P3, inc. will change its name to TRaaS On Product Inc. on April 26, 2022. The company states that, as TRaaS On Product Inc., it will shift the focus of its business operations from media services, which are easily influenced by the economy, to service-optimized manufacturing. However, its current business summary reflects operations conducted by P3, inc. in FY01/22.
The company mainly operates media content and ad distribution systems (media platforms) using digital signage that are installed in selected locations such as storefronts of specified businesses. Unlike television or radio for the general public, these systems deliver location-specific content that appeal to the targeted clienteles visiting these venues. P3’s digital signage are Internet of Things (IoT) devices, which the company designs in-house and outsources production to electronics manufacturing service (EMS) providers. P3 delivers media content (information and ads) to these devices via the cloud and earns ad revenue from the advertisers in return. The company handles the development/manufacture of the devices and operates the platforms, but relies on partner companies for marketing activities and content production. The ad revenue is shared among these parties according to the terms of the agreement for each project. The company formulates the general business scheme and chooses partners on a project-by-project basis.
As the first project in the media platform business outlined above, in FY01/21, P3 began rolling out a digital signage system for beauty salons. The signage comprises an in-house developed tablet-type device that is placed at the mirror stand of each styling chair. The plan is to install these devices at beauty salons across Japan and deliver beauty-related ads to them via the cloud. This also involves recruiting advertisers and distributing their ads along with attention-grabbing content. The scheme comprises three players: P3 (handles device design/manufacture and service operation), a general wholesaler and consulting company in the beauty salon industry (handles device installation and marketing to salons), and an ad production company (handles production of the ads delivered to the devices).
The company manages and distributes beauty-related content and advertisements produced by digital advertising companies via the cloud. Beauty salon consulting companies that handle device installation can use the company's services as a tool for providing management support to client beauty salons. The IoT devices can detect whether a salon customer is seated via a facial recognition feature (without taking personal information) and deliver beauty-related content, helping salons improve their service quality, promote in-store product sales, and lock in customers. For the ad production company, the system generates new digital ad opportunities targeting beauty salons. P3 does not disclose the size of the business or the respective revenue shares of the three parties involved, but it has indicated that it intends to continue operating this business as TRaaS On Product Inc.
The company was originally founded as Tranzas, Inc., Inc. in 1995 by current president Hidehiko Fujiyoshi. Tranzas Inc. specialized in the design of IoT devices such as set-top boxes (STBs) and wearables for commercial use. It stood out for low-cost manufacturing achieved through a combination of device designs featuring leaner functionality than for those intended for general use, selective procurement of materials that match the lean functionality, and use of contract manufacturers in China and Taiwan. In 2019, Mr. Fujiyoshi met Ryuichi Terayama (left his position as a director in October 2021), the current CEO of NSC Holdings, Inc. (unlisted)*, and they established the former P3, inc. as a joint venture, then also an equity-method affiliate of Tranzas Inc., to develop a media platform business. Afterward, Tranzas Inc. (the parent company) absorbed subsidiary P3 and later changed its trade name as a listed company to P3, inc. in May 2020. In 2021, the company began to observe sluggish growth in the category of media services as a result of the COVID-19 pandemic. Due in part to these circumstances, the company announced in March 2022 that it intends to shift the focus of its business operations from media services (which require relatively long periods of time to generate revenue) to SaaS services centered on manufacturing. In accordance with this shift, the company will change its name in April 2022.
The company maintains only one reportable segment: the Terminal Solutions segment. In FY01/22, the company reported revenue of JPY163mn in its Platform, Planning & Product business (40.3% of overall revenue), JPY139mn in its Made-to-Order Product business (34.4% of overall revenue), and JPY102mn in its Technical Service business (25.5% of overall revenue). Before it launched its former Media Platform business, the company primarily focused on device sales. However, since FY01/21, the Platform, Planning & Product business (formerly the Media Platform & IT Services business) has been the company's core business.
FY01/22 results: For FY01/22, the company reported full-year consolidated revenue of JPY405mn (-31.0% YoY), an operating loss of JPY357mn (versus year-earlier loss of JPY246mn), a recurring loss of JPY365mn (versus year-earlier loss of JPY246mn), and a net loss attributable to parent company shareholders of JPY518mn (versus year-earlier loss of JPY384mn). During the year the company launched its Media Platform business and also began working on its first contract under that business, providing digital signage services to beauty salon operators. However, the rollout of the service ended up being delayed by another outbreak of COVID-19 infections. On earnings, gross profit on sales finished down 60.7% YoY, leaving the company even widen its losses at the operating profit level.
