Let's Japan.org Debunking Eikaiwa and Ramblings in Japan

At this time last year, with Nova gone, LJers in the forums were talking about how Skype and lessons online would be the future of eikaiwa. A year to the day that thread was started, J-cast News ran a story on the rapid growth of eikaiwa lessons online. The article reads more like an advertisement than a piece of journalism as it only focuses on three very new online schools, so it's difficult to gauge the popularity or success of online eikaiwa.

The article mentions three schools.

Gun-Gun

• Set up just this past September.
• For 6,000 yen a month allows you to take up to two 25-minute lessons a day via Skype. On a per lessons basis, that works out to 100 yen per lesson.
• Why are they so cheap? Their teachers are in the Philippines and work from their homes. Japanese staff travel to the Philippines to recruit experienced instructors and university grads.
• In just two months Gungun has 600 registered students and 30 instructors, with plans to hire another 10 to 20 instructors.
• Some of the instructors even speak Japanese and Gungun uses this as a sale point to reassure beginners.
• The "school" day runs from 10AM to 25PM, (Yes, the article says 25 o'clock. Only in Japan will you find the 25-hour, 26-hour, or even 27-hour clock.). The usual pattern is housewives in the morning followed by salarymen in the evening.
• Online lessons are already popular in Korea. (Nice dig at Japan, J-Cast. If the Koreans are already doing it, then Japan must be really, really far behind.)

Rare Job

• One of the biggest online schools, had 6,000 registered students at the beginning of September, which increased to 17,000 as of November.
• They started in 2007 with just 10 Filippino instructors and now boast 800 instructors.
• All of the instructors are either university students or graduates. This allows students to choose an instructor that meets their needs. For example, if a student wants to learn conversation in a medical setting, he can be paired with an instructor who has a medical background.
• Charges 130 yen for a 25 minute lesson, a veritable steal compared to online Caucasian instructors who charge at least 1,000 yen per hour. (Oh brother!)

Ripple Kids Park

• Started in November and is geared toward teaching children from the ages of 1 to 15.
• Instructors are also Filippino. RKP employs instructors with experience in internationals schools or working for American companies. (This makes them good?).
• RKP lessons cost 4,980 yen for one 25 minute lesson a week for a month. This works out to 1,300 yen per lesson. It sounds expensive but is still cheaper than actually going to a real school since more than one person can sit in front of the computer and attend the lesson at the same time.
• RKP says that price wars have already started but claims that other "schools" do business by preying on students unfamiliar with the eikaiwa racket business. For RKP, it's nothing but the best: professional, career-oriented instructors (Cough, cough, cough! Where have I heard that bullshit line before?), and RKP's goal is to carve out a niche in the "high end" online eikaiwa business.

I suppose it was only a matter of time before online eikaiwa took off. The technology is there for the taking. Even if the lessons were awful, people probably wouldn't feel too bad about losing a few hundred yen. How can you beat that price? Well, it's easy. You do it with quality. (Note to Gungun, its "copyright," not "Copy Right.")

Update 12/8: The Yomiuri has a nearly identical story. Is it Let's Feature Online Eikaiwa Schools Week in the newsrooms?

Rare Job, another online service with Filipino instructors, has attracted 17,000 registered users since launching two years ago.

The service offers four pricing plans, ranging from 3,000 yen to 8,000 yen. Lessons are available 9 p.m.-1 a.m. on weekdays, and 9 a.m.-noon on weekends. Each lesson lasts 25 minutes. They can be booked up to five minutes before a session is scheduled to begin.

Rare Job has about 8,000 instructors, who, it says, have been chosen from among students and alumni of the University of the Philippines, one of the country's most prestigious institutions.

Eigo de Syaberitai Club is yet another example. It features instructors who are currently teaching English to nonnative speakers at eight language schools in the Philippines.

To take these lessons, users pay their tuition via credit card or bank transfer, but they are not charged registration fees.

For students, affordability seems to be one of the most attractive features of these online lessons. They work out to a mere few hundred yen per hour, much cheaper than the few thousand yen per hour they could expect to pay for instructors from Britain or the United States.

But before you commit, you should always first take advantage of a trial lesson.

In Japan, that test is supposed to be TOEIC, the Test of English for International Communication, which turns 30 this year. The Japan Times has a two-part series on the test, starting with a brief history.

Today, people in more than 90 countries take the TOEIC about 5 million times a year. South Korea is the only other country sharing Japan's enthusiasm for the test. About 80 percent of TOEIC test-takers live in Japan or South Korea. Elsewhere it remains largely unknown. For example, a recent survey showed that the TOEIC was the least known test of English proficiency in Germany, with only 2.8 percent of schoolteachers having even heard of it.

I had no idea that it was a made-in-Japan test and that the vast majority of test-takers are Japanese and Korean (which shows you how much I know).

