000, however its revenue has been in decreasing tendency from around 2005,
after the substitution reached the completion stage. However, the Blu-ray disc (BD), which shipment
started around 2006, has expanded its share steadily (though the pace is slower compared to thetrend seen for DVDs). Its result in 2011 accounted for about 23% of the revenue (Note that its unit
price is higher than that of the DVD). It is expected that BD will contribute to minimize the declining
tendency in sales.

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Figure 3-15 Revenue by home video media
UMD

Blu-raysDVD

DVD Videos

CD related goods

4,000Video cassettes

3,754 3,709
3,506

3,500

3,000 2,870

Laser discs

3,248
2,950

3,308

3,180

2,940

Revenue (100 M Yen)

2,740 2,687 2,702

2,772
2,604 2,570

2,500

2,465

2,861

2,744
2,476

2,740

2,665 2,611

2,000

1,500

1,000

500

0

(Source: Japan Video Software Association)

3.6.2.5 Market share by genres
Revenue share by genres is shown in Figure 3-16. Film (Japanese and foreign) accounted for the halfof the market revenue by 2003. However, since 2004, it has been pushed downward by other genres
such as TV dramas, animation and music. The latest figure shows that it is below 30%.
On the contrary, Japanese animation, or ”Anime”, has gradually expanded its market share, and has
the most highest since 2007. Its sales grew during the market shift to DVD, and it still holds its market
position while many other genres saw decline in their sales. Also, currently the animation market is
supported by many “Anime” fans that have potential demand for high quality products, therefore
increase in sales for Blu-ray disc products has been seen particularly in this market12.

12“Report on Animation Industry 2012”, The Association of Japanese Animations
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Figure 3-16 Revenue share by genres(Source: Japan Video Software Association)

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3.7 Online service
3.7.1 Economic contribution
The estimated result of the economic contribution of the film/ video distribution through online service(internet) is shown in Table 3-9. Online service industry contributes 216 billion Yen in total for gross
output, 91.6 billion Yen in total as the value added, and 6,200 employees.

Table 3-9 Economic contribution- Summary of results[Unit: 100M Yen, person]

Industry

Gross output

Value added

Labor income

Employment

DirectTotal

DirectTotal

DirectTotal

DirectTotal

contribution

contribution

contribution

contribution

contribution

contribution

contribution

contribution

844

2,160

253

916

106

431

2,732

6,200

Online service

3.7.2 Market trend
3.7.2.1 Revenue
The revenue for online service for film / video contents in is shown in Figure 3-17. The market is
growing remarkably by two digits every year as a whole, reaching 84.4 billion Yen in 2011. Especiallywith the background of capacity enlargement and enhancement of functionality in mobile
communications, mobile online service is expanding steadily from 2004. According to the statistics
released by the Ministry of Internal Affairs and Communications compiling figures for internet based
services, revenue from “web content distribution industry”13 is 186.5 billion Yen (as of 2010). Withinthat revenue, IPTV (Internet Protocol TV)14 revenue accounts for 4.8 billion Yen.
Also, in terms of revenue share of distribution window for multi-channel (subscription TV) services, as
shown in Figure 3-18, revenue from satellite broadcasting and CATV together is approximately 75%,
and IPTV, VOD, PC online, mobile distribution remains low which currently make up 7% of the whole.

13

Mainly services that distribute music and pictures through internet, including mobile distribution.
Revenue from IPTV service means revenue from picture distribution service that uses internet suchas video on demand, downloading and IP multi-cast method.
14

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Figure 3-17 Online video service revenue(Source: Digital Contents Association of Japan)

Figure 3-18 Revenue breakdown for Multi-channel distribution (2011)15(Source: “2011 Survey on Multi-channel broadcasting”, Multi-channel Broadcasting Research Institute )15

The report covers current market situation of multi-channel services through survey results from44

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3.7.2.2 Recent services
Internet is an emerging media for broadcasting following satellite and CATV. In Japan, ultra-fastbroadband network has penetrated rapidly, and rich services such as online video distribution has
become one of the key applications. It can be broadly categorized in the following two services.

