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

Old news is fun! The Japan Times reports on Yano Research's survey on the foreign language learning market in Japan, which I wrote about this at the beginning of August and touched on again earlier this month. The only difference with today's article is that the JT spoke with somebody at GEOS.

Susumu Ikegami, a spokesman for Geos Corp., which runs English-language schools in Japan and other countries, said they have been facing a serious decline.

"As the number of students decreased, the number of classrooms also declined," said Ikegami, who declined to give the figure for the classrooms.

Ikegami said the market's downward trend began about five years ago, although the reason is hard to pinpoint. However, he pointed out that the bankruptcy of Nova Corp. in October 2007 had some impact.

It's amazing that Ikegami can't figure out why business is down. You can try and blame NOVA, Lehman Brothers, or swine flu, but you can only wring so much mileage out of those excuses. The article ends with this brilliant plan:

However, Ikegami of Geos said the overall outlook for the language-school market in Japan doesn't appear bright.

"We have 53 schools overseas, and they are doing pretty well. So, while there is the chance of growth from a global outlook, we don't really have a good picture for the Japanese market. Rather than getting more students, we are working to run the business more economically," Ikegami said.

Things don't look good down the road, so let's cut costs? That's it? The market has been sliding for years and GEOS is still at the cut costs/efficiency stage? The article is titled "Few answers for the language market." Is the problem about finding answers to the downturn or the dreadful way in which eikaiwa schools conduct business?

My guess is that it's the latter, with NOVA being the straw that broke the camel's back. All the schools really care about is putting bums in chairs and vacuuming their students' wallets, and NOVA was the poster child of this kind of behavior. METI's press release　describes it in vivid detail, from pressure sales to exaggerated advertising to underhanded refund practices to outright thievery and deception. Other schools have tried to blame its instructors for the failings of the company or sue them for exercising their right to strike.

But the bad behavior doesn't stop at eikaiwa. Dispatch teaching is just as bad. Not only does the job have no benefits, instructors are disposable employees that boards of education pick and choose from and discard at will. Although teaching English looks promising in elementary schools, it should not be forgotten that the potentially lucrative job scene hinges on school budgets. BOEs with no money are more likely to stick with a Japanese teacher than hire an ALT.

The homestay business is more of the same. Gateway21 tore a page from the NOVA playbook with 950 million yen vanishing into thin air as the end result.

To put it bluntly, the rot is extensive, and teachers and students know it. But if the Susumu Ikegamis of the business can't understand why business is bad, then there's not much hope for them. What's the answer that eikaiwas should be looking for? How about: Stop abusing your employees and ripping off your customers?

It's getting close to Obon, so it's time for a ghost story.

Yano Research has released its latest survey of the foreign language market, which shows that the market is still in decline.

The two key findings are:

• The foreign language market was worth ¥767 billion in FY2008, a contraction of 5.2% compared to the previous year.
• The market is forecast to contract further in FY2009 but growth is expected in children's lessons and in language testing.

Blue line shows foreign language market. Magenta line shows foreign language market minus peripheral businesses such as testing, homestays, and translation and interpretation.

Take a wild guess as to why this is so. OK, pencils down. The answer is: NOVA, although the company is not explicitly named. For some reason, in their summary of the survey [PDF], Yano Research tip-toes around NOVA, attributing the decline to a lingering distrust caused by the bankruptcy of the industry's top school in October 2007　(当時業界トップであった事業者が 2007 年 10 月に破綻した影響).

Still, they believe the market will slowly recover and stabilize. The summary notes the following positive trends:

• Demand for children's English lessons is strong due to more interest in early English education.
• Increased demand for language skills has boosted the language testing market.
• The market for learning materials has been boosted by sales of bestselling books like US president Obama's speeches.
• Although the market for English lessons for adults shrank by 9.1% compared to the previous year, private (man-to-man) lessons are going strong due to corporate demand and segmentation of the market to meet business needs.

Yano Research forecasts that the current economic downturn will hurt many in the foreign language business and expects the foreign language market (including peripheral businesses) to fall another 3.7%. They see things improving in the medium term as elementary schools are slated to make English a compulsory subject in 2011, which should also boost demand for children's lessons. English lessons for adults are also expected to improve as demand for corporate lessons remains strong.

So there you have it -- NOVA still haunts Japan from its grave.

Not that you need more reminders about the fall of Nova and the chaos over the past year, but Jordan Pearson offers an excellent account of the collapse.

It would have sucked to be Jason Cornish:

Nova’s business model operated on paying for each month with the amount of new lesson packages sold in the preceding month. When demand for English lessons began to decline, its survival became precarious. When the Japanese Ministry of Education, Trade and Industry (METI) slapped a six-month ban on selling new long term contracts as punishment for its cancellation criminalities, the company was finished, and everyone in the Nova hierarchy, with the exception of the delusional President, knew it was just a matter of time until it went bankrupt.

