East Asian giants in the global tech industry

Governments sometimes struggle to find the right policies to harness emerging technologies, but Japan and South Korea can provide something of a blueprint, Carin Holroyd writes.

For the last 30 years, discussions around the so-called ‘new economy’ have focused on hardware. The world of routers, fibre optic cables, and digital hubs was hardly the stuff of general excitement, but consumers and entrepreneurs alike celebrated the advent of high-speed, reasonably priced, and reliable Internet.

Japan and South Korea both emerged, after a delayed start, as world leaders in connectivity and as Internet-enabled societies.

As the Internet became entrenched, South Korea and Japan established global reputations for their consumer electronics.

Japan’s DoCoMo phones set a benchmark for mobile Internet services and app development that enjoyed commercial success years before Apple’s iPhone attracted global attention.

South Korea started next, with Samsung and LG soon becoming major players in the smartphone market and joining other national firms in pioneering smart television products and services.

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From the early days of the Internet, it was clear to government officials and business leaders alike that the creation of international digital networks and the availability of user devices represented only two-thirds of the commercial digital triumvirate.

The last element – digital content – attracted much less attention and a smaller amount of government support, in substantial measure because of the limited engagement by large businesses and industry in the content sector.

In recent years, governments and businesses have come to understand the commercial importance of digital content. In Japan, this was led by the video game industry, typically in association with the platform manufacturers such as Sony, Panasonic, Nintendo, and Sega, as well as by the nation’s long-standing animation firms.

South Korean firms, on the other hand, built a global multi-player online gaming enterprise. The two countries are among the top five digital content nations, alongside China, the US, and the UK.

Government policy in both countries, however, lagged behind on the development of a digital content economy.

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The somewhat rogue nature of digital companies – young, small, artistic, and more than a little counter-cultural – stood in sharp contrast to the hierarchical large firms that dominate the South Korean and Japanese economies.

The conservative, industry-focused senior officials that drove East Asian economic policy did not immediately see the potential of video games, online gaming, electronic books, music streaming, content-sharing platforms, and the numerous other innovations that connected digital creators and customers.

Within a decade of the launch of the smartphone industry, however, the governments of Japan and South Korea had come around. Both East Asian nations grew in their government promotion of the digital content sector, although they pursued markedly different strategies.

South Korea went all-in on the production side, creating a large-scale Digital Media City outside of Seoul and encouraging entrepreneurs and small start-ups by providing access to training and working facilities, supporting competitions, and showcasing Korean characters in street events and parades.

Appreciating the role of culture in the gaming sector, the South Korean authorities supported story-telling initiatives as part of their plans to encourage online multi-player games.

While the country’s PC bangs, essentially stand-alone commercial video-gaming centres, were so popular that government officials worried about video-game addictions, the market for Korean multi-player online games produced many jobs and successful firms – the currency of national economic development.

The Government of Japan has most recently focused on helping Japanese digital content firms sell their products internationally. Although Japanese video games and animation are well known globally, only a fraction of what these companies produce reaches international markets.

As part of its ‘Cool Japan’ campaign that emphasised the importance of the creative industries in broadening the country’s economic base, the Japanese government co-sponsored numerous events to showcase its nation’s content to the world. This has helped push Japanese digital products into the rich Chinese and American markets.

Financial support for localisation – dubbing and subtitling, for example – and for a ‘Japan channel’ to broadcast Japan-related content in several Asian and other international markets was made available.

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The digital content industry has attracted increased – but far from comprehensive – international attention. There is growing recognition that content – the commercial trade that capitalises on the global network of Internet ‘pipelines’ – has significant economic value.

The sector was, in Japan and South Korea, viewed as important but not transformative. There was money to be made, but not on the scale of their high-profile manufacturing sectors.

Its global success was not without problems either, which appeared with the control of intellectual property rights and the emergence of digital piracy. Challenges also arose in bridging cultural barriers between content producers and global consumers.

Digital firms have already demonstrated the commercial viability of high quality, consumer-sensitive, and competitively priced content, as well as that of continued evolution of digital hardware.

Particularly, the coming expansion will bring the development of virtual and augmented reality and holograms – as well as other technologies – creating new commercial opportunities, expanded markets, and enhanced national revenue.

Governments, including those of Japan and South Korea, struggle to find the right policies, incentives, and business development programs needed to launch digital content to the next economic level.

Regardless, in both nations, there is a growing realisation that this sector will play an increasingly important role in the economy. And other countries in the world should be having the same realisation too.

This article is based on the author’s paper published in the Asia & the Pacific Policy Studies (APPS) journal. You can read the full paper, ‘Digital content promotion in Japan and South Korea: Government strategies for an emerging economic sector’, here.