(1) IPTV (IP multi-cast)
IPTV is a service provided over a designated network carrier. In Japan, it is defined as IP multi-castservice provided through set-top-box (STB). In particular, television services (CS multi-channel
broadcasting) and Video-On-Demand (VOD) are available through broadband such as FTTH
(Fiber-to-the-home). NTT Group’s “Hikari TV”, KDDI’s “au Hikari TV Service”, Softbank’s “BBTV” canbe listed as the main examples. For multi-channel broadcasting, including movie channels, there is anadvantage for IPTV, for potential customers satellite and CATV cannot reach. Figure 3-19 shows thenumber of IPTV subscribers.

Figure 3-19 Number of IPTV subscribers16(Source: Ministry of Internal affairs and Communications)(2) Internet TV, PC/mobile online video services
This type of service can be used over internet regardless of the customer’s subscription to certain
ISP’s. Although it is not provided over IP multi-cast, it includes services which provide video
distribution to TVs through STB and to PCs through internet website. The “acTVila” launched in 2007
by group of major consumer-electronics manufacturers is one example. “acTVila” is an online video
service which customers can view video content without STBs as long as they have an compatible
satellite operators (members of Japan Satellite Broadcasting Association)
16
For IPTV (IP multi-cast) service providers
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digital TV and broadband subscription. According to acTVila, the number of connected TVs17 reachedbeyond 4 million in March 2012. Another example is “GyaO!” (now subordinate of Yahoo!), one ofJapan’s largest online video service launched in 2005. The service became popular that its
subscribers exceeded 10 million in just a year and 2 months. In general, free or paid services of online
videos to TVs or PCs, are in the increase trend and most of them include a variety of genres including
films. Joint provision between online distribution providers and film companies has been seen.
TV broadcast operators which play an important role in the Japanese films, has also entered thismarket. In July 2005, starting with the Fuji TV’s “Fuji TV On Demand” service, NHK and othercommercial broadcasters now provide online video services. For example, VOD service for certain
television programs, and catch-up / subscription services can be watched on PCs. A new VOD service
called Motto TV, or “More TV”, has been jointly launched by major commercial broadcasters andadvertisement companies on April 2012.
Online video service over mobile phones has been increasing gradually since the beginning of 2000.
In May 2009, joint venture of NTT DOCOMO and media company AVEX has launched an online video
service to mobile phones called “BeeTV”. In November 2011, they have enhanced it into a newservice called “VIDEO Store powered by BeeTV” which is basically compatible with smart phones. It isa subscription type service through streaming and downloading of various type of video content.
Compared to the conventional services which focused on rather original short-length videos, the newservice has a special feature that customer can fully watch 2 hours of film or an hour of foreign dramas
on their mobile phone. The service aims to provide customers a new acquaintance to films and itplans to fulfill the service by realizing search menus across genres and choice from different video
quality.
Considering these market trends, it is expected to vitalize related market including films as a whole,through a wide range of distribution over the internet to TV / PC / mobiles, multi-device provision
including smart phones and tablets, and unique value-added services.

17

The number of TVs which has been connected to acTVila’s top web page at least once.
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3.7.2.3 Development in broadband network
The number of broadband subscribers is shown in Figure 3-20. The broadband infrastructure in Japanis one of the most developed in the world, currently the penetration of broadband services (mostly
FTTH) is nearly 70 percent of the households. The government has set the goal for super-high-speed
broadband service (FTTH) to reach 100% penetration by 2015, and is expected to be promoted as animportant infrastructure.
According to the 2010 survey by the Ministry of Internal Affairs and Communications, 47.1 % of thepeople have demonstrated their intention to use online video services, if such broadband environmenthas been developed18. In addition, the survey found that the consumers would increase their overall
expenditure on video content by 72.2 % compared to the non-online media such as DVD (retail andrental). It estimated that the household consumption will increase, with an economic impact of 12.3
trillion Yen, which contributes to 1.5% of the total GDP in 2010. It is expected that the distribution
channels of video content including films to be realized and to potentially create a large economic
impact.

