My research interests include hedge funds and market microstructure.
My work has been featured in CNN, The Economist, NPR,the Wall Street Journal, CNBC, Bloomberg, the Washington Post, and numerous other popular and trade press articles.
Most of my research is available online at http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=596958
For a current list of publications and working papers, please see my CV.
In addition to the articles, I have slides/videos/additional materials for a selection of papers below. Note that these materials may not be for the latest version of the papers, and some information may be outdated.
- An Efficiency Perspective on the Gains from Mergers and Asset Purchases, B.E. Journal of Economic Analysis & Policy, 2009 (joint with Missaka Warusawitharana)
Full paper SSRN Slides
- Informational Linkages Between Dark and Lit Trading Venues, Journal of Financial Markets, 2014 (joint with Mahendrarajah Nimalendran)
Full paper SSRN Video of me presenting the paperSlides
- Under One Roof: A Study of Simultaneously Managed Hedge Funds and Funds of Hedge Funds, Management Science, 2015 (joint with Vikas Agarwal and Yan Lu)
- Limited Attention, Marital Events, and Hedge Funds, Journal of Financial Economics, Forthcoming (joint with Yan Lu and Melvyn Teo)
Full paper (Forthcoming) SSRNNPR InterviewSlides
- Too Good to be True: An analysis of the options market’s reactions to earnings releases, conditionally accepted at the Journal of Business, Finance & Accounting (joint with Yan Lu)
Full paper (Forthcoming) SSRNBP VideoSlides (zipped for file size reasons)
Trends in Japanese Media – 2015
Japan is often acknowledged as standing at the bleeding edge of technology. While this is in many ways true on the hardware side, the softer side of things, media and content, have steadfastly defied the rapid advances seen among other nations over the past ten years and remain relatively stagnant. In 2015, multiple factors are aligning to bring about a sea-change in the way media is both produced and consumed in Japan. The end results of which, while difficult to prognosticate with accuracy, will certainly lead to a major change in the media sphere and the advertising structure which supports it.
There are two key underlying factors which are forcing the legacy media structure in Japan towards revolutionary change. The first is eyeballs. Typical Japanese consumers, especially among key demographics, are now spending significantly more time engaged with the internet than with legacy media (TV, print and radio). This shift has happened over a relatively compressed timeline, comparative to the US and EU markets. Smartphone adoption, as a metric, is expected to pass 70% of the total mobile phone market in 2015, on par with the US. Broadband internet access is nearly universal in urban and increasingly so in rural areas. Per capita data usage is increasing, year on year, at nearly geometric rates. At the same time internet usage surges in Japan, consumption of and engagement with legacy media is seeing steep decline. Average TV viewing hours has flat-lined and may see the first real decline in decades. More critically for advertisers and media companies, engagement, active viewing, has been falling markedly for the past 3 years and is trending precipitously downwards.
As the saying goes, “follow the money.” The rapid shift in media consumption to the net means that advertisers in Japan are facing a new, stark reality where their traditional campaigns are becoming steadily more expensive while reaching a declining audience. Thus far, these trends have had only a minimal impact on the movement of advertising yen away from legacy into online advertising. However, given the seemingly irreversible nature of the shift away from legacy media onto the internet, the tipping point is rapidly approaching and will potentially be reached in 2015. The shift in advertising focus and money onto the internet can only accelerate from here to follow core audiences.
What this means for the Japanese media-scape is nothing short of revolution. The legacy systems, so carefully nurtured and cemented into the minds of advertisers, company executives, brand managers and consumers cannot survive a move online in their present forms. The nature of fame and the systems it leverages to shape culture and sell products will have to change. The reality in 2015 is that few, if any, companies operating in Japan are fully cognizant of or prepared for this change.
In the end, the shift online is a systemic change. As we have seen in industry after industry, disruptive, systemic changes stemming from more mature information age technologies undermine and then replace legacy systems and the companies involved too slow to adapt. The media-scape in Japan is particularly vulnerable to disruption. The reason for this is multifaceted but comes down to three key points. First, the companies involved in the legacy space are bloated and resistant to change. Their overhead and inertia stemming from a system that has been engineered to provide very high-priced services within a virtually competition-free environment. Second, there is little strategic depth within the Japanese media space. A small number of companies control the vast majority of outlets and agencies used so thoroughly under the current paradigm. With the limited number of streams (TV stations, publishers, music companies, etc.), the current run of companies cannot rely on income from one, still profitable stream to salvage those that lose viability. And finally, a general sense of insularity from change has blinded Japanese media companies to the lessons which were so painfully learned by media companies in other countries. There is a strong sense in Japan that the way things have been done is the way things will always be done, new technologies and mediums be damned. This leaves companies within the current legacy media space in Japan existentially vulnerable. Most simply put, Japanese media companies are incapable of affecting internal change to prepare themselves for the coalescing of new technologies and the advent of disruptive changes. The trends that will drive change in the media space and which are coming together in 2015 will hit Japanese media makers out of a psychological blind spot.
