Tower Records Photo: Gaute Gjøl Dahle
Tower Records Photo: Gaute Gjøl Dahle


Why is the music industry in Japan so strong?

It’s no secret that the global music business has seen a downturn in recent years. But in Japan, with healthy CD sales, a thriving live scene, and a unique local culture, things are a little different.

There are several reasons why Japan is the world’s second-largest music market by revenue. First, even though the country generally isn’t quite as pricey as its ­reputation may suggest, plenty of things are still far more expensive than in Europe and North America, and the average price of a new music CD is over €24. Consequently, Japan can reach its number two ­turnover slot with relatively fewer unit sales than other major markets.

Second, Japan has over 2,000 CD and DVD rental shops that allow consumers to rent albums (and rip the songs to disc) for around €2.50. This low-cost acquisition of digital files has slowed the uptake of streaming and digital download services. Downloads and streaming combined ­account for only 18% of the Japanese ­music market, and streaming – by far the fastest-growing method of music ­consumption worldwide – contributes only 5% to Japanese industry revenues.

The Tower Records store at Shibuya, a shopping district in Tokyo, is one of the biggest music shops ­­in the world. Photo: Gaute Gjøl Dahle

Third, cozy relationships among record companies, distributors, retailers and the government serve tosupport pricing structures and distribution models, which – as in ­other industries – help maintain the ­status quo and make it difficult for overseas companies to penetrate the ­market. While Apple Music and Google Play Music are in Japan (along with Taiwan’s KKBox), competing against Japan’s Line Music and Awa, the relative size of the digital market (not including ringtone downloads) is small compared with other countries. ­Spotify is a latecomer to the party, having launched its Japan service only last ­September, in part because Japanese record companies resisted its “freemium” pricing model. (Apple, Google and KKBox don’t offer “freemium” services in Japan.)

So much for the intangible formats then. Anyone remember cassette tapes? No, I didn’t think so. Or CDs? Those may be fading from memory as well, unless you live in Japan, where you can still walk into Tower Records and party like it was 1999, or 2006, when California-based Tower Records went bankrupt. While CD and DVD sales in Japan have declined significantly over the past 10 years, CD sales still totaled €2 billion in 2015, with DVD sales bringing distributors another €571 million.As is true in other markets, pop music in ­Japan can be much more about entertainment than music. And Japanese boy bands and girl bands are massive enterprises that leverage different phyiscal formats and the country’s otaku culture, which can roughly be translated as “geek” or “nerd,” but contains an element of ­obsessive ­collecting.

The ­all-girl supergroup AKB48 was, for example, founded to furnish hardcore fans with more than the usual CDs or downloads and occasional concert. They are a musical theater troupe that performs daily in their own theater and offers supporters “idols you can meet.” The group has sold over 41 million records, including over 36 million singles – the most by any Japanese group.

AKB48 caters to its otaku fans – and makes quite a bit of money – by releasing singles and albums in a wide range of ­formats that offer collectors alternative album cover pictures, B-side tracks, video DVDs, collectible member pictures, event tickets and voting codes for several annual band member election contests. Their ­“superfans” have been known to buy ­several hundred copies of a new release.

Peter Barakan, a British DJ and broadcaster who has lived in Japan since 1974, says the market for traditional music, or music that is produced as “music” rather than “entertainment,” has been shrinking for decades in Japan. “The way the traditional music business in Japan is set up, it’s very difficult to make money,” Barakan says.

Photo: Gaute Gjøl Dahle

And despite the relative continued buoyancy of traditional formats, ­Japanese musicians are increasingly turning to live performances to make ends meet, as is true in other markets. Steve McClure, former editor of ­Billboard Asia, has been writing about the Japanese music industry since 1991. In 1998, he published a book about the Japanese pop music industry called Nippon Pop.

Mclure says that Japanese musicians and bands have never made much money from recordings, instead earning a living from live performances and commercial tie-ups. And while sales of physical media declined, concert gate revenue grew from €22.3 ­billion in 2014 to €27.9 billion in 2015.

Barakan notes that while globally ­famous musicians such as the Rolling Stones and Eric Clapton can sell tens of thousands of tickets online in minutes in Japan, there are also thousands of live ­music venues that accommodate only 20-30 people and specialize in every type of music – jazz, rock, folk, punk, country & western and bluegrass. Japanese ­musicians have been playing jazz since ­­the 1920s and Japan’s biggest bluegrass ­festival celebrated its 45th anniversary last year.

Fuji Rock and Summer Sonic are Japan’s biggest mainstream music festivals, which in 2016 featured Sigur Rós, Beck, Red Hot Chili Peppers and Radiohead, while the Blue Note Jazz Festival last year featured George Benson, Marcus Miller and Earth, Wind & Fire.

Photo: Ewen Corbelon

International music acts continue to perform in Japan because it remains a ­lucrative market. CD prices are protected by law from discounting (with the prices printed directly on the packaging), and cost nearly €25. Around 25% of CDs sold in Japan – yielding revenues of some €500 million – feature non-Japanese musicians, and the three Blue Note jazz clubs in Japan see dozens of international superstars playing to sellout audiences (at prices much higher than in Europe and North America) every year. So for many musicians, a swing through Japan (or at least a quick hop to Tokyo) is worth it once or twice a year.

All of which means Japan is a critical market for musicians and record companies. Yes, CD sales are declining, but revenues are still significant, and although ­digital music is still in its infancy, the ­potential for growth is enormous. Japanese record companies have resisted changes to the distribution model so far, but many observers believe change is coming. The arrival of Spotify in the marketplace, with its unique-in-Japan “freemium” pricing, is likely to open the door to other flexibly priced streaming services that offer consumers more choice.

Japan’s obsessive otaku culture, meanwhile, should continue to assure musicians who find a following that they will ­always have an audience, and one that will pay. 

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