Figure 3-20 Number of broadband subscribers(Source: Ministry of Internal Affairs and Communications)18

The report defines online video services as “VOD services for movies and other videos which
consumers can download and watch, and Catch-Up viewing services (including terrestrial, BS/CS
multi-channel programs) “
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3.8 Estimation of market size attributed to films
In this section, taking account the analysis in the previous sections, we estimated the market value
focusing on films, for each distribution window. The results are derived from studies conducted by
Institute for Information and Communications Policy (IICP).

3.8.1 Revenue within each distribution window
In general, film is first distributed through exhibition, which we define in this section, as primary
distribution market. It is then distributed through home video (retail, rental), pay TV, terrestrial
broadcasting, TV/ PC online and mobile, which we defined as secondary distribution market.
Figure 3-21 shows the market revenue attributed to films, and the share for each distribution window.
The figures are estimated by multiplying certain ratio to overall revenue. For example, for television
broadcast, percentage of film broadcasted to total is multiplied to the whole broadcast revenue (Thedetails are noted in the appendix). Note that the home video market (retail, rental) accounts for theretail market revenue, which covers the final consumption. The total revenue accounts for 560.3 billion
Yen for 2011. Primary distribution market consists of approximately 32% and the rest is for thesecondary distribution market. This means that the overall market attributed to films is three times aslarge as the film exhibition market. Within the latter market, home video (rental) market has the mostshares at 28%, which is almost the size of the primary distribution market19.

Figure 3-21 Market revenue and share attributed to films (2011)(Source: IICP report, Mitsubishi Research Institute estimates)

19

Note that the home video market stated in this section is retail based (see 3.6.2.2 )48

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Figure 3-22 shows the change in market revenue after 2000. We can see that the primary distribution
market (film exhibition) has maintained its size of approximately 200 billion Yen. Secondary
distribution market has been declining since 2003, however its size have accounted for 60% to 75% in
the total revenue during the past decade. The increase after 2000 was mainly due to home video
market resulting from DVDs gained momentum.
Considering the growth in subscription TV services (satellite and cable TVs) as well as TV/ PC online
and mobile video services, there are aspects that could bring an opportunity for film attributed market
to expand. For example, development in technological as well as regulatory basis in broadcasting andinternet/broadband industry, and also the provision of media devices with high capacity /quality suchas Blu-ray discs, suggests the importance of the secondary distribution market.

Figure 3-22 Market revenue attributed to films (2000-2011)(Source: IICP report, Mitsubishi Research Institute estimates)

Figure 3-23 shows the revenue for each window in line with typical duration from the release of film.
When we look at the vertical access, which is the revenue attributed to films, the revenue for the film
exhibition accounts for the most highest, and the market size reduces as each windows shifts.
However, in recent trends, due to the development in digitization and the change in market conditions,
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the position of each window and its duration tend to change. For example, DVD released shortly after
the film exhibition, or exhibition and online streaming released simultaneously. Especially in Japan,
considering the fact that much visual works have been produced by TV broadcast operators, and theirrole in recent Japanese films, much work have originated from TV broadcasting and then distributed
to home video or reproduced for film exhibition. In Japan, pay TV penetration is still low, and therefore
when content are expected to reach high viewing rate, free-to-air terrestrial broadcasting is prioritized.

Figure 3-23 Market revenue vs. typical timing of distribution* Home Video [Rental] is described as same market size for both New/Old Releases as figures cannnot be distinguished* Horizontal axis describes typical timing of distribution (it does not reflect actual market conditions)(Source: IICP report, Mitsubishi Research Institute estimates)

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3.8.2 Trend in number of film/video viewers
Figure 3-24 describes the size of the consumers that commonly view video contents. In particular,
number of film (theater) viewers and home video viewers, film (terrestrial broadcasting) average
viewing rate per households, and number of online video viewers is shown. The numbers for the first
three indicators have been maintaining a certain level and we can see that these activities arecommon in consumers recreation and leisure. Especially, numbers for film (theater) and home video
viewers have recently grown.
On the other hand, as Figure 3-25 shows, it should be noted that there is a drastic growth for online
video consumers. In result from the development and diversity in media, consumers can have accessto video content essentially anywhere at any time. In other words, potentially more and moreconsumers will be viewing content including films. It is essential for the industry to correspond to thesestructural changes, and to deliver diversity of products and services, so as to bring benefit not only toexisting customer but also to new customers. This can be a driving force for the industry development.

