Blockbuster Moving In on Japan’s Video Market

In a country where it costs the equivalent of $19.50 to go to a movie theater, where quality TV dramas are rare and video offerings are spotty, Blockbuster hopes to cash in on a craving for home entertainment.

The Fort Lauderdale, Fla.-based video rental chain, which has opened 32 stores in Japan in the last five years, is preparing for an aggressive new campaign here. By the end of 1998 it plans to have up to 150 stores in the country.

With its clean, well-organized stores, which are run as a joint venture with Fujita and Co., Blockbuster is a welcome alternative to Japan’s typically dingy, cramped video outlets. In many stores, shelf arrangement is haphazard, pornography takes up much of the display space and a desirable movie usually sports a “rented” sticker.

Success in Japan could be a boost for Blockbuster as it faces a saturated market and heated competition from discounters back home. And the threat posed by pay-per-view services that provide video on demand have yet to arrive here.

“Japan is a market that’s shown a tremendous appetite for video entertainment,” said Blockbuster Entertainment Group spokesman Mike Caruso.

About three-quarters of Japanese households own a VCR. Only 27% get satellite broadcasting, according to the Electronic Industries Assn. of Japan, and cable TV is still in its fledgling stages.

Even with all that going for it, can Blockbuster repeat the success of Tower Records, McDonald’s or Toys R Us in Japan’s tough market?

“It’s a matter of adapting to the Japanese retail system,” said Ed Hatch, an analyst with UBS Securities Inc. in New York. “The Blockbuster formula . . . has a good chance to perform well in a lot of environments.”

At Blockbuster Video outlets in Japan, there’s an effort to cater to Japanese tastes: An entire shelf is devoted to the Godzilla series.

But there’s also a strategy to lead viewers across cultural lines. Samurai dramas are placed near westerns with John Wayne. Shelved near “The Godfather” are movies about Japan’s home-grown yakuza mobsters.

At the Kaminoge outlet, which opened in March, a big poster advertises “The Bridges of Madison County,” available with subtitles or dubbed in Japanese.

“We bring direct to Japan the image and film culture of Hollywood,” said Blockbuster Japan Co. President Jun Suzuki. “But we adapt it to the Japanese environment.”

Many Japanese don’t know the names of all the movies made by their favorite foreign stars or directors. So Blockbuster displays feature Oliver Stone or Tom Hanks “corners.”

“It’s really easy to find the actors I like,” said housewife Toshiko Iwasaki, 49, who was returning “The Hudsucker Proxy.”

Video rental outlets total about 10,000 nationwide, averaging 3 million yen, or $28,000, each in monthly revenue, according to the Japan Video Assn., a group of Japanese video makers.

Blockbuster does have some tough competition. Tsutaya Culture Convenience Club is also going after the family market with its 817 outlets, mostly franchise stores. The Osaka-based video rental chain is outdistancing Blockbuster, opening new stores at a rate of eight a month last year.

Like Blockbuster, Tsutaya offers competitive pricing and attractive stores. Its 83 directly run outlets feature large selections, and some sell books and compact discs. It even has a blue-and-yellow logo like Blockbuster’s, although it denies any imitation.

Blockbuster, though, holds some cards of its own. For one, it could tap into the resources of entertainment conglomerate Viacom, which acquired Blockbuster in 1994.

Hatch, the UBS analyst, also believes the recent recruitment of Wal-Mart Stores Inc.’s Bill Fields as Blockbuster’s chairman should help in fine-tuning plans for expansion in Japan and other overseas markets.

Blockbuster Japan has 24-hour quick-drop boxes as well as three-day and one-week rental arrangements, which the smaller local rivals don’t offer.

Films are arranged by category, such as action or mystery, and by the Japanese alphabet within each section--a plus for many.

“The setup feels systematic,” said copywriter Keiko Kobori, 30, who visits Blockbuster several times a month. “It’s convenient and rational. It’s very American.”