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Business trends

Japan startups cash in on e-learning demand spurred by COVID

Experts see expanding beyond providing lessons key for further growth

Tokyo-based startup Phonim launched online music lessons in July, one of a number of education businesses cashing in on growing demand for online learning during the coronavirus pandemic.

TOKYO -- This winter holiday season will be a lot quieter in Japan as coronavirus infections surge, a domestic travel campaign has waned and the declaration of a new COVID-19 state of emergency as early as Thursday covering Tokyo and surrounding areas looms. Still, people are finding alternative ways to fill their time as startup companies are providing e-learning programs in a wider range of areas.

From cooking to playing instruments, education businesses are cashing in on growing demand for online study as the pandemic dictates that people spend more time at home. Staff at startups have been racking their brains to find ways to retain customers and improve lesson quality to prevent demand from diminishing once the global health crisis comes under control.

Tokyo-based Phonim launched online music lessons services in July. And for Hiroto Shishido, the company's 26-year-old president, the pandemic was the "tailwind" that launched the service.

The University of Tokyo graduate, himself a piano devotee, had been working on how to offer convenient and high-quality music lessons to busy workers since establishing the company in 2017.

He figured out that focusing on providing lessons solely online is the key to success as tenant fees for buildings with soundproof chambers are a major burden for music lesson providers. "If we can cut out tenant costs, we can offer more money for first-class musicians to teach our students," Shishido said. In fact, Phonim's instructors are well-known musicians who have won awards in music competitions overseas.

Shishido made lessons as simple as possible so busy students can easily continue learning. Each lesson takes six minutes or less, with students uploading their assignments and teachers sending them feedback after.

The service is based on two main revenue sources: lesson subscriptions and rental fees for 'silent' music instruments that students can play in an apartment at night. Lesson fees are 1,980 yen ($19) a month or more, while rental fees are around 5,000 yen a month.

As of December, Phonim had hundreds of subscribers, mostly in their 30s or 40s which is comparatively young given that the majority of students who attend music schools offering face-to-face instruction are in their 60s or older.

Junko Nakagawa, a Phonim user, said she could finally start learning violin, an instrument she had longed to study for years. She takes lessons late at night after work and while doing housework. "Phonim is a good fit for me as it enables learning the violin while working and raising a child," said Nakagawa, who plans to keep using the service even after the pandemic ends.

Shishido said the company remains unprofitable for now, but he is aiming for a turn into the black by spring and increase total subscriptions to 2,500 by the end of 2021.

Japan is in the middle of a third wave of coronavirus infections as daily case numbers hit a record high. The government on Dec. 14 decided to suspend its Go To travel campaign of discounts to encourage people to move about the country and boost the economy through domestic tourism.

But with the suspension, people are again staying home and many are expected to avoid some end-of-year customs such as traveling to their hometowns or visiting their parents. For them, online hobbies are one of the best options for filling lonely hours at home during the holiday season.

Small Bridge, operator of online lesson service Cafetalk, said the number of lessons attended by students has increased significantly amid the pandemic. In fact, it rose 307% for music, 270% for yoga and dance, 400% for art, and 160% for the abacus during October to November last year compared to the same period in 2019.

Small Bridge's business model is designed to motivate teachers, which results in higher class quality. The company takes a commission of between 15% to 40% from teachers each time they provide a lesson. But the portion the teachers can keep increases up to 85% as more students book their classes. Also, teachers can set lesson fees that students pay.

In 2019, the company became profitable for the first time since it started in 2010 and it expects that the pandemic will accelerate that trend.

A company representative said that it even held an online music competition for students. "It's a challenge for us how to keep students motivated," the representative said. "Giving students opportunities to show the fruits of their practice can also lead to keeping them as customers."

Mitsuko Horiuchi, a 71-year-old ukulele learner, started using Cafetalk in May. A drawback of online study is often the lack of company to share the class atmosphere, but Horiuchi said she can concentrate more with remote learning. "There are no complex human relationships or chitchat during the class and that is good for me," she said. Horiuchi found her teacher on YouTube and is now taking his lessons on the service once a month.

Some providers have even found a way to help struggling restaurant businesses by offering online cooking lessons.

Kentaro Jogi, president of Pate, launched online cooking class service Telecook in April. For 1,000 yen to 6,000 yen, users can learn how to cook a tasty dish from chefs who cut their teeth in Michelin starred restaurants. In some classes, Telecook sends ingredients chosen by the chef to users' homes.

Jogi said a total of 1,000 people have used Telecook so far and he is aiming to expand the scope of the business to become profitable. "Some companies have used these services to enhance communication among their employees," said Jogi, referring to special group online cooking classes that companies hope will help foster camaraderie and reduce feelings of isolation from working remotely. "There are more business domains to which we we can expand beyond just cooking classes," Jogi added.

According to Japan's Yano Research Institute, the e-learning market in 2020 grew to 246 billion yen, up 5% from 2019, but swelled 39% compared to 2016.

Despite the arrival of vaccines heralding the eventual end of the pandemic, many service providers stress that they can sustain their businesses as digitalization continues and the new 5G, or fifth generation, wireless network makes online services more accessible.

Phonim's Shishido remains bullish. "Before the pandemic, there used to be a stereotype that online services are substream compared to mainstream store-based services," he said. "Now the pandemic has changed that view in many yet-to-be-digitalized businesses and this trend is irreversible."

But some say companies need to go beyond offering lessons or just connecting learners and teachers and develop more advanced services using, for example, artificial intelligence or big data if they want to expand further.

"If they can offer students a new method that allows them to learn things quickly by collecting and analyzing learner data, for example, that will be a driver for further business growth," said Hirokazu Hasegawa, a professor at Waseda Business School in Tokyo, part of prestigious Waseda University.

"Whether the startups stay small or grow bigger depends on whether they can offer something new that no one has been able to before," Hasegawa added.

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