Figure 3-24 Number of participants / viewing households for selected window* Participants: number of people that went to theater or viewed video more once during the year
(Source: "White Paper of Leisure”, The Japan Productivity Center,”2012 Information Media White Paper" Dentsu Soken”)

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Figure 3-25 Number of online video viewers (YouTube)*: Number of users at the time of survey. Survey period (month) varies for each year.
(Figures for 2010 is as of Feb.2011)*: During 2005-2008: Users accessed from home /2009- : Users accessed from home or workplace.

(Source: "2011 Information & Communication White Paper”, Ministry of Internal Affairs and Communications.)

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3.9 Case studies for economic contribution of films
In this section, the economic contribution of film industry is described based on case studies, which
provides a practical image of the economic impacts originated in films, compared to themacro-economic approach explained in the previous sections. First, we define and categorize the“ripple effects” originated by films (3.9.1). Some quantitative results are shown based on externalstudies, as well as estimates of the direct economic impact of the international film festival (3.9.3).

3.9.1 Examples of economic ripple effects
It can be said that there are many “ripple effects” brought by films, to other industrial sectors which are
not, in general, directly associated with the film industry. Table 3-10 shows examples of ripple effects.
One of the aspects regarding the economic ripple effect generated from the content industry, can be
defined as the value added such as product planning and production within non-content industries.
One typical example would be character merchandizing from a popular animated cartoon. As revenue
from rights management is growing, we can assume that various ripple effects can be observed inperipheral industries. We can distinguish these effects from the indirect or induced economic impact
estimated in previous chapters, where the former is basically the input (or upstream) to the film
industry and the latter is the further economic impact from increase in wages (or downstream)occurred from direct and indirect impact. However, both may overlap in terms of economic activity or
value, and therefore the ripple effects mentioned in this section may partially be included in theeconomic contribution estimated in the previous sections.

Table 3-10 Categorization and example of ripple effects
Segment

Description

Character,

Product planning / marketing for apparel, toys, or general merchandizing through

Designreconfiguration of content format and copyright management of films

Fashion

Product planning / marketing for clothing and accessories after reconfiguration ofcontent format and copyright management of films

CultureProduct planning / marketing in related service market by expressing lifestyles of thefilm characters

Tourism[Examples: “dance boom”, “soccer boom”]

Consumption made by filming crew/ staff and tourists visiting film locations (lodging,meals, souvenir purchase and so on)

Transportation

Consumption made by filming crew/staff and tourists visiting filming locations ontransportation

Other fields

Increase in recognition (rise in popularity) of the filming location, etc.

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3.9.2 Economic ripple effects of films in the local economy
In this section, some examples of economic ripple effects that had led to the economic activation andlocal revitalization through production, distribution, and exhibition of films, are described based on
external studies.
Here we categorize the economic effects into direct effect and ripple effect. The direct economic
effects relate to consumption from filming crew/ staff lodging, meals and preparing filming sets at film
locations. The ripple effects are the tourist’s consumption in transportation, lodging, meals, souvenir
purchases and rise in popularity of film locations induced by the location tourism, i.e. tours that visit
filming location sites. As such economic ripple effects are expected, many local governments performaggressive invitation activity of filming location; none the less the scale of the effect varies according
to the scale of the films producing, film director and the cast.
Table 3-11 shows some examples of economic effects (direct and ripple effects) of Japanese films,
observed within a regional economy, which have been quantitatively analyzed by local authorities. We
can see that these film titles generated economic effects very close to their own revenue frombox-office.