FY01/23 forecast: For FY01/23, the company is forecasting full-year consolidated revenue of JPY480mn (+18.6% YoY), an operating loss of JPY23mn (versus year-earlier loss of JPY357mn), a recurring loss of JPY44mn (versus year-earlier loss of JPY365mn), and a net loss attributable to shareholder of the parent company of JPY44mn (versus year-earlier loss of JPY518mn). While aiming to significantly reduce fixed costs and improve profitability through operational streamlining measures it began implementing in FY01/22, the company will also turn its attention to the B2B market, focusing on new growth areas such as SaaS services centered on manufacturing and owned media development. The company plans to fund these new measures through intensive investment of management resources. On April 26, 2022, P3 plans to change its trade name to TRaaS On Product Inc.
The company has not announced a medium-term management plan. However, based on its policy of focusing on the Media Platform & IT Services business as an operational pillar and the assumption of post-pandemic market environments moving forward, the company can be expected to shift its focus toward SaaS services grounded in manufacturing and owned media development starting in FY01/23. P3 plans to continue operating its existing digital signage business for beauty salons.
Shared Research has concluded that the company's strengths include its relationships with ideal component suppliers, which it established through the outsourcing of manufacturing in Taiwan and China; its program module libraries, which save labor on the design front; and its proven ability to establish subscription-based businesses. Meanwhile, we see the company’s weaknesses as: dependence on partners, difficulty achieving economies of scale due to limited target markets, and difficulty ascertaining market demand due to a sales system that uses resellers.
*NSC Holdings, Inc.
The holding company of News Service Center, Inc. News Service Center was founded in 1970 with the support of the political and business worlds in response to 63rd Prime Minister Eisaku Sato’s inquiries into the question of “how to inform the Japanese people of government activities.”
The first president was Heigo Fujii, a member of the House of Councilors, who was vice president of Nippon Steel Corporation (TSE1: 5401) and a mediator between the government and the private sector. The government contributed 40% of the initial capital, with the remaining 60% coming from the Asahi, Mainichi, Yomiuri, and Sankei newspapers, and advertising giants Dentsu Inc. and Hakuhodo Inc. (the main company of Hakuhodo DY Holdings [TSE1: 2433]). Employees were seconded from Nippon Telegraph and Telephone Public Corporation (currently Nippon Telegraph and Telephone Corporation [TSE1: 9432]). Receiving allotments from the national public relations budget, the company was the first to commercialize a telephone information service business in Japan. It established the Telephone Service Association, an organization comprising more than 400 member companies, and spread telephone information services across Japan.
The company provided breaking news from major outlets free-of-charge over the telephone, and sandwiched government PR messaging in between the programming. The advertising business expanded, and News Service Center came to own a group company publishing Weekly Japan, a free newspaper started by the government, which resulted in it creating a newspaper media business with a circulation of over five million. In the age of television, the company, supported by funds from the national budget, started a public relations business using video content to promote public facilities. It developed media in the three areas of telecommunications, newspapers, and television.
In 2000, News Service Center was privatized and temporarily became a subsidiary of the NTT Group before being spun off in 2013. The company transitioned to a holding company structure in 2015 with its news media business becoming a newly formed subsidiary News Service Center. Meanwhile, in 2001, The News, a media service operated by the company, became Japan’s largest news site with 4,600,000 registered members. The company currently operates The News, and has many users as a government-preferred mobile media operator. It operates a news media business that involves developing and operating news portal sites and providing ad space.
|Gross profit margin||43.7%||26.9%||29.3%||35.3%||20.1%|
|Operating profit margin||20.0%||-||-||-||-||-|
|Recurring profit margin||17.5%||19.5%||-||-||-||-||-|
|Per-share data (JPY)|
|No. of shares outstanding at the end of period('000 shares )||2,168||3,132||3,160||3,169||3,686||3,691||-|
|EPS (fully diluted)||-||55.6||-||-||-||-||-|
|Dividend per share||-||-||-||-||-||-||-|
|Book value per share||-||434.9||380.7||341.6||197.0||56.6||-|
|Balance sheet (JPYmn)|
|Cash and cash equivalents||1,103||793||618||432||120|
|Total current assets||1,536||1,266||1,009||652||227|
|Tangible fixed assets||15||25||28||128||1|
|Investments and other assets||29||20||60||112||71|
|Total current liabilities||255||144||72||190||29|
|Total fixed liabilities||0||0||3||10||61|
|Total net assets||539||1,362||1,203||1,091||726||209|
|Total liabilities and net assets||703||1,617||1,348||1,167||936||299|
|Total interest-bearing debt||0||0||0||3||103||62|
|Cash flow statement(JPYmn)|
|Cash flows from operating activities||166||-260||-102||-116||-263|
|Cash flows from investing activities||-42||-56||-75||-137||89|
|Cash flows from financing activities||661||6||1||108||-40|
TRaaS On Product Inc announced it will offer first series unsecured convertible bonds with share subscription rights and 11th and 12th series share subscription rights via third-party allotment.
