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Billionaire porn king reinvents himself as Japan's startup guru

[TOKYO] Imagine the publisher of Pornhub.com being asked to address Harvard University undergraduates on the virtues of running a socially responsible business. That's basically what happened in Japan this past December, when the country's most prestigious private university extended an invitation to adult entertainment mogul Keishi Kameyama.

After years of being rejected for bank loans and frozen out of business deals, the onetime pariah is now being embraced as an internet pioneer, and even a role model. His ever-evolving media and technology empire, DMM.com, started with pornography but has grown into a vast collection of enterprises that have made him one of Japan's richest people.

Mr Kameyama got an important vote of confidence a few years ago when filmmaker 'Beat' Takeshi Kitano agreed to appear in ads for his start-up incubator, and the endorsements have come quickly since.

In December, there was the invitation from Keio University students to discuss his work investing in Africa and supporting young entrepreneurs. A month later, Japan's most popular weekly magazine hired him to write a column for its website, Bunshun Online, offering parenting and relationship advice.

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In April, undergraduates surveyed by the Nikkei newspaper picked him as one of Japan's top 100 employers, ahead of IBM and Google.

"We're always trying new things, so people think: 'if you work there, interesting stuff is going to happen. It's like, what's he's going to do next, shoot off a rocket?" Mr Kameyama said with a laugh during an extended interview in which he talked about his family, his finances and the complicated ethics of the business that made him wealthy.

It may seem strange that the operator of an online mall for hardcore sex videos has won such public acceptance, but Japan has always had a sort of look-the-other-way tolerance for pornography. More significantly, Mr Kameyama has expanded into an eclectic portfolio of businesses that now include a currency trading platform, video games, an online English school and solar farms. Last year, porn was less than a third of the group's US$1.7 billion in sales.

"People are starting to realise just how smart this guy is," says Akira Ishihara, president at Tokyo-based consultancy Kiseki Keiei Risya, who featured Mr Kameyama at a seminar on start-ups last year.

"He's extremely forward-looking and the way he puts cash to work is just very, very smart."

Married with two kids, the 56-year-old wears a stubbly goatee and an inconspicuous uniform of monochrome T-shirts. His ownership of DMM gives him a net worth of US$3.5 billion, according to financial records disclosed for the first time to Bloomberg News and calculations from the Bloomberg Billionaires Index based on current earnings.

Yet, Mr Kameyama's look and demeanour scarcely suggest wealth. Japan's ninth richest man rides a bicycle to work.

Mr Kameyama says he started giving interviews a few years ago in order to quash rumours he was a yakuza gangster. Still, he never allows himself to be recognisable in photographs - and asks magazines and internet sites to mask his face with a cartoon avatar. He says it's to protect his privacy.

In three decades of financing pornography, Mr Kameyama says he hasn't set foot on an adult movie set more than once or twice, and he doesn't watch his own films. To him, porn is the proverbial widget - a thing to sell for more than it costs to make and market, no different from any other product.

"I didn't get into the adult movie business because I was a fan," he says.

"But it was an experiment that worked, and once I had money, I wanted to try other things, too."

Mr Kameyama started producing porn in the late 1980s after discovering he didn't have the money to finance a feature film of the non-adult variety. By 1998, when he launched Japan's first web-streaming service (the same year Netflix got its start renting DVDs through the postal service), DMM was already Japan's biggest producer of pornographic movies.

Within a decade, more than a million internet users were paying to stream Mr Kameyama's films. With all those eyeballs glued to his site, he began looking for other things his mostly male audience might want to buy.

In 2009, Mr Kameyama purchased a struggling online stock brokerage and, after an overhaul that cost almost US$100 million, turned it into Japan's most popular platform for retail investors trading foreign currencies, according to marketing firm Forex Magnates. That made DMM into a kind of virtual Las Vegas, catering to some of people's most basic preoccupations: sex and money.

From there, Mr Kameyama branched out into more family-friendly ventures.

Some of his best ideas, including the one for the hit video game "Fleet Collection", have come through an online submission window called "Kame-Direct", where anybody can pitch him new products or businesses.

Decisions to buy a Rwandan software developer, along with a stake in Rwanda's biggest electronic payments company, were inspired by a recent vacation Mr Kameyama took to Africa.

Mr Kameyama won't disclose his profits, but he says there's enough to fund all the new business without having to take DMM public, unless he tries something huge like building an amusement park based on Japanese anime characters.