Table 3-11 Examples of Ripple Effects to the Local Area
Title [year]

Economic effects

Hula Girl[2006]

1.17b Yen*box-office revenue:1.4b Yen

The Samurai I Loved[2005]

0.6b Yen*box-office revenue:1.4b Yen

Tokyo Tower[2004]*box-office revenue:1.63b Yen

0.47b Yen

Description of the effectDirect effect: cost of lodging, meals, productions of sets byfilming crew
Ripple effect: consumption by tourists visiting filming
locations, cost of tourism advertising and invitation activities
Direct effect: cost of lodging, meals, productions of sets byfilming crew
Ripple effect: consumption by tourists visiting filming
locations, cost of tourism advertising and invitation activities
Direct effect: cost of lodging, meals, productions of sets byfilming crew
Ripple effect: consumption by tourists visiting filming locations(Source: Tohoku Bureau of Economy, Trade and Industry)
Next, we referred to Walt Disney’s various business operations in Japan, from the standpoint of
economic ripple effects based on Walt Disney’s films.
In Japan, the distribution of films/ TV programs and management of Tokyo Disney Resort, areconsidered as two pillars of Walt Disney’s product market. In its film business, several box-office titles
exceeded 10 billion Yen in recent years (Table 3-12). Its business spreads to management of Tokyo
Disney Resort (including hotels) as well as distribution of video content (DVDs, Disney Channels),music, illustrated books, games, clothing, tableware, toys, wedding business, mobile phone and so on
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(Table 3-13). This adds up to approximately 500 billion yen per year.
Walt Disney generates its business by producing box-office hits and inducing synergistic effect withrelated business operation. This can be described as a form of eco-system on the basis of film/video
content. Its economic effect on gross output as well as employment is assumed to be a large size, andone can say that this is one example of economic effect originated in films.

Table 3-12 Revenue from Major Disney films (Domestic market)
Title

Film exhibition

year

Alice in Wonderland

11.8b Yen

2010

Finding Nemo

11.0b Yen

2003

Pirates of the Caribbean: At World’s End

10.9b Yen

2007

Toy Story 3

10.8b Yen

2010

Table 3-13 Disney-related Market in Japan
Item

Revenue

Notes

Tokyo Disney Resort

317.9b Yen

FY2011 results

Hotels42.2b YenFY2011 results

Retail (Disney Stores)

14.8b Yen

FY2009 results
Based on Walt Disney Japan
President interview article (Oct.2010)
Estimated from number ofsubscribers (5.75 million households
as of Sept.2011)

Winnie-the-Pooh related goods
Disney channels (CS broadcasting)over 100b Yen
3.6b Yen

3.9.3 Economic impact of International Film Festivals
In this section, first we estimate the economic impact of International Film Festivals. Next we describe
the economic ripple effect on award-winning films based on external studies.
3.9.3.1 Estimating the direct economic impact of International Film Festival
We have analyzed the direct economic impact of the International Film Festival. When InternationalFilm Festivals are held, economic impact is mostly generated by visitors from domestic and foreigncountries. As a case study, we chose Tokyo International Film Festival (TIFF), one of the largest film
events in Japan and associated events with TIFF.
The Tokyo International Film Festival is a film festival held in Tokyo every October, most recent being
24th TIFF held in Roppongi Hills in October 2011. Also, various tie-up projects and related events55

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(other film festivals and business meetings) were held mostly during TIFF. The public record of the24th TIFF is as follows:

Table 3-14 Public record of the 24th TIFF
Period: Oct. 22nd (Sat.) to 30th (Sun.), 2011 (9 days)
Place: Roppongi Hills, and Sendai City, etc.
Number of films: 177 (355, if films from the tie-up projects are included)
Number of attendees: 118,038 (266,957, when those from the tie-up projects are included)－TIFF: 118,038 persons－Tie-up projects: 148,919 persons
Official goods:- Brochures (1,800 Yen)
- Ecobags (2,000 Yen)
- Badges (300 Yen)
(Source: Public record and Web site of the 24th TIFF)

Based on the data above, we have estimated the economic impact generated by opening of TIFF,
tie-up projects, and related events. It is estimated that the economic impact is approximately 950
million Yen. It consists of revenue from entry tickets and related goods, etc., and expenses defrayed inJapan by visitors and invited guests from overseas for transportation and staying, etc.

