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The politics of Japan's media
takeover battle
By Richard
Hanson
TOKYO - In the latest takeover
battle in Japan between young predator Livedoor Co
and media giant Fuji Television Network Inc, the
giant has won at least the first round. Fuji
obtained 36.47% of the outstanding shares of the
radio outfit Nippon Broadcasting System Inc (a
part of the same Fujisankei group) through its
tender offer that was tallied up early Tuesday.
"Possessing a stake of more than one-third
in Nippon Broadcasting, which gives us veto power
at shareholders' meetings, is very meaningful,"
Fuji TV chairman Hisashi Hieda said at a press
conference. Hieda, after a month of battling to
keep control of his company against Livedoor
president Takafumi Horie, 32, might have wanted to
use the word "sweet" for the victory. But it's
still too early to rejoice. Besides, Hieda had to
pull the loyal strings of just about every major
share- or stakeholder (from Tokyo Electric to
Toshiba, with the likes of Toyota Motor declining)
in the process.
More potent backing came
from the government. The staunchest support was
lent by the ruling Liberal Democratic Party (LDP),
which has since the end of World War II made the
Fujisankei group into, some critics say, an
extension of the ruling party. This is a result of
the inertia of the "1941 Rules" that shaped both
the structure and character of the wartime and
postwar mass media in Japan.
Nihon Keizai
Shimbun, the top business paper (with the Sankei
ranking two), reckons that owning a stake larger
than one-third in the radio broadcaster will give
Fuji Television veto rights on important
management decisions at shareholders' meetings,
empowering the TV broadcaster to neutralize the
influence of Livedoor Co, which now holds more
than 45% of the stake in terms of voting rights.
That is what Hieda was aiming to do. Fuji
Television has in effect headed off a threat from
Livedoor to indirectly affect its management
through Nippon Broadcasting, which is the top
shareholder of Fuji. Owning a stake larger than
one-third in the radio broadcaster will give Fuji
Television veto rights on important management
decisions at shareholders' meetings.
Livedoor apparently wants to increase its
stake to more than 50%. Much of what remains to be
settled will be fought over in the courts.
Ironically, one of the complainants in the court
might include the founding family, the Shikanai
clan, which was eased out of management in 1992.
Don't count out Livedoor just yet. It was only
last month that upstart Horie, whose main business
is the Internet, made his niche in Japan's media
history. Last year, Horie also shook the baseball
business by trying to buy a professional team.
Wanna-be media mogul Horie, with his brash
strategy, is out of the running for the moment but
one can never be sure with a man like that. After
all, he mustered his forces on the Tokyo Stock
Exchange's usually sleepy pre-opening "off-market"
session to buy, in just 28 minutes, enough shares
to own more than 30% of Nippon Broadcasting System
Inc. And radio stations were clearly not what he
was gunning for. Nippon Broadcasting happened to
be the largest shareholder in Fuji Television
Network Inc, the jewel in the crown of the vast
Fujisankei group holdings that cover more than 100
companies and 2,000 employees. Heady stuff for a
company like Livedoor that started in 1996 with a
capital of 6 million yen (US$57,000) and a name
like "Livin' On the Edge Inc". Currently it boasts
of an annual sales figure of 300 billion yen and a
net worth estimated at 200 billion yen.
But for now the "1941 rules" seem to have
saved the day for Fuji. The "1941 rules" are
really more of a convention, a convention bred out
of the post-World War II relationship between the
mass media and the most powerful political party
in Japan, the LDP. The conservative factions that
ruled Japan during the Allied Occupation (1945-51)
formed the LDP soon after the end of the war.
The Shikanai family had conservative
leanings, and was known from the 1920s as a
publisher of trade newspapers (much like Nihon
Keizai Shimbun). Their lives changed dramatically
as Japan's imperial wars expanded and controls on
all media - including the national broadcasting
company (known as NHK) and the big three national
privately owned daily papers (Asahi, Yomiuri and
Mainichi) - were usurped by the government.
By 1941, the government's Cabinet
Information Bureau had embarked on a program of
consolidating the media. This meant shutting down
about half of the nation's newspapers (from 104 to
64). At the time, according to Gregory J Kasna,
author of The State and the Media in Japan,
1918-1945, the result was devastating from a
news point of view: "In November 1941, the
Japanese Imperial Army nationalized all public
news agencies and coordinated their efforts
through the Information Liaison Confidential
Committee, which included representatives from the
army, the navy, the Foreign Ministry, the
Government Information Office, the Cabinet
Information Bureau, the Home Ministry, the Great
East Asia Ministry, the Transportation Ministry,
the Domei News Agency and the NHK. Thereafter, all
published and broadcast news reports became
official announcements of the Imperial Army
General Headquarters in Tokyo for the duration of
World War II."