The company announced that, at the Board of Directors meeting held on May 2, 2022, it decided to offer first series unsecured convertible bonds with share subscription rights and 11th and 12th series share subscription rights via third-party allotment. It also announced a resolution to enter into an investment agreement with Whiz Partners Inc (unlisted) as a managing partner of the Whiz AIoT Evolution Fund (LLP), the scheduled allottee.
The company has determined that this flexible means of funding is in the best interest of its stakeholders and will meet future capital needs while maintaining a stable financial base over the long term. The total amount of funds raised is about JPY400mn. For details, please refer to the Release and the Supplementary Financing Materials published along with it.
TRasS on Products Inc has released Supplementary Financing Materials.
On April 27, 2022, TRass On Product Inc. announced its business plans and prospects for future growth.
Following its name change from P3, Inc. to TRass On Product Inc. on April 26, 2022, the company followed up on April 27 with a presentation of its business plans and an overview of its prospects for future growth. There were no changes in the guidance previously issued by the company for consolidated sales and earnings in FY01/23, or for the guidance issued for sales at individual business units. For further details see company press release.
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||% of Est.||FY Est.|
|Gross profit margin||26.8%||21.8%||23.1%||29.3%||30.9%||41.4%||35.6%||35.3%||23.7%||25.9%||26.0%||20.1%|
|Operating profit margin||-||-||-||-||-||-||-||-||-||-||-||-||-|
|Recurring profit margin||-||-||-||-||-||-||-||-||-||-||-||-||-|
|Gross profit margin||26.8%||16.8%||27.5%||36.9%||30.9%||46.3%||11.9%||34.6%||23.7%||28.3%||26.1%||-|
|Operating profit margin||-||-||-||11.1%||-||-||-||-||-||-||-||-|
|Recurring profit margin||-||-||-||11.7%||-||-||-||-||-||-||-||-|
Quarterly operating profit
|Media Platform & IT Services||19||38||55||69||7||19||26||40||Platform, Planning & Product||8||21||28||40||23||82||109||163|
|% of total||11.5%||11.5%||12.7%||8.8%||6.4%||5.6%||6.2%||6.8%||% of total||7.4%||6.2%||6.6%||6.8%||24.3%||45.0%||34.3%||40.3%|
|IoT Solution Services||99||205||271||568||58||235||272||388||Made-to-order Product||58||235||272||388||42||48||131||139|
|% of total||59.8%||61.9%||62.5%||72.5%||53.4%||69.4%||64.5%||66.2%||% of total||53.4%||69.4%||64.5%||66.2%||44.3%||26.3%||41.3%||34.4%|
|% of total||56.2%||37.1%||31.6%||47.2%||9.2%||49.3%||45.3%||45.0%|
|% of total||3.6%||24.5%||30.9%||25.1%||43.3%||19.8%||19.0%||21.2%|
|Information Technology||46||87||106||147||43||83||122||157||Technical Service||43||83||122||157||29||51||76||102|
|% of total||27.8%||26.3%||24.4%||18.7%||39.6%||24.5%||28.9%||26.8%||% of total||39.6%||24.5%||28.9%||26.8%||30.6%||28.0%||23.9%||25.2%|
|Media Platform & IT Services||19||19||17||14||7||12||7||14||Platform, Planning & Product||8||13||7||12||23||59||27||54|
|% of total||11.5%||11.5%||16.6%||3.9%||6.4%||5.2%||8.4%||8.5%||% of total||7.4%||6.2%||6.6%||6.8%||24.3%||67.5%||19.9%||62.1%|
|IoT Solution Services||99||106||66||297||58||177||37||116||Made-to-order Product||58||177||37||116||42||6||83||8|
|% of total||59.8%||64.0%||64.4%||84.9%||53.4%||76.9%||44.5%||70.5%||% of total||53.4%||69.4%||64.5%||66.2%||44.3%||6.9%||61.3%||9.2%|
|% of total||56.2%||9.1%||3.2%||29.7%||9.2%||46.4%||5.7%||12.5%|
|% of total||3.6%||22.6%||12.2%||8.0%||43.3%||5.9%||3.1%||7.5%|
|Information Technology||46||41||19||41||43||40||39||35||Technical Service||43||40||39||35||29||22||25||26|
|% of total||27.8%||24.8%||18.5%||11.7%||39.6%||17.4%||46.9%||21.3%||% of total||39.6%||24.5%||28.9%||26.8%||30.6%||25.2%||18.5%||29.9%|
Full-year consolidated results for FY01/22 (February 2021–January 2022)
In Japan, vaccination campaigns aided efforts to quell new COVID-19 infections, allowing restrictions on businesses to be eased with this in turn bolstering prospects for a pickup in economic activity. The emergence of new coronavirus variant, the Omicron variant, once again clouded the outlook and made it difficult to predict the business environment going forward.
