ITOCHU Corporation has taken an equity stake in Utagoe, Ltd. (head office: Shibuya Ward, Tokyo; President: Tomo Sonoda), a research and development venture launched by Waseda University. The two companies have signed a basic agreement for commercialization of and business in Ocean Grid (OG), a live video distribution technology developed by Utagoe utilizing grid technology.

1. Background

According to the 2006 Internet White Paper, some 77 million people in Japan access the Internet, and more than 40% of their households (38,000 people) have broadband connections. Japan is seeing the spread of constant connection and utilization of the Internet for sending and receiving large amounts of data. In this situation, Internet-based video distribution services like Yahoo! Video and GyaO are growing.

Meanwhile, the most popular type of web service in 2006 was user-contributed video. The U.S.-based YouTube, a major service of this type, attracts more than 2 million users per month and is accessed by more than 5% of all people with Internet connections in Japan. These are remarkable figures for an English-language website. Dozens of user-contributed video websites in Japan, such as Watch Me! TV and Ask Video, are also growing rapidly. This is taken as an indication of the richer content of consumer-generated media (CGM). Blogs, social networking services (SNS), and other text-based CGM are beginning to incorporate photos and motion video, for example. The coming years hold the prospect of a steady increase in such distribution and contributed on-line video services, and an expansion of the market for on-line ads applying video.

In order for the Internet to surpass television, however, it must have media offering an absorbing "live" experience that can be enjoyed passively, like conventional TV. In other words, the Internet, which demands active users and has interactive and participatory features, must acquire passive and time-passing capabilities. This, in turn, will require a decline in distribution costs to a level enabling even individuals to run their own broadcasting stations.

With the support of Japan's leaders in grid technology, Utagoe developed OG, a live video distribution technology applying the former, and launched an SNS called Looc, which allows members to communicate while watching live video. ITOCHU endorses Utagoe's efforts to usher in the age of "total transmission and total reception," and is supporting its development and commercialization of OG and Looc.

2. Overview and Goals of Business Alliance

In September 2006, ITOCHU instituted ITOCHU Web Technology Labs (T Labs). It organized engineers from the open-source community, and created a technology team to promote agile Web development and help drive the switch to Web 2.0 among ITOCHU Group's e-business companies.

Through this business alliance with Utagoe, ITOCHU aims to support the sales and commercialization of OG. We also hope to have T Labs develop and deploy Web services using the information technologies developed by Utagoe. In addition, we plan to actively market broadband technologies and services pioneered in Japan like OG in other countries, through our overseas offices.

3. Outline of Utagoe, Ltd.

4. Outlook for the Future

The Lower House of Japanese Parliament has passed a revision to the Copyright Law aimed at simplifying the copyright management of IP multicasts. This development should add even more impetus to the trend toward fusion of broadcasting and communications.
ITOCHU is going to make a vigorous effort to develop business in Internet video services centered around Utagoe. We also plan to develop business in Internet video advertising.

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