Four years ago, the Japanese financial news giant
Nikkei sent shocked the global media world with a surprise announcement: It had
bought the storied
Financial Times for $1.3 billion. “Billion” was a pricetag few thought they would see in news media sales again. As I
parsed that buy at the time, one question stood out most: Why would anyone pay what seemed like a 35× multiple for the FT?
Certainly, the FT was a leader, maybe the leader, within the mostly bedraggled pack of newspapers moving through the industry’s titanic disruptions. But it was still mid-transition. Revenue growth was still a major challenge, and as a result profits were slim. So, what did Nikkei see that made it outbid its peers, including the innovative European giant Axel Springer?
Tsuneo Kita saw the future.
And he made a big, bold bet.
A giant in Japanese media and longtime executive at Nikkei — its chairman since 2015 — Kita gave me a rare interview on a recent trip to the United States. In our hour-long conversation, conducted through an interpreter in San Francisco, the affable and accessible Kita spoke about that big buy and what it has meant to the transformation of Nikkei itself. We cover partnerships, culture, the technological imperative, and Japan’s unique digital disruption trajectory in the interview, which has been edited for length and clarity.
This should be read as a companion to
yesterday’s interview with FT CEO John Ridding, in which we get his view of what the new ownership has meant to his company and talk about its remarkable, industry-leading success in digital transformation.
Ken Doctor: First, a question on
the sale. Most people in the industry believed that, on a financial basis, you overpaid for the FT. How do you look at it?
Tsuneo Kita: I am able to say that this acquisition is a successful one. There are many, many ways you can evaluate your company. You’ve got tangible assets, you’ve got intangible assets. The intangible part of the Financial Times is invaluable for Nikkei. Nikkei has changed since we acquired the FT. Without the FT, it wouldn’t have been possible for us to transform ourselves as we have.
Even before we acquired the FT, Nikkei had been pursuing the strategy of globalization. The addition of the FT is actually promoting that strategy in a big way. It’s a big step.
Doctor: My sense of the strategy, from afar, is that the FT really allowed you to be a global player, while Nikkei itself was more focused on Asian markets. But I don’t know if that’s right.
Kita: Yes. If you look at the Japanese market, it is quite clear that the market is actually shrinking because of the population decline
[Some estimates forecast that Japan’s current population of 127 million will drop below 100 million by 2049. In fact, new government programs now aim to attract immigrants to make up for the lower native birth rate.] So, in order to grow, we had to go to overseas. And since we are based in Asia, Asia is our No. 1 priority. In order to do that, we have set up editorial headquarters in Bangkok and commercial headquarters in Singapore.
Doctor: Are you then trying to take the Nikkei brand beyond Asia, or really focusing mainly on Asia with the Nikkei brand?
Kita: Of course, the first step is always Asia and then the next step is probably the U.S. Japan, especially, has very strong ties with United States in terms of the economy, business, financial markets. So maybe we started with Asia, but we’ll go to the United States.
Doctor: You now have two big brands, Nikkei and FT, and I know you’re doing some things together. Are there strategic decisions to be made of when you use the Nikkei brand and when you use the FT brand? Do you use them together? Are you still working through those issues?
Kita: One of the most important principles that we have is that the FT and Nikkei respect each other’s editorial independence. That’s of utmost importance in a partnership. So the FT is pursuing their own globalization strategy. Nikkei is pursuing our own. The way we report the news is different between us. The FT has its own view and Nikkei has its own view. If we have two different views, then that will make us able to offer more diversified views to our respective readers. Sometimes, we collaborate with each other. Sometimes, we’re competing with each other.
Doctor: In the Asian business market, many of your peers see the same opportunity. Bloomberg’s making a major push there. Rupert Murdoch likes to do that too every once in a while, and numerous other companies are as well. Who do you see as your strongest competitors in Asia in the next five years?
Kita: We don’t necessarily see any media companies as particularly rivals to us. I mean, we have our own growth strategy. You mentioned Bloomberg and The Wall Street Journal, but we don’t see them as necessarily a direct threat to us. We have our own strategy and that’s most important to us. Japanese media, most of them are still focused on the Japanese domestic market. So in that sense, they are not really competitive with us in Asia. But again, we are only pursuing our own strategy.