The greatest impact of these changes will be seen in the erosion of the power of television within the Japanese media environment. Today TV is king in Japan. The reach of TV and the advertising power it wields is seen as the corner stone of Japanese media. TV is the font of fame, the best, indeed only, means of national high level promotion and advertising on it commands some of the highest rates in the world.
For Japanese viewers, however, dissatisfaction with TV is at an all-time high. The perception that content is repetitive, of poor quality and uninteresting is pervasive. The number of hit, must-see shows is falling every year, the viewership rates are at historic lows and the number of viewers who are only passively watching (switching the TV on when they get home and leaving it as background noise) are growing. TV production companies are caught in a catch-22. They cannot innovate too heavily lest they upset advertisers who dominate networks through control of the ad revenues. They cannot improve the quality of programming because networks are in a spiral of cost-cutting that does not allow for any splurges. The money which has supported the flagships of TV programming is steadily draining away and this, in turn, is lowering everyone together.
One key impact of a slow death for TV in Japan is on the very nature of fame itself. In the current system, fame is solely available via the legacy media gestalt. As was the case in the US and EU prior to the recent advent of internet “fame,” Japanese media personalities are created by and maintained through access to exposure on TV. Control of the advertising streams give control of the talent agencies who, in turn, control the media personalities in their folds. Large advertisers in Japan have been able to shape a system of promotion uniquely centered on famous personalities, not brand, concept or content. This system exists as a further lever of control within the advertising space in Japan. The necessity of using a famous face to promote one’s products or services and the central control of these personalities make affecting a major campaign outside of the current legacy media space all but impossible. Or at least, so believe the legacy media. Dissatisfaction among viewers with the current crop of TV programming is affecting their view of those TV personalities that stand so central to that programming.
One of the biggest coming areas of change will be the ability to break out of the legacy rut of personality-based advertising and promotion by presenting alternative commercial narratives that focus on branding and message, not spokespeople. The Japanese viewing public has had a relatively nominal level of exposure to the fine art of branding. The potential to take a highly refined advertising tool and apply it to a nearly virgin market in Japan as the current norms break down will open up significant space for advertisers, both domestic and international, in Japan.
Beyond the lack of viewer engagement, disappointment with content selection and limited nature of fame in Japanese media is the emerging competition to the media system itself. Streaming video services currently in Japan are notable mainly for their lack of success. This is not a systemic or benefit issue as much as it has been a problem of resources. Current players in the alternative to TV space simply do not have the resources (content or budget) to provide a strong alternative to legacy media. In 2015 this will change. The interest that major global players have shown in international expansion is not skipping over Japan. Big-name streaming services will inevitably come to the Japanese market place and when they do will have the resources to provide much stronger competition to legacy media than has been the case in the past.
Additionally, the cost to produce original and engaging content to be distributed online has come to the point where minor, domestic and international players can provide attractive content to the Japanese viewing audiences with very low profitability thresholds. There is an incredibly active and growing indie film and video short market in Japan. Some of these productions have proven major commercial successes. The creativity of such content and the ability for virtually anyone to make it with negligible startup capital means the scale of competition for eyeballs in Japan can be far wider and more accessible than before; so much so that legacy media will be unable to easily compete.
All of the above points to a coming breakdown in the current dominance paradigm of TV in Japanese media. Television will, of course, not disappear but the increasing competition online via streaming services will continue to accelerate. With it, the movement of advertising money will move away from TV and into other, non-legacy mediums. With the hemorrhage of ad revenues away from TV, not only will the TV space have to reform itself but the nature of fame and its gestalt will open up in Japan. The impact of these changes for advertisers within this market cannot be overstated. A shift away from legacy paradigms opens up virtually limitless new advertising options, creates new access ways as yet unexplored and thus unprotected within the consumers psyche and can radically lower the costs to reach significant market segments.