With revenue finishing the year down 31.7% YoY and gross profit down 60.9%, the company finished the year with loss widened at the operating profit level. The company's efforts to grow the business by using the technological expertise to create various media platforms for individual companies, did not bear fruit.
Full-year revenue of JPY163mn (+307.5% versus parent company figures for the same business in FY01/21.)
The digital signage system business for beauty salons, which the company has been operating since FY01/21, grew in Q2 FY01/22. However, growth in ad revenue generated through this business began to stagnate in Q3 FY01/22 as advertisers remained relatively reluctant to place ads.
Full-year revenue of JPY139mn (-64.2% versus parent company figures for the same business in FY01/21.)
The sharp drop in revenue at the Made-to-Order Product business reflected a combination of a drop in orders for large set-top boxes and the investment in resources on its PPP business.
Full-year revenue of JPY102mn (-35.0% versus parent company figures for the same business in FY01/21.)
As was the case at the Made-to-Order Product business, revenue at the Technical Services business also declined following the company's decision to concentrate more of its resources on the PPP business.
|(JPYmn)||1H Act.||2H Act.||FY Act.||1H Act.||2H Act.||FY Act.||FY Est.|
|Cost of revenue||199||181||379||135||188||323|
|Gross profit margin||41.4%||27.0%||35.3%||25.9%||15.3%||20.1%|
|Operating profit margin||-||-||-||-||-||-||-|
|Recurring profit margin||-||-||-||-||-||-||-|
For FY01/23, the company is projecting full-year consolidated revenue of JPY480mn (+18.6% YoY), an operating loss of JPY23mn (versus year-earlier loss of JPY356mn), a recurring loss of JPY44mn (versus year-earlier loss of JPY365mn), and a net loss attributable to shareholder of parent company of JPY44mn (versus year-earlier loss of JPY517mn). In pursuit of revenue growth, the company plans to intensively invest management resources in SaaS services and owned media development, which it has designated as growth areas, while basing its central strategy on manufacturing for the B2B market. In terms of profit, the company plans to reduce operating loss by substantially cutting fixed costs and improving profitability through operational streamlining measures it began implementing in FY01/22. In accordance with the anticipated shifts in its business activities, the company plans to change its name on April 26, 2022.
|Results vs. Initial Est.||FY01/17||FY01/18||FY01/19||FY01/20||FY01/21||FY01/22|
|Revenue (Initial Est.)||-||-||1,500||888||1,545||1,232|
|Results vs. Initial Est.||-||-||-53.7%||-11.8%||-62.1%||-66.2%|
|Operating profit (Initial Est.)||-||-||271||20||81||10|
|Operating profit (Results)||0||252||-145||-103||-247||-326|
|Results vs. Initial Est.||-||-||-||-||-||-|
|Recurring profit (Initial Est.)||-||-||269||17||81||4|
|Recurring profit (Results)||184||245||-147||-102||-247||-340|
|Results vs. Initial Est.||-||-||-||-||-||-|
|Net income (Initial Est.)||-||-||178||17||68||3|
|Net income (Results)||112||152||-166||-122||-384||-460|
|Results vs. Initial Est.||-||-||-||-||-||-|
In FY01/19, the company initially forecast revenue of JPY1.5bn, but actual revenue was only JPY694mn. The result is mainly explained by underperformance in IoT Solution, which recorded revenue of JPY478mn (-51.8% YoY), JPY695 short of the JPY1.2bn forecast owing to lower-than-expected sales of newly developed IoT controllers for hotels and lodgings. On the profit front, the company posted an operating loss as it felt the fixed cost burden more keenly due to a significant decline in revenue.
In FY01/20, the company put a halt on expansion of the automatic check-in devices for lodgings (the company books these device sales under Hospitality and after-sales subscriptions under IT Services) that it had been promoting in the IoT Solution business due to changes in market conditions. This caused Hospitality and IT Services (integrated into Media Platform & IT Services in FY01/21) revenue to fall JPY185mn below plan. In the Enterprise domain of its IoT Solution business, the adoption of wearables in large factories pushed performance JPY94mn above plan, but not enough to cover the decline in Hospitality and IT Services.
