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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

Power Ranger

A Japanese Toymaker Invades Cyberspace

By Cesar Bacani
and Murakami Mutsuko / Tokyo


A TYPICAL DAY AT Tokyo's Shibuya shopping district. In one mall last month, a mini-skirted college girl squealed as she wrote and sent off her first ever e-mail message. A young couple looked with wonder at a live-action real-time New York scene being downloaded from the Internet. Beside them, a young salaryman tirelessly explored sites on the World Wide Web one after another. Next to him, a bunch of teenagers whooped and stomped as they played a car racing game. Drawn to the excitement, a steady stream of shoppers picked up a little crescent-shaped controller and joined the fun.

A typical computer promotion? Yes -- and no. Like a computer, the device on display, called Pippin Atmark, can access the Internet, play video games and run CD-ROM software such as a multimedia encyclopedia. But it does not come with a monitor. Instead, the product developed by America's Apple Computer links to a television screen. Sold by toymaker Bandai for about $600 each, Pippin is a stripped-down -- and much cheaper -- version of Apple's Macintosh computer. Initial reaction has been mixed. But Bandai president and CEO Yamashina Makoto confidently predicts sales of 200,000 Pippins in Japan in the next 12 months -- and 300,000 more in the U.S. after a launch later this year. Plans for other markets, including Asia, have yet to be announced.

"Ay-yay-yay." That's what a Bandai character in the hit TV show Mighty Morphin Power Rangers says when danger looms. Some industry watchers share the sentiment. "I'm not optimistic about Pippin's potential," says Fujine Yasuaki, an analyst at Smith Barney International in Tokyo. "The quality of the images is not too impressive and it's not as easy getting linked to the Internet as Bandai claims. And the price is not too attractive. I expect sales in Japan to reach half their estimate." Adds Morita Mitsuko, an analyst at Morgan Stanley: "It's very difficult to tell how it will do, particularly as other computer makers [aside from Apple] are planning cheaper PCs and network computers."

Not that Yamashina, 51 is losing sleep over Pippin. For him, it's just another product that Bandai must offer its target market. "Kids always look for something new," he told Asiaweek. "You need to present them with something more exciting all the time." Besides, he sees Pippin as an educational tool, not just a videogame player competing with sophisticated devices from Nintendo and Sega, the world's two biggest-selling toy sellers, and Sony's PlayStation. Yamashina says most of the 200 or so CD-ROM titles Bandai hopes to release this year will be teaching and learning programs.

But make no mistake. Bandai will use its accumulated 46 years of experience as a toymaker -- and its war chest -- to push Pippin. So far, it has spent $93 million to make and sell the gadget. Bandai is a master marketer, best known for transforming cartoon super heroes and villains into products every child thinks he must have. The toymaker boasts rights to a gallery of characters that include Ultraman and Godzilla -- and 60 or so new ones it culls from Japanese manga (comics) every year. Yamashina has already scored in the U.S., Europe and Asia with Power Rangers action figures and Sailor Moon dolls. By 2001, he says, now fifth-ranked Bandai will become the world's third-biggest toymaker, overtaking America's Mattel and Hasbro.

If that comes to pass, it will be a personal triumph for Yamashina. In 1980, at age 35, he took over as president and CEO from his father Yamashina Naoharu, who became chairman. Naoharu had begun as a toy wholesaler, then branched out to making plastic toys, metal plane and car models, and action figures. The family business did well as postwar Japan pulled off the economic miracle that brought affluence to almost everyone. The young Yamashina studied economics at Tokyo's Keio University, one of Japan's most prestigious private schools. He perfectly embodied the image of the wealthy "Keio Boy," spending his free time yachting and driving sports cars.

At the family firm, the young man brimmed with ideas. Over his father's objections, Yamashina teamed up with animation companies, including Toei, the creator of the Power Ranger television series and films. One of Yamashina's first major successes was the theatrical release of a cartoon starring the robot Gundam, one of Bandai's mainstay plastic characters. Sunrise, which Bandai now partly owns, made more Gundam movies and Bandai saw revenues soar. From 1980 to 1984, it moved 100 million figures of the robot, which transforms into a plane, a tank and other weapons. Gundam's success helped boost the company's 1986 initial public offering on the Tokyo stock exchange. Two family foundations still own more than 10% of Bandai.

Yamashina continues to mine the powerful synergy between toys and shows. In the search for merchandise, Bandai scans comics, TV programs, movies, video games and even commercials. It aggressively bids for the toy rights to cartoon characters. One enduring icon: the alien Ultraman, who has been "protecting the earth since 1966." The silver-and-red super hero has appeared in more than 500 live-action TV episodes. Ultraman merchandise brings in some $200 million a year.