The last paragraph caught my attention:

Yoshida was unable to speculate on TOEIC's future in Japan, but the IIBC chairman's blog provides a clue. Watanabe believes that every junior and senior high school should adopt the test for the good of the nation, writing, "Just imagine what it would be like if TOEIC spread to junior high and high schools all over Japan. The results would astonish people around the world. Japan would rise like a phoenix from the ashes, and Japanese women and men would begin to play more important roles on the international stage."

Where to start with this? Imagine if Japan could stun the world with its TOEIC results. They might be able to have the second largest economy in the world and be a leader in high technology. Oh, wait, that already happened without the test. I suppose I can't blame Watanabe for thinking big, but I'll be impressed when they fix the utterly broken approach to teaching English in school.

Terrie Lloyd's column in Japan Today is supposed to be a look at the state of eikaiwa in Japan, but it's a poor effort stuffed with meaningless business-speak. Teaching English has been on a downward slide ever since Japan's asset bubble burst. The collapse of NOVA only served to make things worse. Let's take a look at the column.

Last week, the ex-president of Nova Corporation, once Japan's largest English school chain, was in court to answer charges of embezzlement prior to the failure of his company. According to the prosecutors, Nozomu Sahashi diverted about 320 million yen ($3.3 million) from Nova to pay student fee reimbursements of a related company.

Quibble: the trial began on June 1st and is slated to end on July 3rd. The way this is written, it sounds as if the trial started last week.

To be honest, I'm surprised that this is the worst thing the prosecutors could come up with, because moving money between companies is common practice for conglomerates, especially if related firms are in trouble. Indeed, it's as simple, and legal, as making an inter-company loan. Maybe he didn't do the paperwork and so there is a case to answer for, but I'd be surprised if it will amount to prison time.

I think a lot of people are surprised that Sahashi was arrested for embezzlement given his shady stock dealings and the autocratic way in which he ran NOVA. Sahashi may not spend much time inside a jail cell, but he is ruined. After this trial is over, he will have to face the civil suits against him.

That said, referring to embezzlement as a paperwork error is a glib dismissal of the crime. Companies can, of course, move money around, but this ignores the relationship of Sahashi to the money. He ruled owned NOVA and pulled all of its strings. He also held ownership in NOVA Kikaku, which was run by a relative. Nova quickly ran out of cash after METI sanctioned the company and had nothing in its coffers to pay employee salaries and reimburse the torrent of canceled lesson contracts. Moreover, the money Sahashi took belonged to an employee welfare fund, and he raided the fund after colluding with a manager without bothering to consult with his board or the staff. It's difficult to say how his actions constitute a loan especially when the money was not his to use in the first place. What he did was rob Peter to pay Paul. It was no clerical error.

What's interesting is that if you look at the companies remaining in the market since Nova imploded, none of the majors seem to been able to step in and steal significant market share. Indeed, by my estimates, the five largest schools between them probably don't teach more than 500,000 students and thus I can see that the industry is highly fragmented. This is quite unusual in Japan, where normally there is one massive incumbent taking a 70%-80% market share, then leaving mere scraps for everyone else.

This fact tells me that no one so far, including Nova earlier, has figured out how to systemize the English-teaching business, and that there are lots of students who appear to be happy studying in smaller schools. Perhaps the human element of local teachers you know and trust is still very important. Or perhaps it means that Japanese business owners and managers haven't figured out yet how to extract the best business growth and financial results from their foreign teacher employee base.

I'm sorry, but "none of the majors seem to been able?" Moving on, "there are lots of students who appear to be happy studying in smaller schools" is almost laugh-out-loud funny. People are happy studying at smaller schools? Impossible! And what does it mean to "extract the best business growth and financial results from their foreign teacher employee base?" Why does English teaching have to be systemized and run by a large company, anyway? The collapse of NOVA is like the asteroid that killed the dinosaurs. The little schools are picking up the crumbs of NOVA and thriving. There's nothing wrong with this. There is something to be said about learning English at smaller, more personal schools--they generally pay better attention to their customers.

For example, right now the marketing focus of most schools is on cheaper lessons and variations of private lessons and smaller classes. This is all well and good, but smaller classes are not cheap to do, so using simple Psych 101 theory, it would follow that popular teachers should be trying to convince their students that better quality learning means more one-on-one teacher time, and thus higher fees. I appreciate that many teachers may not see themselves as salespeople out to extract more value from their students. However, if some enterprising CEO could come up with a strategy that allowed popular teachers to overcome this reluctance, then with the right in-house training and incentives, that school could be pulling in much better margins and therefore grow more quickly.

