Feb. 4 (Bloomberg) -- Yusuke Ohki’s 2,000 books were crowding out his Tokyo apartment, so he scanned them all into an Apple Inc. iPad. Six months later the 28-year-old is running a 120-person start-up doing the same thing for customers.
Japan’s cramped living conditions and the arrival of the iPad in May have spawned as many as 60 companies offering to turn paper books into e-books as publishers have been slow to provide content for new electronic readers. Japan has lagged the U.S. in introducing e-books because of a rigid pricing system, uncertainty over copyrights and early problems reproducing Japanese characters on screens, said Toshihiro Takagi, an analyst at market researcher Impress R&D in Tokyo.
“People are taking matters in their own hands because the publishers are not meeting the market’s needs,” said Takagi.
Japan’s $24 billion market for paper books and magazines, the world’s largest, may see an explosion in e-books as Samsung Electronics Co.’s Galaxy Tab tablet computer and readers by Sharp Corp. and Sony Corp. take on the iPad. Sales of electronic books in the country will probably more than double in the next three years to 153 billion yen ($1.9 billion), according to Tokyo-based Yano Research Institute Ltd.
Ohki and rivals including Denshika.com and Scan Honpo are tapping that demand. Ohki founded Bookscan with childhood friend Shinya Iwamatsu in April, converting books into PDF files that can be read on the iPad, iPhone, Amazon.com Inc.’s Kindle and Barnes & Noble Inc.’s Nook. The company charges 100 yen per book for a service called “jisui,” or “cooking for oneself.”
“The home-made e-book market will continue to exist as long as the copyright situation isn’t dealt with and people cannot find books they want in electronic format,” said Masashi Ueno, a researcher at Yano Research Institute. “In Japan, copyright agreements vary depending on the author, meaning a publisher could serialize a comic book but may or may not have the rights to publish it as a separate book.”
Japan’s copyright laws permit users to digitize protected works for personal and family use, according to Seichi Higuchi, the secretary general of Japan Book Publishers Association. Reproduction of a purchased work by a third party requires publisher’s permission, Higuchi said. Bookscan requires customers to tick a box to say they have this permission.
“There are more than 30 or 40 scanning companies and huge amount of books are scanned every day, so I can hardly believe all the scanning is legal,” Higuchi said in an interview in Tokyo last month.
“The pressure is building on the publishing industry to meet consumer needs before these home-made contents begin to circulate illegally,” said Nobuo Kurahashi, an analyst at Mizuho Financial Group Inc. in Tokyo. “This is a sign of latent demand.”
Japanese will buy 67 billion yen worth of e-books in the fiscal year ending March 31, most of it comics for mobile phones, Yano Research Institute’s Ueno said. Content for tablet computers and e-readers will account for more than half of e-book sales in the year to March 2015, compared with about 3 percent now, Ueno said.
Electronic books were equivalent to 8.7 percent of the $4 billion market for paper print in the U.S. in the first 10 months of 2010, Association of American Publishers said in December. Sales of e-books in the country are set to almost triple to $2.8 billion by 2015, according to Forrester Research Inc. in Cambridge, Massachusetts.
Sales of iPads and web-based document storage services such as Evernote and Dropbox have helped spur the cottage industry.
“The iPad’s release is the biggest factor in making this business possible,” Ohki said. The Tokyo-based company in July bought industrial scanners to reduce the four-month wait faced by its more than 12,000 customers, he said.
Sales of consumer scanners at PFU Ltd. rose 80 percent in June and more than doubled the following month because of the iPad’s release, according to Tadashi Oura, the head of marketing for imaging products at the company. The Tokyo-based subsidiary of Fujitsu Ltd. chartered flights to rush the devices from its factories in China to meet the spike in demand, Oura said.
Japanese buyers of Amazon’s Kindle reader are redirected to the company’s U.S. site since no Japanese-language titles are available. Lack of content and low demand forced Tokyo-based Sony to stop selling e-readers in its home market in 2007. Osaka-based Panasonic Corp. gave up in 2008.
Sony, which resumed Japan sales of its e-readers in December, formed a venture last year with mobile-phone operator KDDI Corp., Asahi Shimbun Publishing Corp. and Toppan Printing Co. to provide electronic publications. The group will take on an e-book alliance of NTT DoCoMo Inc., Japan’s largest wireless carrier, and Dai Nippon Printing Co.
“We are at year zero for e-books in Japan,” Toshihiro Konno, who heads the venture between Sony, KDDI, Asahi and Toppan, said at a briefing in December. Konno estimates Japanese will buy about 780,000 e-readers and 85 billion yen worth of content in the year to March 31.
Meanwhile, customers are turning to scanners to make room in a country where average living space per person is about 37 square meters (398-square feet), or almost half that in the U.S., according to real estate service provider Mitsui Fudosan Co.
Satoshi Tagomori, 28, who works for a pharmaceutical company in Kyushu, southwestern Japan, had his books scanned to make room for his newborn child, cutting the space occupied by books in his 50-square meter apartment by about 75 percent.
“There was just no more room for books when my son was born,” Satoshi said in a phone interview. “Plus, I was worried about the shelves falling over.”
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