Despite this knowledge however, not only did Nova continue to sign-up new students on short-term contracts and string instructors along with bullshit faxes and misinformation, they actively recruited new instructors from overseas, knowing full well that they would soon be stranded in Japan with no income!

Jason Cornish from Seattle was one these unfortunate chumps. He interviewed for Nova in September, and being sober at the time, easily got the job. The first thing he saw when he arrived at his final destination, Kokura station, was Kurosaki branch AT, Joi Wong, sitting on the shinkansen platform in shorts and a t-shirt holding a crudely-drawn sign on A4 paper baring Jason’s name.

As Jason remembers, “This guy comes up to me and says, ‘You Jason? Nice to meet you. Sorry about my casual appearance, but the bastards you’re about to work for were supposed to pay me two weeks ago and haven’t, so I’m on strike today.’ This was the very first thing I heard when I arrived in the city!”

But, as Jordan notes, deciding to cling to the corpse of the dead bunny or join G.communication was an unappealing choice.

The televised conference about the corporate takeover in November 2007 was a classic example. We were told we were supposed to turn-up in suits, and I was like, “Fuck that! Pay me and you can tell me what to wear!”, but sure enough, everyone else, except one other guy, dutifully turned-up suited and booted.

My “fuck-you-I-won’t-do-what-you-tell-me” attitude turned-out to be a stupid move, however. We really would have been smartest going with the herd – from a financial perspective anyway (which is obviously what it was all about). At the meeting regarding the buy-out (though the “buy-out” can be more accurately described as vultures picking over a carcass) we were given the option to either sign-up to the new company, G.communications Ltd., or stay with the bankruptcy-protected Nova until it officially went bankrupt some time in the future (potentially years). As Nova’s useless trustees, charged with finding a corporate sponsor, had promised us they would find a company who guaranteed instructors’ back-salaries and would at least partially refund lost student contracts, revealed at said meeting that our savior, G.com (who currently run Nova) were going to do neither, I refused to sign their broke forms at all.

I ended-up doing myself out of ¥150,000 though by not signing up to the new company (which was everyone else did). Some took Option B which was to go on stand-by and take 60 percent salary until they were offered a position some time in the future, as opposed to Option A: start work immediately; these people were given ¥150,000 to tide them over. This money was essentially a parting-gift however, as G.com surely expected most of the instructors to take this money and bounce. My clinging on to the carcass meant I was still technically a Nova employee, on 60% pay, until official bankruptcy was declared, even when I went home to New Zealand for a few months, and this was included in my back salary from the government. Eventually, most of the Option B peeps that stayed, having been categorically promised future employment with G.com, were done away with in a few months anyway, the new company citing less than anticipated customer interest as the reason.

Read the rest...

According to the Yano Research Institute, the effects of the collapse are still being felt. Their latest survey on the foreign language market shows it to be still on the skids, attributing the 8.4% year-on-year decline [PDF] to the "Nova shock." That shock has manifested itself in a marked shift from studying at schools to e-learning (studying via computer or mobile devices) and to corporate-oriented education services. E-learning increased 7.8% and corporate education services grew 3.4%. The survey notes that the decline in the language market may have bottomed out, provided that the businesses get their act together and regain the confidence of their customers.

With the financial crisis in the United States forcing Japanese manufacturers to cut employment and production, I'm not sure I share the tentaive optimism of the survey. There is still a lot of toxic debt that has to be dealt with and the full force of the crisis and the recession has yet to wash up on Japan's shores. There is still a lot of anger and mistrust over the way Nova decieved its customer and over the government's involvement and handling of the matter, and the receission may shrink the market yet further, killing off smaller and waker schools. It seems that GEOS is aware of this and has been taking steps to control costs so as to weather the coming storm. Maybe I'm too pessimistic. Is eikaiwa and language learning more recession-proof than other businesses? Has the recession affected you or do you expect things to chug along as usual?

A new report by the Yano Research Institute shows that the language study market is still feeling the effects of Nova's collapse.

After a look at the declining fortunes of the foreign language market, the Yano Research Institute has published a the results of its survey [PDF in Japanese] on the impact Nova's failure had on the foreign language sector in Japan.

Just as Nova instructors were getting shafted yet again when g.communication reneged on its promise of jobs, the cover story of the December 26 issue of Newsweek was a special report by David McNeil on English conversation schools.

Internet forums and blogs are now rife with speculation about Nova's fate. Will it survive, will it get a government bailout, or will is go bankrupt? At this point in time, all anyone can do is speculate.