More business gobbledygook. How do you extract more value from students? Sell them more lessons with a slick PowerPoint presentation? Pick their pockets? The bit about getting teachers to be salesmen is nothing more than a rehash of the way GEOS and AEON already do business. Here's where the analysis falls flat. It focuses too much on the financial viability of schools while ignoring the elephant in the room--that the large eikaiwas are, on the whole, poorly managed and terrible places to work. They are set up to reap maximum profit, not educate.

The problem with eikaiwa goes beyond money and trying to find the right strategy, and has everything to do with delivering quality. Sadly, the large schools aren't interested in this. Instead, they treat instructors as unskilled labour. Instructors work for low pay, generally have no healthcare plan, have little opportunity for professional development, have few benefits, and have even less job security, but are expected to look and sound professional at all times. It's all about making a buck off selling time with English-speaking foreigners.

Using Berlitz and GABA as being representative of the entire industry is too simplistic. The author himself even says that the English teaching market is extremely fragmented, so looking at Berlitz's and GABA's numbers tell us about the health of the respective companies and nothing about the industry as a whole. By this metric, had Mr. Lloyd been writing about eikaiwa when NOVA was at its peak, he might have praised NOVA as a paragon of business for its high revenue stream, venture into videophones, slick advertising, and aggressive expansion policy. The numbers tell us that the schools are not very healthy, but we also need to consider what is happening on the ground.

Berlitz could have the best teaching methodologies in Japan, but the fact that they are suing some of their teachers for trying to unionize exercising their right to strike and are stalling for time suggests that they don't care about them. GABA is equally dodgy. It is more of a middleman than school, and as a result, it's "partners" work at "studios" for no guaranteed salary, no paid holidays, or any other benefits.

The pressure sales tactics used by the schools to vacuum as much money out of students' pockets, the poorly trained instructors working in even poorer conditions, and the mistrust of the whole operation by students combine for a perfect storm that David McNeil describes as an industry rigged for implosion. It's no wonder the industry is in decline because it is completely lacking in credibility.

How about this for a radical idea? Make eikaiwa about education. Set standards. Have strict curriculums. Hire instructors with qualifications and treat them with respect, and pay them a decent salary. This may be a pipe dream, but it makes a lot more sense than "pulling in much better margins," or trying to "extract value" from students. The large eikaiwas might be surprised to learn that delivering a quality product leads to financial success.

In the forums, Inflames provides a link to a G.communication PDF. It seems that they have decided to rent out space at its Yaesu school. There's nothing unusual about this as businesses look for ways to generate revenue during the economic collapse. I've heard about parts manufacturers making confectioneries to help make ends meet. Still, it suggests that business isn't very good at the Yaesu school.

Let's back up a bit to March 2008:

YAESU NOVA

Well, not surprising, the opening of the YAESU school today was a complete bomb! They had a total of about 7 calls and hardly any visitors. There are plans to open new schools in Shibuya, Shinjuku and Ginza next. One has to wonder if they'll get the word out for those schools.

Now, fast forward to the present:

The reason for this is that Yaesu has now become a HALF DAY school. Its only open from 5-9, Monday-Friday. It used to be a regular school. I worked there for six months, up until the end of last year almost, but then got the forced transfer BS and was told to move - as have other instructors, due to the reduced operating hours.

It doesnt surprise me now that they have to rent out the rooms - probably just to cover the rent. My understanding is that now ALL of the instructors that teach there are newbies, who came after the collapse and received the Mickey Mouse, lecture-style training by Mr.Smiley and crew. Some received actual training, basically like OJT (especially last year, cuz we had training every couple weeks and I was doing Obs for pretty much the whole six months I was there). At the time I was there, however, and shortly thereafter, the instructors (myself included) pulled through the bankruptcy and had gone through Old Novas system of training (again, nothing amazing, but more comprehensive than what most have received following the collapse), and were used to the textbooks, the lessons, etc.. Even instructors that were relatively new (started with Neo-nova) were working with seasoned instructors and could receive tips/advice if they wanted it.

The flyer is straightforward: the Yaesu school has space for rent. Says the first ad:

1. 2 minutes from the Yaesu Exit
2. So close, you can catch your (bullet) train with seconds to spare
3. No other businesses next to the school. Nice and quiet
4. Close to izakayas, so you can head out for a drink after your meeting
5. Same-day reservations available

There are four rooms (1 ten-person and 3 six-person rooms) with videophone booths, white boards, and access to washroom. The 6-person room rents for ¥3000/hour while the larger room goes for ¥4500/hour.

The second ad is more of the same, but with an added touch of humor. This time, instead of a meeting room, G. com is renting out "private offices" which suspiciously resemble the meeting rooms, for the low price of ¥500/hour. Again, the 5 merits of their service:

1. 2 minutes from the Yaesu Exit
2. So close, you can catch your (bullet) train with seconds to spare
3. No other businesses next to the school. Nice and quiet
4. Large desks for efficient work
5. It's cheap

The hilarity is in the two text boxes in the bottom right corner.