In FY01/21, the company launched its Media Platform business and began working on its first contract under that business—providing digital signage services to beauty salon operators. However, the onset of the COVID-19 pandemic caused delays in the installation of the terminals used for digital ads and the receipt of advertising budgets from sponsors. As a new initiative, the company entered into business alliances with new advertising partners (including Nagano Toyota Motor Sales Co., Ltd.), but none were in time to contribute to earnings in FY01/21. In its IoT Solution business, the company failed to win a large contract. As a result, revenue fell YoY. On the profit front, P3 saw operating losses widen as SG&A expenses soared even as revenue fell, the jump in SG&A spending being driven mainly by spending in support of business expansion.
In FY01/22, performance in the Platform, Planning & Product business declined substantially as the company incurred severe impact from the COVID-19 pandemic. This result occurred largely because ad revenue in the signage business for beauty salons fell short of expectations as advertisers remained relatively reluctant to place ads. Additionally, the global shortage of semiconductors caused a sharp increase in prices of the company's products and procurement delays that extended periods of time for required for product delivery. In FY01/22, the company reported operating loss in the Platform, Planning & Product business because the decline in revenue left it unable to cover its fixed costs.
As of FY01/22, the company has not released a medium-term management plan. However, it has announced in April 2022, a change in its business policy and in accordance with this shift, has indicated that it will change its name from P3 to TRaaS On Product Inc. Shared Research has surmised that the company's business policy, which it presented when it changed its name from Tranzas, Inc. to P3, inc. in FY01/21, indicates its basic position regarding future business operations.
During its Tranzas era, which continued through FY01/20, the company focused on selling IoT devices equipped with inexpensive and optimal features and created through both its own design and the use of electronics manufacturing service companies. At the same time, it designed products such as set-top boxes and wearables and outsourced their manufacture to third-party companies at low prices. After changing its name in May 2020, P3, inc. began to focus on the media platform business as the core centerpiece of its corporate group's activities while viewing manufacturing as a supporting function. After assuming the name TRaaS On Product Inc. in April 2022, the company will establish a management structure through which it will aim to establish SaaS service and owned media operations while basing its central strategy on manufacturing.
The company launched a digital signage system for beauty salons in FY01/21 as the first project of its Media Platform business. The project is a collaboration between P3 and two other partner companies, with P3 responsible for the design and outsourced production of IoT devices and the operation of the media platform, Dalia Incorporated (Fukuoka, Fukuoka Prefecture; unlisted) handling installation of IoT devices as business tools for beauty salons, and Digital Garage, Inc. (TSE Prime: 4819) in charge of ad agency functions such as creating media content and digital ads. Earnings for this service come in the form of advertising revenue and are shared by the three partners (details of the arrangement undisclosed). The company will continue to operate this business following its name change in April 2022.
The company has indicated that it will change its name from P3, inc. to TRaaS On Product Inc. and modify its business operations on April 28, 2022. The following information is based on the company's financial results in FY01/22.
The company has its origin in the design and outsourced production of Internet of Things (IoT) devices, an ongoing business since the time it operated under the trade name Tranzas. In the more recent Media Platform business, the company develops devices catering to a narrow business domain, uses them to distribute media content (information and ad content) to a specified audience, and receives ad revenue from advertisers in return. The latter business model positions the operation of media platforms as the main earnings pillar.
The business under the trade name Tranzas had centered on the low-cost manufacturing and sales of in-house designed devices. After changing its name to P3, however, the company shifted focus from the simple sales of devices to the provision of services using them (i.e., adding information distribution functions and offering their use as part of a media platform). Taking the TV media as an example, the role of P3’s Media Platform business is analogous to a TV broadcaster that also manufactures the TV and functions as an ad agency.
The company operates its media platform business under a recurring revenue-based earnings model that entails continual billing. During its Tranzas era, the company's business model involved designing original equipment in response to customer demand and market trends and outsourcing manufacturing and the procurement of components to companies in Taiwan and China. However, under this business model, the company's IoT devices were generally geared toward specific customers and were not suited for mass production. Consequently, the company was prone to incurring significant losses when demand fluctuated.
In fact, in FY01/19, it launched a service support system for small lodging facilities where it foresaw an increase in demand, only to discontinue marketing efforts the following year. In FY01/21, the company changed course from pursuing these kind of device sales to creating a platform business grounded in recurring revenue. Still, the company’s traditional expertise in design and outsourced production remains central to its strategy since IoT devices are also key to advancing the service-centered business model.