Doctor: Does that strategy include paid digital subscriptions outside Japan? I know you’re closing in on 700,000 digital subscriptions for Nikkei, and I think that’s almost all in Japan. Are you looking at selling significant number of digital subscriptions outside Japan?
Kita: I’m not quite sure if you’re familiar with this, but we have our English-language publication called
Nikkei Asian Review. It’s digital-based now — the main source of delivery is just digital now. And it is actually a paid model. So we are doing this paid subscription model in Japan in Japanese, but we’re sort of doing the same overseas in English with the Nikkei Asian Review. It is taking some time, but from the beginning I’ve been saying that it’s going to be a 10-year project. Whatever time it takes, we are going to grow it.
Doctor: Where do you want to be at the end of 10 years?
Kita: The ultimate goal is to make the Nikkei Asian Review the primary source for Asian business information. Probably we start with Asian readership first, but again, in New York and in U.S. overall. I mean, people in the financial industry in general are interested in Asian information as well. So we are going to make this a global publication. It was launched in 2013, so in 10 years, it’s 2023.
Doctor: It’s hard, as we know, for North American and European publishers to understand Japanese publishing because of the language barrier. So we look for comparisons. Is the Nikkei Asian Review kind of like The Economist, for instance, for Asia? How can we compare so that western readers would have a sense of what you’re trying to do?
Kita: We started this publication, Nikkei Asian Review as a weekly magazine. Now again, it is really digitally centralized and digitally operated. So in that sense, it is exactly the same as the Financial Times or The Wall Street Journal. The content we are reporting is all about Asian business. So that’s the difference. But the business model is the same as the FT and WSJ.
Doctor: It’s the same?
Kita: Yes. You remember
Carlos Ghosn, the former CEO of Nissan? When he was detained,
we were the one to interview him first. So we wrote about it in English on the Asian Review. And that was cited by and carried out by the Reuterses or the Bloombergs. So it’s the same as any other publications — if you have a scoop and then we deliver it online, then we’re going to improve our awareness in the overseas market.
But we’re focusing on Asian tech news, I should say, as well as any news on the China. So that’s our main focus and we’re going to report all this news in English with the Nikkei Asian Review.
Doctor: Here we are in Silicon Valley, or on the edge of Silicon Valley. How much coverage does Nikkei do of Silicon Valley here?
Kita: We have an office in Palo Alto. And the office has five reporters, including for business-oriented publications called the
Nikkei BP, Nikkei Business. And on top of that, we have one guy for our commercial operations, business development.
Doctor: And I heard also that you have just started a new program at Columbia University?
Kita: Yes. We’ve been speaking to
Steve Coll [dean of the Columbia University Graduate School of Journalism] for two reasons. One is to send Nikkei reporters to Columbia to study data journalism. The other is a type of scholarship program for Asian journalists who are going to studying in the Columbia Journalism School.
And from time to time, we have conferences in Tokyo, inviting professors and faculty from the Columbia Journalism School. The audience are Japanese college students to help to promote what journalism means, how important it is.
Nikkei’s place in journalism and in an anxious world
Doctor: Let’s change tracks. This is a difficult point in the world, in politics, in democracy. And the press’s role in democracy and all the places that have been democratic is a major issue, including in our own country here at the moment. It’s clear to me that although Nikkei is under-covered as a company, that you are one of the most important news companies in the world.
And I know that your belief in transparent journalism, and in providing information to people is at your core. My question is: How dangerous a situation do you think we are in with the attacks on the press and the press’ business problems? There are so many pressures on the press today. Do you see this as a major issue?
Kita: The media industry has been under pressure for a quite long time. It’s always been a battle, to speak, with authority, with the real power. So in that sense, it doesn’t change much. Yes, that’s getting difficult, but that makes me believe that the battle is worthwhile fighting. That makes us all the more important in the society.