Schoolgirl-turned-super-fighter Sailor Moon looks set to challenge Ultraman's TV record. Her series begins its fourth season this month, a first for a cartoon in Japan. But then the blonde heroine has had a lot of help -- not least from Bandai, which bought the toy rights from Toei in 1993, when the program made its TV debut. Bandai advertised on the show and sold not only Sailor Moon dolls but also toiletries, cosmetics, confectionery, linen, clothes, electronic notebooks, video games -- almost anything you can name. Sailor Moon is credited with expanding the Japanese market for cartoon character toys and related merchandise to $4.6 billion.

Also in 1993, Bandai caused a stir in the U.S. with the Power Rangers. Though the company had enjoyed some success there in the mid-1980s with Gobots, a line of plastic vehicles that transformed into robots, Bandai America, a fully owned subsidiary, had no big hit since. But then Toei teamed up with California-based Saban Entertainment to produce the American version of Kyoryu Sentai Ju Rangers (Dinosaur Corps Beast Rangers).

Toei and Bandai have been making money from Kyoryu Sentai for almost 20 years in Japan, where the live-action TV series and movies -- and toy figures -- are still favorites with children. For U.S. television, Saban cast three male teenagers, one of them an African-American, and two girls, one an ethnic Vietnamese, set the story in a high school and gave it the title Mighty Morphin Power Rangers. Special-effects action scenes from old Kyoryu Sentai programs make up about a third of each show. "No one really imagined it would be such a hit in the U.S.," says Endo Masayoshi of Toei's International Division. The Fox network is still showing Power Rangers. Twentieth Century Fox released a movie version last year, though it did not power up the box office as anticipated.

But Bandai America came out a winner: it grossed $330 million from Power Ranger toys in 1994, more than ten times 1993 sales. (Sailor Moon has been showing in the U.S. since last year, but the related merchandise has not been moving as fast as that of the Power Rangers in their first year.) The U.S. subsidiary's performance helped the group bounce back from an $16.2-million loss in fiscal 1993. A casualty of a fierce videogame player price war in Europe, Bandai wrote off its inventory of Nintendo products and terminated an agreement to act as the agent for the Japanese company. The next fiscal year, Bandai's group profits topped a record $109 million. Yamashina says earnings for the year ending March 1996 will reach $112 million on sales of $2.2 billion.

Bandai is refocusing on Asia. A major target: China. Other Bandai toons have long been popular in the region -- ask your kids what Dragon Ball Z is (answer: a TV cartoon that mixes martial arts, slapstick and some sex) or who Crayon Shin Chan and Anpanman are (a precocious pre-schooler and a super fighter). In Malaysia, however, the word "Morphin" had to go because the government said it sounded like morphine. Saban had meant morphin as shorthand for "morphing in" -- which is what the five heroes do when unleashing their ultimate weapon, a super-robot that combines their powers.

Bandai has subsidiaries and manufacturing centers in Asia, particularly in China and Thailand. But it also maintains a large network of sub-contractors. "You need to introduce a wide range of new products," says Yamashina. "It's already a big thing if you offer ten toys and three become hits." The lean-and-mean manufacturing approach is one of Bandai's strengths; it can discontinue production lines without being saddled with expensive molds, unused raw materials and staff.

The company has decided not to manufacture Pippin itself -- Mitsubishi has been hired to produce the gadget. For its part, Apple absorbed the research costs, though it was Yamashina who asked the computer maker to design the machine. Apple gets royalties for every Pippin sold and has the right to license the technology to other companies. So if it proves a hot seller, Bandai can expect keen competition. Already, IBM and U.S. software giant Oracle are expected to launch their own stripped-down Internet-accessible PCs. And Nintendo and Sega may equip their videogame players with Internet capabilities if Pippin eats away at their market share.

But few can match Bandai's awesome collection of popular toy characters. Ultraman and Gundam star in two of the 20 Pippin game titles currently on sale in Japan, though most are "edutainment" offerings like Japanese Folk Stories, the musical Peter and the Wolf, and the documentary People of the Amazon. Bandai already markets a Japanese audio device titled Teach Me, Sailor Moon, which could easily cross over to a Pippin CD-ROM. And if Pippin still tanks? Super Yamashina will simply reach into Bandai's capacious bag -- and continue testing new goodies for himself and other like-minded kids. Hai-yah!


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