This media platform business became the company's centerpiece after it changed its name to P3, inc. and was re-titled the "Platform, Planning & Product" business in FY01/21. The core element of this business is the company's digital signage system for beauty salons. The company manufactures the hardware terminals associated with this system and operates the corresponding ad distribution system. Meanwhile, two partner companies sell the system to beauty salons while recruiting advertisers and producing content. The revenue that the company generates through this business stems from ad distribution fees. Meanwhile, the hardware terminals manufactured for the company by subcontractors are installed at beauty salons and function as operational assets for the company.
The term value-added reseller (VAR) generally refers to companies that add functions to existing hardware or software and resell the resulting products. Examples of this can be found in electronics, which are combinations of hardware and software. For example, a company that purchases existing computer parts, assembles them, adds the necessary applications, and sells the resulting product as a fully functional PC would be considered a VAR. In this example, the customer saves labor and time spent obtaining and assembling computer parts when they purchase a PC from the VAR.
The company had 45 employees as of end-FY01/21. Its sales team is relatively small considering the number of personnel involved in design, production outsourcing, and management. The company’s business format relies substantially on VARs to carry out its sales functions.
P3 uses different VARs depending on product type. For example, the company does not deliver its set-top boxes (STBs) directly to hotels, but to systems integrators that provide content services for hotels. These then deliver the STBs to end users after networking them. Similarly, the company does not deliver its digital signage devices developed for beauty salons directly to end users, but provides them to a wholesaler and consulting company operating in the beauty salon industry that distributes the devices to salons as a part of management support services. Additionally, a content production company generates ads for distribution through these digital signage devices by recruiting advertisers and producing ad content.
Some of the added value created by VARs comes from intellectual labor such as systems integration, customization, consulting, training, and translation. Value-added may also be generated by developing a specialized use of the product so as to resell it as a new product tailored to client needs. In the case of P3’s STBs, systems integrators add value by incorporating the devices into their systems to add various content and services.
P3 designs IoT devices in-house and outsources their production. While the company is a manufacturer, it has a different take on design and production than most companies, based on founder and president Fujiyoshi’s experience in observing manufacturing sites in Taiwan and China—the so-called “world’s factory”—when he set out to produce set-top boxes (STBs).
Since its establishment in 1995, the company has cultivated its method of outsourcing production, one of its distinguishing characteristics, based on President Hidehiko Fujiyoshi’s experience in designing and manufacturing electronics. P3 outsources to companies in Taiwan and China that shoulder global manufacturing instead of using companies in Japan. Through direct, ground-level observation of the local manufacturers, Fujiyoshi has concluded it was difficult to create value-added through in-house manufacturing; rather, what was important was to have an eye for the right contractors that can procure low-cost materials and have adequate production capabilities.
According to P3, manufacturing is currently in its third phase, where combining existing technologies is essential. The company recognizes that in this phase services utilizing the end product are more important than manufacturing the product itself. This is one of the reasons why P3 does not carry out in-house production.
According to P3, transitions in the phases of manufacturing have proceeded as follows. The first phase represents the production of goods by physically assembling components and building mechanisms, as was undertaken by many Japanese home electronics manufacturers in the early stages of their development. This covered, for example, machines that operated by combinations of electric currents such as radios and telephones. From there, as internet protocol (IP; communication method by which data is exchanged via the internet) surfaced and societies underwent digitization, application software became the center of functionality rather than hardware. Mr. Fujiyoshi calls this the second phase. He was interested in the second phase, in which application software became an important element in hardware, and shifted the company’s trajectory toward software-oriented manufacturing.
According to Mr. Fujiyoshi, the turning point in the second phase was the advent of the Android operating system, which led to the creation of a layer between hardware and applications (the company calls this “middleware”). Subsequent hardware development progressed through the combination of modules, enabling anyone to create hardware. The middleware layer also allowed anyone to create the application software above it.
As manufacturing entered its third phase, the technological innovations at each stage became more mature. For example, IP technology and video technology have matured for the most part, leaving little room for brand new functionality. However, the services they provide can change greatly depending on how these technologies are combined. For example, a simple-function landline telephone uses an analog signal to transmit voice depending on the strength of electrical energy. Most telephones today do not work the same way; instead, calls are often powered by IP technology (using an IP connection and a mechanism to convert analog voice to digital signal and vice versa). Moreover, they have gone much farther in functions: they connect to the cloud and WiFi, transmit data, and are equipped with displays. The company believes that the third phase of manufacturing consists of creating things by aggregating various intellectual properties that have been handed down from the past.