Table 3-15 Economic impact of 24th TIFF
Item
Tickets, etc.
Sales of related goods
Expenditure
visitorsbyNumber of person *1

Total (million Yen)

500-15,000 Yen *1

Approx. 267,000

540

*1

Approx. 82,000

130

103,197 Yen*2

Approx. 2,670

280

Total

950

Unit cost (Yen)foreign

300-2,000 Yenth*1 : Based on the public record of the 24 TIFF.
*2 : Average expenditure made by foreigners visiting Japan for attending an exhibition/trade fair
(Source: "Consumption trend of foreigners visiting Japan (2011)", Japan Tourism Agency)

3.9.3.2 Economic ripple effect from film awards
The effect from winning the Academy Award (or nominated to it) is sometimes referred to as "Oscar
Effect" or "Oscar Bounce". For instance, in the United States, it is estimated that the winning of the"Best Picture Award" in the Academy Award increases the revenue of the film exhibition by 20 to 40
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million dollars, while 4 to 5 million dollars for the "Best Actor and/or Actress Award"20.
As mentioned above, winning of, or being nominated for an international film award such as Academy
Award, gives an impact on the box-office revenue and DVD sales of the work. Here we will depict theexample of economic ripple effect from winning of, or being nominated for the award. We take theJapanese film "Departure" as an example. The film won the “Best Foreign Language Film of the Year”
in the 81st Academy Award. We have quoted the analysis from a report conducted by the DigitalContents Association of Japan (DCAJ) in 2010.

The film “Departure” is a Japanese film which was released in September 2008. It was nominated for
Academy Award in January 2009 and won the “Best Foreign Language Film” in February 2009.
Theater attendance was 5.6 million and the box-office revenue was 6.3 billion Yen.
In assessing the economic ripple effect, economic effect during the 7 months after winning theAcademy Award is defined as “Economic effect after winning”. This is considered as the incremental
economic impact generated by winning the Academy Award. Also, “economic impact prior to theaward”, which is the economic effect during the film release and the award, is defined as “economic
impact without winning the award” (see Figure 3-26). The award-winning effect is derived from the two
economic effect.

Figure 3-26 Framework of analysis

For both cases, direct impact, indirect and induced impacts were estimated. Direct effect has been
calculated on the basis of box-office revenue, revenue from retail shops, DVDs and the diary of themortician which is the original work. Indirect and induced impacts were calculated based on thenational statistics “2005 Input-Output transaction table”. When comparing with the non-awarded case,20

The estimated is based on the article in Movie Maker, "The Economics of Oscar", July 2003.
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7.77 billion Yen had been added, therefore the multiplier for the award effect equals to 2.14 (Figure3-27).

Figure 3-27 “Departure’s economic ripple effect by winning Academy Award
Before-award

After-award

68.2

77.7

41.1
DirectImpactExhibition 30.0
Restaurant/shop
DVD
Original book

[Unit: 100M Yen/year]

46.5
Exhibition 33.0
Restaurant/shop
DVD
Original book

7.3
3.0
0.7

8.5
3.5
1.6

145.9
Indirect
Impact

25.5

29.3

1.6

1.9

InducedImpact* DVDs sales are estimated from sales volume after 1 month release

By observing these cases, it can be said that there are a wide range of economic ripple effects
brought by films to peripheral industries. Taking the scale into consideration, we should not consider
the economic effect of the film industry by just focusing on the exhibition revenue but try to consider
widely including content industry and its peripheral industries. Taking into account the contribution to
local economies such as through tourism, it can be said that the film industry has an important role in
the overall economy.
Also, a wide range of efforts in the film industry including International Film Festivals can be said tohave contributed to raise economic contribution, not only has it contributed to the culturaldevelopment as a film work.

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4. Appendix
4.1 Methodology and Sources of data
The estimation for economic contribution (Gross Output, Value Added, Labor Income and
Employment for each sub-sector) was based on different data sources and assumptions, mostly
underlying on the basis of comparable industry within the national statistics. Here we describe thedata sources and methodology in details.

Film production / distribution
Item
DirectDetails
Gross Output

ImpactBased on the “Survey of Selected Service Industries (Production anddistribution of video content)” published by the Ministry of Economy
Trade and Industry. Ratio of production revenue to distribution revenue
from past statistics (2004), were applied to the total (production +distribution) revenue, as current statistics does not distinguish between
the two.