The immediate postwar
dilemma for the media was that the Allied
Occupation behaved more or less the same way. One
result was that all but the strongest publishers
suffered. "While the Asahi, Yomiuri and Mainichi
had achieved prominence before the 1930s, the
Nihon Keizai and Sankei newspapers were artificial
offspring of the consolidation period," writes
Kasna.
Some benefited by an infusion of
powerful outsiders, such as the president of
Yomiuri, Shoriki Matsutaro, who moved from the
notorious Home Ministry's Special Higher Police.
Even after the war, and the occupation, the
one-newspaper-for-one-prefecture pattern stayed
on. Wartime cabinet official Kiwao Okumura, in
charge of the media, coined as a principle the
slogan "Private ownership, state management."
Critics of the current Japanese media,
such as prominent political commentator Minoru
Morita, who attended Tokyo University during the
occupation era, say that the relations between the
conservative political factions of the LDP and the
Fujisankei group are still close. The most public
demonstration of the ties between Prime Minister
Junichiro Koizumi and Fujisankei tend to be over
"right wing" positions they both support, such as
visits to the Yasukuni Shrine in Tokyo to pray for
the war dead.
Infusion of patriotism at
the school level is being pushed aggressively by
the media, especially Fujisankei. Some
particularly controversial books have angered
other countries, including one printed and
distributed by Fuso Publishing Inc, a major
publishing house owned by Fujisankei.
Koizumi is calling for revision of the
postwar pacifist constitution to remove Article 9,
a clause inserted by the United States to prohibit
Japan from using force with other countries. That,
too, is supported editorially by Sankei Shimbun.
According to the president of another radio
broadcasting company, with long experience in
mediating between the LDP and big business,
Fujisankei's close relations with conservative
politics began in the late 1940s, when the company
was going through a rough patch. That relationship
has not wavered over the years. And the LDP
rewards loyalty, the reason the party, including
the current prime minister and his predecessor
Yoshiro Mori, were surprisingly quick in
supporting Fujisankei against the intruder, both
in public and behind the scenes.
On the
face of it, the political arguments center on
whether a media company, which serves public
interest, should be allowed to be subject to a
speculative takeover bid and whether a foreign
firm can indirectly control such a business. The
revision of relevant legislation is set to be a
major issue in Diet deliberations. "Broadcasting
businesses are meant to serve the public interest.
This issue is of great importance in terms of
national security as well," Shinzo Abe, the LDP's
acting secretary general, said at a recent press
conference.
Mori was not at all amused
that Fujisankei was under attack. He actually took
it personally, having started his career with the
Sankei Shimbun in 1960 as a reporter.
"Broadcasters exist to serve the people. I wonder
why a broadcasting company should become a
takeover target so easily," Mori said. He even
warned that new regulations are needed to protect
"public interest" from such takeovers. Since then,
there has been a flurry of activity to prevent
Livedoor's attempted takeover, and the likes in
future. Thanks to the political rhetoric, there
has been a large outpouring of support in
Fujisankei's defense, mostly in the form of share
movements aimed at bolstering the position of
Hieda of Fuji Television.
Most of those
supporting Fujisankei want laws to be tightened
up, in a way that will prevent Japan from opening
up its capital markets to freer investment from
abroad. The involvement of Lehman Brothers in
financing Livedoor has understandably drawn fire
in this climate of nationalistic deluge. Junji
Higashi, chairman of New Komeito's Diet Policy
Committee, was reported as saying, "I wonder if
it's permissible for a broadcaster to be
controlled purely by the power of money, taking
into consideration the fact that news
organizations serve as a public organ."
Yomiuri Shimbun reported that at a meeting
of the LDP's study panel on telecommunications
held recently, members agreed to revise the Radio
Law and Broadcast Law to tighten controls over
takeovers by foreign firms. One panelist said
foreign takeovers are strictly controlled,
regardless whether they are direct or indirect, in
France and the US. Another member suggested the
legal loopholes be removed by studying overseas
cases.
In 1996, there were similar howls
when Rupert Murdoch tried to buy shares in TV
Asahi Corp by setting up a company. The actual
laws in this area will be relaxed in 2006, when it
will be easier to invest in Japan from overseas.
Will a hungry Livedoor wait that long?
Richard Hanson, veteran
correspondent and expert on Japanese economy,
finance and politics, is the author of Money
Lords: The Pride and Folly of Japan's Finance
Ministry Elites.
(Copyright 2005 Asia
Times Online Ltd. All rights reserved. Please
contact us for information on sales, syndication and republishing.) |
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