Japan is going to see major shifts in 2015 in the world of gaming as well, as it is now on par with the legacy TV and film industries in terms of profits and consumer reach. There are three principal areas of change coming. The first is in platform. The release of the next-gen consoles, PS4 and Xbox One, in 2014 is likely to be the last major launch of dedicated gaming consoles in history. Despite the massive bump which PS4 and Nintendo will mean for console makers, the writing is on the wall: more gaming platform options like tablets, smartphones and PC, mean a major shift away from the centralized gaming market which has existed in Japan now for decades.
Content is where the long-term money is and Japanese-produced content has suffered a growing irrelevance for some years. The problem stems from a disconnect between Japanese game makers and the global gaming zeitgeist and a lack of drive to move non-mainstream products abroad. Neither of these points is permanent nor fatal and both are likely to be remedied in the long term. However, what we are most likely to see in 2015 is a continuation of the trend for Japanese game makers: running a dual track with a growing proportion of their content dedicated to Japanese gamers only and a dimming of the drive to make globally popular properties.
The seeds for a Japanese games renaissance are in the making, however. This will be most apparent in 2015 in the mobile games market. Mobile gaming is the fastest growing and in 2015 likely to be the more profitable gaming platform in the Japanese market. Japan already enjoys the status as the second most profitable mobile app and game market in the world, behind only the US in volume of sales. There is a growing trend for overseas mobile game makers to specifically target Japan, which is matched by domestic makers creating excellent, potentially globally competitive content. The limited startup capital necessary to create mobile games, versus triple-A titles, opens up the market to a greatly underutilized mass of game designers in Japan. As skills and experience build in the mobile game market, 2015 will be a breakout year for Japanese games both in Japan and abroad.
A powerful, as yet all but untapped, additional revenue space for mobile game makers in Japan is in-game advertising. Domestic legacy advertisers have been slow to adopt in game advertising within this market. However, as the engagement grows and the benefits of this medium from the advertising stand point become more apparent, companies will begin to push more money into the space. If Japanese mobile makers can leverage these new income streams to increase their access to overseas markets, the potential of Japanese content entering and succeeding abroad is very real.
Japan has the unique distinction of being the only industrialized country that still has a mass market for physical media like musical CDs. This has allowed the music industry in Japan to engage in some truly unique and very interesting marketing and promotional activities, like the AKB48 phenomenon, but has severely restricted innovation into future applicable technology and techniques. The recent 2014 sales numbers reflect a fascinating dichotomy between the musical acts who drive CD sales (“idols” and performance-based groups) and those who drive digital sales (pop and EDM). The nature of popular culture suggests strongly that the now multi-year long idol boom in Japan will come to an end soon. Once this does, the support for physical media-based music sales is expected to collapse.
To say that the Japanese music industry is unprepared for this is an understatement. In Japan, like many other countries, YouTube is actually the largest source for music among all consumer segments. Music streaming companies like Pandora and Spotify do not yet operate in Japan. There has been massive resistance from the Japanese music industry against these companies’ entry into the market. However, a significant collapse of CD sales, which is all too likely to occur in 2015 or shortly thereafter, may rapidly open the door to more modern forms of paid music services.
In the publishing industry as well, outside competition in the form of ebooks and digital sales is on the verge of reshaping the market place. Ebooks now make up approximately 15% of total book sales in Japan. Not a massive number, but compared to just 3 years ago when it was 2% the inroads made by digital literature is stunning. In 2015 it is estimated that this number will increase by 70% or more to over a quarter of total Japanese book sales. The resulting impact of increased digital book publishing and retail in Japan is twofold.
First, it will severely impact an already knife-edge legacy publishing industry. As we have seen in the US and EU the majority of publishers will either collapse or consolidate. Book stores across the country will be forced to shutter. These book stores do not just sell books but are the major outlets for Japan’s bloated and barely profitable magazine industry. The magazine industry, in its turn is a linchpin in the overall legacy media system here. The impact of even a few more percentage points of change in commerce shift online will have a domino effect across Japan and Japanese media well beyond the publishing industry. This phenomenon that is going to be seen in 2015 will accelerate the other trends sited throughout this article.
The second major impact will be the diversification of creative talent. Currently Japanese publishers reject well over 80% of the book and article submissions they receive. As much has existed in the past in the US and EU, there still exists in Japan a significant legitimacy gap between those who publish via a publisher and those who choose the self-publication route. The tools which have been perfected in the US (Amazon services and others) are very easily adopted by Japanese authors. The sheer monetary benefit of ditching the publisher which has gone so far in remaking the US industry will only be a stronger motivation in Japan where publishers regularly take over 90% of the net profits from book sales. As more major names become aware of this and take advantage of the utility of modern, online publication, the swing of the pendulum in Japan away from legacy publishers will increase. This will also allow a flowering of independent authorship and a wider range of topics and content.