Value Added /Based on the ratio of Value Added/ Labor Income to Gross Output for the

Labor Income“Motion Picture and Video Production/ Distribution” in the “Information
and Communication Industry Input-Output transaction table” publishedby the Bureau of Statistics of Ministry of Internal Affairs andCommunications.

Employment

Based on the “Survey of Selected Service Industries (Production anddistribution of video content) “. FTEs were estimated by applying the ratioof FTEs to total number of employees (both provided in the statistics), to
the total number of employees attributed to film production / distribution
activity.

Indirect

Gross Output

Indirect impact is estimated by applying multipliers for “Motion Picture/Induced

and Video Production/ Distribution” contained in the I-O table to the

ImpactGross Output (direct impact) after considering self-sufficiency ratio.
Induced impact is estimated by applying average percentage income
consumed (0.745) and composition ratio of private final consumption
expenditure to every industry (derived from the I-O table), to the direct /indirect labor income.

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Value Added /Based on the ratios of Value Added/ Labor Income to the Gross Output.

Labor Income

As for employment, ratio of FTEs to total number of employees for each

Employment

industry, are derived from national statistics “2005 Input-Output table”.
(This I-O table aggregates the FTEs for all industries). We multiplied thisratio to each industry in the employment table which is contained in the“Information and Communication industry I-O table”. Next, employment
coefficients (ratio of FTEs to gross output) for each industry are derived
to estimate the multiplier for indirect and induced impact for employment,
taking into account the increase in gross output. The multiplier is thenmultiplied to direct impact (employment).

Television production / distribution
Item
DirectDetails
Gross Output

ImpactBased on both “Survey of Information and Communication Industry(Television program production)” published by the Ministry of Internal
Affairs and Communications and “Survey of Selected Service Industries(Production and distribution of video content)”. The latter includes boththe production and distribution of television programs, therefore
revenues from the former statistics were subtracted.

Value Added /Based on the ratios of Value Added/ Labor Income to Gross Output forLabor Income

the “Motion Picture and Video Production/ Distribution” in the I-O table.

Employment

Based on FTEs provided in the “Survey of Information andCommunication Industry (Television program production)”, for TV
production. As for FTEs in TV distribution, ratio of Film production FTEs
to Film distribution FTEs is multiplied to TV production FTEs.

Indirect

Gross Output

Indirect impact is estimated by applying multipliers for “Motion Picture/Induced

and Video Production/ Distribution” contained in the I-O table. Rest of the

Impactmethodology is the same as in the previous table.
Value Added /The methodology is the same as in the previous table.

Labor Income
Employment

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Film Exhibition
Item
DirectDetails
Gross Output

ImpactBased on the exhibition revenue statistics published by the Motion
Picture Producers Association of Japan, Inc.

Value Added /Based on the ratios of Value Added/ Labor Income to Gross Output inLabor Income

the “Movie theaters/ Performing theaters/ Event halls” in the I-O table.

Employment

Based on FTEs provided in the “Survey of Selected Service Industries(Cinemas)” published by the Ministry of Economy Trade and Industry.

Indirect

Gross Output

Indirect impact is estimated by applying multipliers for “Movie theaters//Induced

Performing theaters/ Event halls” contained in the I-O table. Rest of the

Impactmethodology is as the same in the previous table.
Value Added /The methodology is the same as in the previous table.

Labor Income /Employment

Television Broadcasting
Item
DirectDetails
Gross Output

ImpactBased on the revenue statistics from the “Survey on Information andCommunication Industry”.

Value Added /Based on the ratios of Value Added/ Labor Income to Gross Output inLabor Income

the “Public Broadcasting”, “Commercial Television Broadcasting”,“Commercial Satellite Broadcasting”, “Cable Television Broadcasting”
contained in the I-O table.

Employment

Based on the employment statistics from the “Survey on Information
and Communication Industry”.

Indirect

Gross Output

Indirect impact is estimated by applying multipliers for each industry/Inducedselected as above, contained in the I-O table. Rest of the methodology

Impactis the same as in the previous table.
Value Added /The methodology is the same as in the previous table.

