Sumitomo Corporation, a diversified Japanese conglomerate, has launched a company with a view to capitalising on growth opportunities in digital media and content in Japan and abroad.
The new subsidiary, SC Digital Media, builds on Sumitomo’s existing media division, which is based on pay TV broadcasting and accounts for a large part of the group’s revenue, driven by J:Com, a leading telco operator.
SC Digital Media is headed by Shuichi Nagasawa as president and CEO. Nagasawa was formerly president of Asmik Ace, an independent movie production and distribution unit under Sumitomo’s media division.
Daizo Nishitani, who joined Sumitomo Corporation last September, is now director of SC Digital Media. He said it would act as an investment vehicle and operate separately from Sumitomo’s established media business. As well as making strategic investments, it will look to form joint-venture partnerships, incorporate international business models and technology, and build human capital through talent acquisition.
Nagasawa said the main motivation for launching was international expansion. He said Japan’s changing media consumption habits were another reason for the launch. In a statement, Sumitomo noted that online advertising in the market is set to grow to 1.7 trillion yen (US$16 billion) by 2020, driven by video.
Nishitani said SC Digital Media does not want to limit the potential areas it invests in. “It could be a tool vendor or it could be a content or entertainment product, or a company specialising in digital,” he said. He added that in terms of markets, SC Digital Media would look to build an “axis” consisting of Japan, North America and Asia including China, but said it would not focus on any particular countries.
It is not yet clear whether SC Digital Media will offer marketing services. Nishitani said there were no plans to do so this quarter, but again noted that “we don’t want to limit ourselves”.
“Most of our business is around media and advertising on media as a publisher but for the future, who knows?” he said. “We would like to be a player in the digital media and marketing industry, not just an investor.” He said the company would be in a position to announce some of its services, as well as partnerships, in the spring.
Dentsu and ADK are two major advertising groups that are aggressively investing in content to augment and diversify their business. Nishitani emphasised that Sumitomo was not looking to compete with them, but to continue to work collaboratively with them as it has through J:Com and act as part of the wider content ecosystem.
“We’re not trying to set up an advertising agency,” he said. “We were never thinking about setting up competition to them. We don’t aim to dominate content but to work with [Dentsu, Hakuhodo and ADK] and other external companies.”
The leaders of SC Digital Media were unable to disclose how much Sumitomo has invested in the company. Compared to J:Com, which has nearly 17,000 employees and turned a profit of almost 70 billion yen ($657 million) in 2016, it is still small, with a staff of 10. But Nishitani said it was more than just an experiment, and indicated that it is expected to eventually become a major part of Sumitomo’s business.
The headcount will double by April, Nishitani said. Staff come from a range of backgrounds, including from Google and brand-side marketing roles as well as from within Sumitomo. Most are broadcasting, media and marketing specialists, but not all. Emi Shinkai, a business development manager who Campaign also spoke to, was previously in charge of aluminium trading for Sumitomo. Moving between apparently unrelated departments is common at large Japanese companies, and she said she was attracted by the prospect of working at something akin to a startup.
Nishitani, who worked at Essence Digital and Apple, claims digital media is still a “white space” in Japan. He said when he joined Sumitomo, he saw it as an anomaly among trading conglomerates by looking to develop the field.
“People are wondering why—why we want to do business in digital media,” he said. “But just as we are seen as a traditional part of the cable and satellite TV sector, we want to have the same recognition within the digital media sector.”