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Wednesday, Aug. 15, 2012

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Despite flaws, Rakuten is 1-0 against Amazon in Japan's e-book wars


Rakuten, Japan's largest online shopping mall — and a head-to-head rival of Amazon Japan that also hopes to expand its business globally — launched its first e-book reader, the Rakuten Kobo Touch, on July 19, getting the jump on the long anticipated Japanese release of Amazon's Kindle.

News photo
Page turner: Rakuten's Kobo Touch e-book reader has a headstart in the race with Amazon's Kindle in Japan. KYODO

On June 26 — the very same day Amazon Japan officially announced on its website that its Kindle e-book reader was "coming soon" — Rakuten launched a simple teaser site stating that it would shortly be releasing an e-book reader: The single page site looked as if it had been designed in a hurry. On July 2, the Rakuten Kobo was then introduced at a press conference, and began shipping on July 19.

Whilst the Amazon teaser does not give a date for the Kindle's release in Japan, the speed with which Rakuten acted with its Kobo has surprised consumers. The price too, ¥7,980, which closely matches the $99 price of Amazon's latest Kindle Touch in the United States, is quite competitive compared to existing e-readers in Japan. The price and the promise of better-than-Kindle Japanese-text support — such as vertical text — seem to be proving popular and Rakuten has already sold about 100,000 Kobo devices.

On the launch day, however, several software issues arose. Problems such as being unable to install the set-up application on a PC, difficulty logging-in, the set-up not finishing and the app not working if a user has a Japanese-text login name, flooded Rakuten's review page, where 1-star reviews were common. And it was not only software defects that were reported. There were also issues with the search system — such as searches not returning a book that is obviously available or searches returning a list of foreign-language books rather than the Japanese.

The lack of the promised assortment of books was also criticised. Rakuten had mentioned that the service would start with 30,000 e-books, yet there were less than 20,000 at launch, and 12,000 of them were from Aozora-Bunko, a free-book project of copyright-expired texts. In reality only about 8,000 books could be purchased.

Rakuten, however, still promised that the store would have 30,000 by the end of July, 60,000 by late August, and 200,000 by the end of the year. As of today, there are still only about 26,000 books available.

To make things worse, on July 23, Rakuten hid user reviews on the Kobo Touch webpage, which angered people even more. Any e-shop hosted on Rakuten's e-mall must want, at some stage, to erase negative reviews. By only allowing its own product reviews to be hidden Rakuten is damaging the reputation of the mall and its review system.

In an attempt to calm critics, Rakuten CEO Hiroshi Mikitani appeared on several business media sites, including Toyo-Kezai and Nikkei Business, saying that "Kobo's launch was successful" and "I ordered the review page closed. Because most of those negative reviews are now incorrect as we have already fixed those problems ... Most users are okay. Only 2,000 to 3,000 users complained."

In these interviews, I guess, Mikitani wanted to send a message to publishers that everything is under control. The reason that the number of e-books available is not increasing as planned is possibly because some publishers do not yet provide many books in digital form. Publishers are waiting to see if it is worth riding on Rakuten's Kobo bandwagon or not.

In the interviews Mikitani said that he doesn't care about the Amazon Kindle. But the rush to get the Kobo out so fast, even with an imperfect service, seems a strong indicator that Rakuten wanted to get into Japan's e-book market before Amazon does.

Despite being pretty popular in the United States and Britain, the Amazon Kindle and its e-book store has not yet hit the Japanese market. Yet since its 2007 launch in the U.S. the Nikkei and other business media have repeatedly "leaked" the news that some Japanese publishers had agreed to signup with Amazon. However, all of the named publishers denied or made no comment on such agreements when other media tried to confirm the deals.

It's my guess that these leaks and denials could be a tactic by Amazon to encourage paranoia among Japanese publishers who won't want to be left behind if other publishers signup with Amazon. The contract system Amazon uses in the U.S., however, which allows it to control book prices, makes Japanese publishers reluctant. I suspect that the reluctance of Amazon Japan to declare a release date for the Kindle shows that they are still having a hard time negotiating with publishers.

Even though Japan had the world's largest e-book market until last year, it was mainly built on regular mobile phones with non-major comic books. It's still unknown whether traditional (i.e., non-comic) books on a dedicated e-reader will become a popular reading experience in Japan or not.

As Japan's resale price-maintenance system protects paper-books from discount, and a good amount of existing publishing contracts remain oral and/or do not cover digital versions, it is safer for publishers to delay their digital migration for as long as possible.

Having e-book readers from Rakuten, in addition to Sony and soon from Amazon, sounds good for consumers if the competition creates more user-oriented services. But at the same time, Japanese publishers' wheeling and dealing may delay the e-book revolution a little further. We will see if Amazon Japan's "coming soon" will really be "soon."

Akky Akimoto writes for Asiajin.com. A Japanese translation will be released on ja.asiajin.com. You can follow him @akky on Twitter.


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