"Imagine what people would say if Mr Porn built a Disneyland?" he says.

With DMM's revenue growing about 30 per cent annually, adult entertainment is becoming an ever smaller part of its expanding universe. The DMM.com portal, which promotes all of Mr Kameyama's businesses, has 27 million registered users. A link to the site's X-rated material is hidden away in a corner, like a secret doorway to a backroom.

In March, Mr Kameyama moved 2,000 of his employees into new headquarters, occupying five floors high up in a new skyscraper. The lobby has a tropical jungle theme, with life-sized projections of lions and exotic birds dancing across the walls. It's a look Mr Kameyama said he dislikes, but one of his top lieutenants convinced him it would be a good recruiting tool.

"I hate it," he says.

"But if it works, great. If it doesn't, we'll try something else."

The porn industry's labour practices have come under more scrutiny since the arrest last year of a film producer accused of using a deceptive contract to coerce at least one woman into performing sex on camera. DMM wasn't connected, but since it is Japan's biggest shopping mall for adult entertainment, critics say Mr Kameyama bears some responsibility for the industry's abuses.

"The company got where it is by choosing to ignore the many different ways that women are being forced into this," says Shihoko Fujiwara, head of Lighthouse, a Tokyo-based non-profit organisation working against sex trafficking.

Mr Kameyama says DMM never knowingly financed films that involved coercion, and the company removes products from its site when there are complaints. He says DMM had only one brush with the police in almost 30 years of producing adult films - an investigation last year into indecent exposure, which led to no charges. On the larger question of whether pornography exploits women, Mr Kameyama admits he's less sure.

"I don't think everything we do is right,'' he says, "but in this business we're better than most. If my own daughter told me she wanted to be an adult film actress, I'd tell her, 'look, there are risks, but it's something for you to decide."'

Growing up in the small seaside town of Kaga, Mr Kameyama's parents ran a cabaret, a club where men paid to enjoy the company of hostesses, mostly in hopes that one thing might lead to another. It wasn't a brothel, but it wasn't a world apart, either. The women often roomed in the house and shared the family dinner table.

"Growing up like that, it taught me not to be prejudiced," Mr Kameyama says.

After dropping out of accounting school sometime around 1980, Mr Kameyama says he considered almost any work that promised to pay well. There was a very brief adventure as a semi-nude dancer at a gay Chippendale's club. Once, he tried to get a job at a hospital washing cadavers.

By the time he was in his late twenties, Mr Kameyama was the owner of several rental movie shops. But when Japan's version of Blockbuster Video set its sight on his town, he knew it wouldn't last.

To survive, Mr Kameyama decided to try making movies instead of renting them. He set up his porn factory in an empty supermarket, where he used thousands of household video recorders to copy from master tapes, running night and day.

He was able to convince most video stores to stock his product by making them an offer too good to refuse: "Here's a box of 100 tapes, pay me only for what you sell."

It was a deal that didn't require an army of salesmen to pitch. And, because viewers rarely complained about picture quality, unsold tapes were easily re-used.

The next big idea was a cash register Mr Kameyama developed that looked like a tablet computer. He gave it to customers for free, in exchange for their sales records - data that made him better than anyone at tracking the preferences of Japan's porn consumers.

The biggest innovation, though, was going online. That wasn't an obvious choice in 1998, when DVDs were still new and fewer than one-in-five Japanese households were even connected to the internet.

Getting an early foothold on the web allowed Mr Kameyama to widen his control, even as the internet turned the rest of the porn world upside down. DMM.com now sells about half of the estimated US$1 billion worth of adult videos purchased in Japan each year.

"He's done what no old-guard American company has been able to do, which is ride it out from the DVD days, go online and dominate," says Alec Helmy, founder of XBIZ, an adult film industry publication.

That durability is part of the reason students at Tokyo's Keio University asked Mr Kameyama in December to address the seminar on, of all things, socially-conscious entrepreneurship. They asked how he comes up with new ideas and has the confidence to act on them. One student asked how to build a viable business that also contributes to society. 

Mr Kameyama's response: Start by building a company that lets a few people feed their families, instead of trying to tackle global hunger.

Asked to explain his philosophy, he struggled for a tidy phrase and settled on this: "I like to be able to think, 'I'm a little less flawed today than I was the day before.'"

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