One area where this will have a strong impact is in manga sales. Already in 2014 digital manga sales accounted for nearly 10% of the total. In 2015 this is expected to grow to almost 20% or more. The universality of smartphone use among core manga reading demographics combined with the ease of access and lower costs of digital manga are propelling the strongest content segment in publishing online. The end of the printed manga cash cow for legacy Japanese publishers will accelerate their decline. Conversely, new and independent manga content makers’ ability to reach a wide audience will see an explosion of new content. While not likely to be a factor in 2015, this trend will see the creation of a massive new library of potentially globally attractive content over the coming few years.
One of the most intriguing changes we are likely to see will be in the ossified newspaper and general news category. Newspaper sales have been in decline in Japan since 2005. General news programming on Japanese television is some of the most consistently poorly rated programming on the current schedule, which is saying a lot. There are no 24 hour, Japanese news channels. News is one of the most strictly controlled aspects of media in Japan with both government and corporate intrusion and oversight. Self-censorship of news among Japanese papers and programs is intense and significantly determinate to overall quality and relevancy. Worst of all, the issues which plague the news in Japan are widely recognized among consumers.
The difficulty of creating a strong, independent fifth estate in Japan has always rested on the twin pillars of government/corporate influence and startup/operations costs which inevitably pressure news providers into obedience with self-censoring norms. Both of these factors are under direct threat from the internet. Overseas basing of a Japanese language news service, while not yet attempted or legally defended, is a fascinating option which is widely discussed online. The minimal overhead of operating a news organization online, as opposed to the costs of doing so in print or on television, makes the creation of multiple and eventually viable competition in this space all but inevitable.
To counter the potential existential threat posed by less constrained, popular online news sites (already so influential in other markets like the US), the legacy news providers in Japan are currently making two major changes to their content and presentation style. The first is to incorporate ever more elaborate visuals and graphics packages in the hope of setting a quality bar high enough to deter competition. The second is to increasingly engage in more alarmist and continual crisis-style reporting. The boost in sales and viewership which accompanied the January ISIS hostage crisis has only accelerated this trend. There were many voices condemning what was widely perceived as exploitative reporting of this story but that did not stop a record number of papers being sold or the highest TV news rating since the 3/11 earthquake.
Traditionally breathless, scandal and tragedy reporting has been the sole preserve of the weekly magazines and other marginal sources. However, the strong decline in pillars of the legacy news world means that an attention-grabbing style is likely the only means left to remain relevant. To this end, we can expect to see a strong shift in reporting style, if perhaps not, in content, in 2015.
Legacy news broadcasters and papers are still, however, highly constrained in the content which they can publish. To a Japanese audience hungry for real news and impactful reporting, a shift to flashier graphics and more a sensational style is likely to be insufficient to stem the longer term tide of decline. An across-the-board decline in the legacy publication industry, access to an open internet, increasing numbers of out-of-work writers and lack of legal/political/commercial pressures from an online format makes 2015 a perfect storm. There is a high probability that this year will see the birth of a slew of high-profile Japanese news and sub-news, popular news, web sites. A more open news media here will have no shortage of big stories and is poised to generate a new, highly read and engaged with medium.
So, what does this all mean for Japanese media? In so many words it means that a tidal wave of change is coming. Not coming in a few years’ time or at some point down the road; it is happening now. The old paradigms which have held sway for so long here are facing the threat of irrelevance as they have never done before. The media market place in Japan is poised to enter an unparalleled period of change.
2015 will see a number of trends coalesce in a self-reinforcing cycle of collapse and change. The Japanese are some of the most invested, intensive media consumers in the world. The media which they have consumed to this point was the product of its milieu but now there are fundamental technologic and social changes in play that are changing the very foundations of this massive structure. The internet, ecommerce, declining engagement with legacy media, an influx of new content creators, the lowered cost of online production and distribution, the universality of net access and engagement, the movement of advertising money online, the breakdown in the paradigm of fame, the pressure of cutting edge deep pocketed overseas competitors, an unready and unresponsive legacy media and an undying hunger from Japanese consumers for something new and something more are all coming together in 2015 to create a tectonic shift in the media landscape of Japan. The results of which will be cataclysmic for some but beneficial to most. There is a proto-Cambrian explosion simmering within the Japanese media space and 2015 is the year these changes will begin to take form.