You mentioned the business problems — that’s the same in Japan as well. I mean, we are facing similar challenges in Japan to what you are facing in the United States. Precisely because of that, we need to maintain and improve our business operations so that we can provide free and independent journalism. And in our case, it is digitalization so that we can make ourself stronger. And that will be the basis of our free and independent journalism.
Doctor: I wrote in my book,
Newsonomics, in 2010 that by 2020 there would be about a dozen legacy companies in the world who will make it through from print to digital. And I did not include Nikkei in that list at the time. But I would now, in there with The New York Times, The Washington Post, News Corp, Axel Springer, and a few others.
I’m interested in what you want. What do you want the audience at Nieman Lab to know about Nikkei? About the business purpose, the social purpose, and where it stands with journalism. It’s a big question.
Kita: I would summarize it in a few ways. We are business media, and we would like to contribute to the growth of the world economy through our media activities. Our
corporate creed says that it’s through fair and impartial reporting that we contribute to the peaceful and democratic growth of the economy. That’s our corporate decree. So this is our mission.
The second point is: We are going to be tech-driven media. We will deliver our quality content information through digital. And we’re going to expand our areas of reporting by using digital technologies in a globalized way. So those are our main missions. That’s the way I would like to see Nikkei in the world.
Doctor: That’s ambitious. In terms of technology and being tech-driven, we’ve seen major changes in technology in the news business. I’m wondering on a 1 to 10 scale, with one being a little and 10 being a lot, where the chairman of Nikkei believes we’re at, in terms of technology driving journalism.
Kita: It’s an interesting question, but there is no goal in terms of digitalization in our industry. Things that we never anticipate could happen. It’s a constant change. Sometimes we do well, sometimes we do worse. But we need to keep updated with the latest technologies all the time.
That’s the constant challenge that we are facing. And that’s the constant effort we’re making. That is the reason why we have an office in Silicon Valley. Not just journalists, but business development people, to get to know and acquire the technologies that we can use to make our reporting better, more helpful to our readers, and to grow our business as well. And we are doing this alongside the FT.
Lessons from the FT buy
Doctor: The FT has been a technology leader in the press for almost two decades. I’m wondering what kinds of things, in the four years since the buy, you would point to as: “We were able to take these lessons from the FT”?
Kita: There are things that we learned from the FT. But there are things, at the same time, that we can share with the FT. The FT is ahead of us in terms of audience engagement, in terms of how we develop the subscription base by using all the data that we acquire from the existing subscribers. So that’s a big thing that we’ve learned from the FT.
At the same time, probably in the field of AI, we are ahead of them. We are doing research and developing AI in Tokyo. So, this is something that we will be able to share with the FT.
Doctor: I understand there is more mixing, more embedding both ways. How much interplay is there between the two organizations in terms of staff working with staff?
Kita: One example is we’ve got a gentleman from the FT in the first year of our partnership who really helped us to create
our new website, a high-performance website.
[It’s a progressive web app.]That’s one good example. In total, probably, we have more than 100 people going back and forth.
Doctor: How do they go back and forth? Is it a week here and there as joint projects? Is it business, editorial?
Kita: We have a variety of formats. Let’s speak one by one. In the newsroom, we’ve got, for example, the Nikkei Asian Review, which has a couple of FT editors all the time. I mean, people rotate, but at the moment, I think we have two or three FT editors working for the Nikkei Asian Review in Tokyo. On the commercial side, sometimes it’s a shorter trip, sometimes it’s three months. In some cases it’s a year or two years that we have people from FT, we have people going from Nikkei to FT. There’s a variety of formats.
It is increasing. And the collaboration becomes more like business as usual. So when I went to New York just the other day, an FT staffer told me that his particular project is done through collaboration between Nikkei and FT. I didn’t know that. On-the-ground collaboration, on-the-ground communication, on-the-ground exchange are all getting to be more like business as usual.