Another reason why P3 does not carry out its own manufacturing is that it believes that software, not hardware, is what adds value. In its early days, the company ran a business of bringing internet connection to condominiums. In that context, it began communicating with Taiwanese companies in search of products that could not be found in Japan. When the company posted information on products manufactured by one of these Taiwanese companies on its website, it received inquiries about a certain set-top box (STB) that was not available in Japan at that time, leading the company to eventually decide to manufacture the device.
However, as the production of STBs progressed, Mr. Fujiyoshi realized that it was not the production of hardware that was important, but the engine that was installed inside, that is, the software. Manufacturing can be carried out at low-cost at a local manufacturer in Taiwan. The company came up with the idea that it should focus on its software development capabilities rather than competing based on manufacturing costs. The company’s basic stance on manufacturing is to make use of the network of Taiwanese partners built by Mr. Fujiyoshi, while focusing on the in-house development of high value-added software.
In digital signage hardware, most of the material costs go to the display panel. The company’s signage is constructed by combining rectangular LED modules each with dimensions of several dozen centimeters, which allows the overall size of the panel to be freely adjusted. The company imagines these displays being used at entrances of commercial buildings or in stores that want to create luxurious spaces. They have already been introduced at multiple stores of a domestic telecommunications carrier. P3 procures the LED modules in Asia, and creates the engine controlling the displays in-house.
Around the time at which President Fujiyoshi began to recognize the importance of prioritizing services and intangible business elements over manufacturing itself, he met Ryuichi Terayama, who was chairman and CEO of the company until October 2021. According to the company, former Chairman Terayama was very knowledgeable about the media industry and had many connections in related fields to the extent that he was said to be an industry heavyweight.
In addition to his former position as chairman and CEO of P3, Terayama has also served as chairman of NSC Holdings, Inc. (unlisted) and as president of News Service Center, Inc., the de facto predecessor of NSC Holdings. News Service Center, Inc. was founded in 1970 with the sponsorship of players in the political and business worlds after inquiries by the then-Prime Minister Eisaku Sato. The Japanese government contributed 40% of the initial capital, with the remaining 60% coming from the Asahi, Mainichi, Yomiuri, and Sankei newspapers, and ad agency giants Dentsu Inc. and Hakuhodo Inc. Employees were seconded from Nippon Telegraph and Telephone Public Corporation (currently Nippon Telegraph and Telephone Corporation [NTT]). Almost all of the major media outlets at the time had a hand in establishing the company.
Receiving allotments from the national public relations budget, News Service Center, Inc. was the first to commercialize a telephone information service business in Japan. It established the Telephone Service Association, an organization comprising more than 400 member companies, and spread telephone information services across Japan. The company provided breaking news from major outlets free-of-charge over the telephone, and sandwiched government PR messaging in between the programming. The advertising business also expanded. News Service Center came to own a group company publishing Weekly Japan, a free newspaper started by the government, which resulted in it creating a newspaper media business reaching circulation of over five million. In the age of television, the company, supported by funds from the national budget, started a public relations business using video content to promote public facilities. It developed media in the three areas of telecommunications, newspapers, and television.
P3, inc. (initially established as an equity-method affiliate of Tranzas, Inc.), was established by former Chairman Terayama, who contributed the experience he accumulated while leading these companies, and President Fujiyoshi, who is well-versed in the field of manufacturing. Upon establishing P3, these two individuals were instrumental toward steering the company's advertising media business, which also encompasses elements of manufacturing, in the right direction. The first project undertaken in connection with this business was the was a digital signage system for beauty salons.
The company began to view the operations conducted by P3, inc. as its core business, and subsequently changed its name from Tranzas, Inc. to P3, inc. The company plans to change its name again and, instead of limiting itself to operations in the field of media, expand into the SaaS business and owned media development while maintaining a central focus on manufacturing and leveraging the expertise it previously accumulated through its activities in the media business.
P3’s businesses can be broadly divided into those that are continuations of Tranzas businesses and those that have been added since the trade name was changed to P3 in FY01/21. The company renamed its reportable segments in FY01/22. Its current segment classifications took effect from the beginning of the same year, and the company has retroactively adjusted results generated in FY01/21 to conform with these classifications while modifying revenue reported up to FY01/19 to conform with the classifications originally applied during FY01/21. Starting in FY01/23, the company will introduce new segment classifications as TRaaS On Product Inc.