Labor Income /Employment

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Home Video
Item
DirectDetails
Gross Output

ImpactBased on the revenue statistics published by the Japan Video Software
Association. Note that the figures represent revenue on wholesalebasis (sales to retail and rental stores), and is not converted to retailbasis due to limited information.

Value Added /Based on the ratios of Value Added/ Labor Income to Gross Output inLabor Income

the “Motion Picture and Video Production/ Distribution” contained in the
I-O table.

Employment

Based on the “Survey of Selected Service Industries (Production anddistribution of video content) “. Ratio for employment to revenue (video
sales), from past statistics (2004) were applied to the Gross Output, as
current statistics does not distinguish the figures.

Indirect

Gross Output

Indirect impact is estimated by applying multipliers for “Motion Picture/Induced

and Video Production/ Distribution”” contained in the I-O table. Rest of

Impactthe methodology is the same as in the previous table.
Value Added /The methodology is the same as in the previous table.

Labor Income /Employment

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Online Service
Item
DirectDetails
Gross Output

ImpactBased on the revenue statistics published by the Digital Contents
Association of Japan (DCAJ). This includes revenue for IPTV, internet
video streaming (ex. VODs) to platforms such as TV/ PC/ Mobile.

Value Added /Based on the ratios of Value Added/ Labor Income to Gross Output inLabor Income

the “Internet based services” contained in the I-O table. Note that thestatistics attributed to this category covers IPTV services.

Employment

Based on the number of employees provided in the “Survey on
Information and Communication Industry (Internet based services)”.
FTEs were estimated by applying the ratio of total FTEs to the total
revenue, to the Gross Output.

Indirect

Gross Output

Indirect impact is estimated by applying multipliers for “Internet based/Inducedservices”” contained in the I-O table. Rest of the methodology is the

Impactsame as in the previous tables.
Value Added /The methodology is the same as in the previous table.

Labor Income /Employment

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4.2 Details for estimation of market size attributed to films

MarketFramework

Methodology

Revenue from exhibition ofFilm

Distribution

films produced for theatricalrevenue

MarketreleasePrimary

Film Exhibition

Secondary

Terrestrial

Operators’

Distribution

Broadcast(subscription,

Marketrevenueadvertising)from broadcasting films

Sourceexhibition Movie Almanac

Broadcast operators’ Commercial
revenue * percentage

Broadcastingof film broadcasted

Almanac,
NHK Radio &television year
book

Satellite

Operators’

revenue

Broadcast,broadcasting films

from

CATV

Home Video

Revenue from film video

Satellite

broadcast

NHK Radio &operator and CATVs’ television year
revenue * percentage

book,of film broadcasting

MIC materials

Wholesale Revenue * JVA materials(retail margin ratio)+
total

rent

wholesale

video

*

marketshare of film videos *average rental price
Online(PC Internet, Mobile) Online

User

average

Video (film) revenue

expenditure * number

IICP surveyof internet users /mobile internet users*MIC : Ministry of Internal affairs and Communications*JVA : Japan Video software Association(Source: “Report on production and distribution of media soft ”, IICP)

4.3 Currency exchange rate
The figures in dollars are converted from Yen based on average exchange rate in 2011 announced by
Customs and Tariff Bureau, Ministry of Finance Japan (79.97 Yen / dollar) .

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4.4 Restrictions
This report has been commissioned by the Motion Picture Associations which has been preparedsolely for the purposes herein. Mitsubishi Research Institute, Inc. accepts no liability of any kind to any
third party and disclaims all responsibility for the consequences of any third party acting or refraining
to act in reliance on the information provided in this report.
All the data collected for the preparation of this report is publicly available; hence we have notconducted an audit in respect to various government departments or other organizations that haveprovided the information necessary to undertake this assignment. The statements and opinions
written in this report are given in good faith, based on information available at the date of this report,
and on the basis that all information relied upon is true and accurate in all material respects, and not
misleading by reason of omission or otherwise.

The views expressed in this report represent our

independent consideration and assessment.
We reserve the right, but are under no obligation, to revise or amend our report if any additional
information which exists at the date of our report, but was not drawn to our attention during its
preparation, subsequently comes to light.

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