Doctor: I did a keynote at the
FT News Summit in New York this spring, and I was able to talk to a number of FT staffers. They are quite happy with your ownership. One of them told me he had a list of 40 companies that could have bought the FT when [former owner] Pearson was selling it. And the journalists weren’t enthusiastic about most of those names. They were unclear, when you bought it, what was going to happen. But they are very pleased by the cooperation and the openness. And you know, it’s not easy to please journalists anywhere.[/conr]
Japan and culture
Doctor: I know we only have a few minutes left. Let’s talk about culture. Many people will say Japan’s very different than U.S. — the cultural barrier, the language barrier. John Ridding told me he had a different take on that. John said that one of the funny things is that it turned out that FT and Nikkei shared a culture.
You clearly knew the value of the FT to Nikkei, the hidden value in the FT. Did you understand that cultural fit?
Kita: I started my career as a financial markets journalist, so the FT has always been in my sights. The FT’s corporate position:
Without fear, without favor. That is really the same as our corporate creed. And when I became the president in 2008, I thought about globalization. And when you think about that, the FT is our most preferable partner.
It’s been quite a long time since we started really studying the FT, long before we acquired it. So when they joined Nikkei Group, I didn’t really have a sense of surprise.
Doctor: I’ve been fortunate enough to cover business change in news around the globe, and the trends are really similar all over the world, but the trajectory is very different.
And it seems, when I look at it from outside and knowing too little about the Japanese market, that the Japanese press, while it’s felt digital disruption, is more insulated from that disruption than the press in North America and Europe.
Kita: Yes, one of the biggest difference between Japan and the U.S. and the European media markets is the distribution system for the print. Print, yes. Print’s still very strong.
Doctor: 2.4 million circulation for you. And
Yomiuri is at 8 million.
Kita: In total, it’s about 40 million [newspapers sold], just below 40 million. It is decreasing every year. We can’t stop that trend, but still, it’s just under 40 million. Thanks to the home delivery system, all the agencies, delivery agents.
Doctor: So you have had more time to adjust?
Kita: I don’t think we at Nikkei can be complacent about that. Because our readers are business people — they are very digital. They are data-oriented. Their digital literacy is very, very high. So we have to meet their demands, and we have to be prepared for that. In our case, Nikkei’s case, we don’t have much time.
Doctor: As I report on the changes in the news industry, I hear about Google and Facebook everywhere around the world. But also in Japan, I hear so much about the strength of Yahoo Japan. And Yahoo Japan as kind of a unique aggregator which pays millions of dollars to major press companies in Japan. And I’m wondering whether you think that situation will hold or may change in the next several years.
Kita: Actually, Nikkei doesn’t provide news to Yahoo Japan. We don’t do that because we think it’s unnecessary. Never did it.
Doctor: So all the popular papers do, but not Nikkei?
Kita: Yes, that’s correct.
Doctor: Good decision.
Kita: That’s our uniqueness.
All the other major newspapers did provide content to Yahoo Japan, because they didn’t have enough resources, didn’t have enough capability to deliver their own content through their own platform. We did have it. But Asahi [Shimbun, another major daily with 6.4 million circulation] is building up its own platform. They are probably doing the same [as Nikkei, going more direct to readers.]
So I think I’m not quite sure how long Yahoo Japan can maintain their dominant position that they have now. We’ve got many other news aggregation sites coming up in the Japanese market as well, and I’m not quite sure how far Yahoo Japan can be as strong as they are now.
Doctor: I know you’re coming here from New York. What was the purpose of this trip? Are you hoping to raise the profile of Nikkei and the FT in the U.S.? Is that part of this journey?
Kita: Yes. I was in New York actually earlier this week. I’ve made myself go to FT’s offices in London and New York regularly. I go to London almost twice a year. I go to FT New York once a year to talk to staff. That’s part of my job. So there’s no special purpose of me visiting New York this time.
Actually, we had quite good and constructive discussions on how FT is expanding its presence in the United States market. Ever since we bought the Financial Times, I’ve been saying that the biggest challenge and the biggest opportunity, so to speak, for the FT lies in the United States. So that’s the topic of the conversation I had in New York.
The reason why I came here in San Francisco is to meet you so that I can help improve the FT’s presence and awareness of Nikkei in San Francisco.
Photo of Nikkei chairman Tsuneo Kita at a Tokyo press conference for its acquisition of the FT, July 24, 2015, by AP/Eugene Hoshiko.