|Segment sales and profit||FY01/17||FY01/18||FY01/19||FY01/20||FY01/21||FY01/22|
|Platform, Planning &Product||40||163|
|% of total||6.8%||40.3%|
|% of total||66.2%||34.4%|
|% of total||26.8%||25.2%|
|Media Platform & IT Services||63||69||40|
|% of total||9.1%||8.8%||6.8%|
|IoT Solution Services||444||568||388|
|% of total||63.9%||72.5%||66.2%|
|% of total||-||-||45.0%|
|% of total||-||-||21.2%|
|% of total||27.0%||18.7%||26.8%|
The company reorganized its business categorization at the start of FY01/20. Then, in FY01/21, it added Media Platform & IT Services—its new growth driver—to the FY01/20 categorization (the former IT Services category was merged into the new category). In FY01/22, the Media Platform & IT Services business became the Platform, Planning & Product business, which will later be renamed the "TRaaS" business in FY01/23.
In FY01/20, the former IoT Solution was split into IoT Solution, Information Technology, and IT Services. The new IoT Solution included two subclassifications based on client type: Hospitality and Enterprise, instead of the previous three that were based on operation. The main business in this category is the provision of IoT devices and solutions.
From FY01/21, the company added Media Platform to its businesses. It integrated this new business with existing IT Services to form Media Platform & IT Services, which is P3’s focus. Meanwhile, the company positioned IoT Solution, which mainly handles manufacturing and sales, as a legacy business undergirded by its traditional manufacturing focus. IoT Solution subclassifications, Hospitality and Enterprise, have not changed since being reorganized in FY01/20.
The company changed the names of some of its businesses in FY01/22. Activities associated with these businesses have remained largely unchanged, with the name changes primarily reflecting reorganization conducted within these businesses.
The company has positioned the Platform, Planning & Product business (formerly the "Media Platorm & IT Services" business) as its core business where it aims to achieve a full-blown expansion. Currently, the business is centered on providing digital signage for beauty salons, which the company began pursuing in August 2020. The company collaborates with the following two companies that act as VARs in this business. The division of roles of the three companies is as follows.
Dalia (unlisted) is a general trading company handling beauty products. It was founded in 1946 and is headquartered in Fukuoka. In addition to product sales, the company provides management support, marketing support, and creative planning for beauty salons. Founded in the era of postwar shortages, it procured and sold cold perm liquid. It also lent “electric perm” equipment to beauty salon owners free of charge on a deferred payment agreement, which played a part in the spread of the perm hairstyle after the war. Digital Garage is listed on the Prime Market of the Tokyo Stock Exchange. It operates multiple businesses including an advertising business, a payment business, and an investment business.
P3 has developed an originally designed digital signage optimized for beauty salon environments. The equipment is a tablet-shaped IoT communications device with a built-in stand. The company handled the development and design, and has it manufactured by EMS companies in Taiwan and China. The signage usually runs at about JPY35,000. The company is able to set prices cheaper than low-spec tablet models through careful selection of functions and procurement of low-cost materials. The hardware is characterized by anti-glare glass and doubled screen brightness to offset the bright lighting of beauty salons.
As for performance, the digital signage is equipped with a system called “eve”* that detects whether a salon customer is seated in front of it. The device also streams content likely to be of interest to beauty salon customers, with the help of a dedicated media (Sakizaki Teruko) and P3’s proprietary program distribution cloud network. As of July 31, 2021, the company had installed 11,261 dedicated devices at 2,110 salons nationwide, with a monthly reach of 1,126mn people.
eve: A P3-developed patent-pending monitoring system based on facial recognition. The system is installed in digital signage terminals designed and manufactured by the company to measure the number of effective playbacks by confirming the presence of customers in salon chairs. Effective playbacks exclude those when a customer is not seated in front of the terminal. This enables the company to record data per each piece of content or ad played in the salons. The monitoring system only obtains anonymized data related to when a customer is seated and does not record any footage or audio. This system complies with the Sensing Signage Guidelines established by the Digital Signage Consortium (DSC, Minato-ku, Tokyo; 109 members) for the purpose of protecting privacy.
Sakizaki Teruko, the digital signage media distributed on the company’s device, is based on the concept of “everyone is comfortable in his or her own skin.” The content consists of information of use to beauty salon visitors, covering topics in beauty, fashion, food, lifestyle, and entertainment, among others. Sakizaki Teruko also distributes original content including a trouble consultation segment in which a character (with the same name as the media) answers customer questions from her own perspective, and a fortune-telling segment; in addition, it delivers ad content. Digital Garage, which produces the content, says that customers generally tend to spend a long time in beauty salons, meaning they are more likely to absorb the content. From the beauty salon side, the content encourages communication between hairdressers and customers, providing greater opportunities to promote hair styling products and shampoos.