The top one says, "All you can drink coffee" and the bottom one, "OK to ask foreigners questions after 5:00 P.M." How demoralizing. Instead of giving lessons, instructors will be expected to entertain users and their endless parade of hits such as, Do you know Ichiro? How long you Japan? and the timeless classic, Can you eat Japanese food? Why not just turn the school into a host/ess bar and be done with it?

I wonder if there's a catch here. ¥500 for the first hour and ¥400 for every subsequent hour is really cheap, and I don't see how that covers costs unless all of the offices are used. Will users have to sit through a sales pitch for lessons? Does G.Com hope that people will magically sign up after renting their rooms? Moreover, what's to stop someone from using this service as an eikaiwa? Would a businessman be able to snag an instructor and have him correct or edit some correspondence?

Like the parts manufacturers forced to make candy, G.Com's attempt at converting the school into a meeting space is delaying the inevitable. If you can't make a go of your primary business, it's time to think about closing the school or downsizing it, and accept the fact that it will never be very busy or profitable.

From Japan Today, a pretty standard interview with the president and CEO of an English school, but this bit caught my eye:

Do shady operators in the English school business tar everyone with the same brush?

I would say that archaic business models that don’t function well in this industry have forced some schools to be more aggressive in ways that are inappropriate for an education-oriented company. When Nova launched, it was in the early bubble days of easy financing. All the contracts were signed with loan companies and the cash was prepaid to the company. So in a situation like that, you have a lot of cash coming in the door, but you have increasing liabilities for lessons that haven’t been taken. Now for two or three years, the student slowly works it off. If they don’t work it off, the contract expires and the money is yours. But what happens is you have no consistent cash flow like rent when you own an apartment or building.

Having prepaid classes really drives cash flow. It’s like an insurance company float getting premiums in advance which they invest. What’s happened in the industry is that Nova and all these other companies had 100% float and really huge floats to be honest. This brought in vast amounts of cash which they over used to expand. With Nova, all it took was a little bit of a downturn and it wiped them out completely because they had 46.7 billion yen worth of debt to their customers which they should have refunded but were unable to. It ends up looking like an overextended multilevel marketing business in some ways with the fly wheel spinning faster and faster until it eventually collapses.

I'm nitpicking, but I don't think "a little bit of a downturn" means what he thinks it means, unless fraudulent business practices, losing in the Supreme Court, and receiving 6-month sanction from METI constitutes a "downturn."

The blog Tofugu has an interview with a current neo-NOVA employee. There's not a lot you haven't heard before, but it's still worth a read for its summary of the aftermath of NOVA's collapse and the perspective on what it's like working for NOVA now.

If you're thinking about working in Japan, the word on NOVA is simple: Don't bother working for them.

5. Would you recommend anyone coming to Japan to try and get a job at G. Education?

Honestly? At this point, no. Come to Japan and try to get a job, sure. But don’t try with G. Education… too much is up in the air at this point, the company hasn’t really figured out what the hell it’s doing and is still not turning a profit as of yet. We’re all still sort of holding our breath for the second grand finale, though that is by no means for sure what’s going to happen. The bottom line is that the future is uncertain, and the management is clueless. I shudder to imagine the mixups and lack of help someone brand-new to Japan would have, all on behalf of G. Education.

Best bet is to get a contract with one of the other big eikaiwas before setting foot in Japan, unless you’ve got a significant savings and don’t mind tightening your belt and not indulging in the tourist experience until your situation gets a bit stable. You can build a decent schedule that will support a comfortable lifestyle, including partying and touristy stuff, but it takes time and multiple small companies.

Amazingly, this teacher has fond memories of NOVA:

Old NOVA, while a typically evil corporation out to squeeze every bit of profit it could from its customers and its employees, was at least reasonably efficient and under control. When management told us something, we generally could feel it was reliable (up until the spiral into bankruptcy, anyways). It knew how to manage foreign employees and had a system set up that took care of all the little details that foreign instructors would have to deal with, moving to a foreign country. The new NOVA is lacking in reliability, know-how, awareness of the differences between foreign and Japanese management style / work expectations

So, old NOVA was evil, and the new NOVA is a mess, but as long as the paychecks keep coming in everything is OK. That's an awful justification. You have three choices when you work for an employer like this:

1. Fight for your rights and take them to court if necessary
2. Quit and find another job
3. Give up on your life in Japan and return home

Sadly, it seems this particular teacher has chosen a fourth option: do nothing. G.communication and schools like it will continue to limp along for a long time so long as they have a steady supply of compliant teachers suckers. Don't be a sucker if you want to teach in Japan.

Teaching private lessons for a pittance? What if I told you you could double your rates while working less using a proven method that can transform your life? Interested?