Music industry takes baby steps toward digital content

by Steve McClure

Special To The Japan Times

Will it be the “carrot and stick” or just “the stick” that revives flagging digital-music sales in Japan?

As in other major music markets, digital sales here — via PCs or mobile phones — have helped offset the slide in sales of physical product such as CDs. In 2011, sales of physical product (excluding music videos) in Japan amounted to ¥212 billion, down 6 percent from 2010, according to local labels body the Recording Industry of Japan (RIAJ). Digital sales totaled ¥72 billion, down 16 percent.

And in the January-March quarter, digital sales slumped 20 percent year-on-year to ¥15.4 billion. That comes at a time when digital sales are on the rise in other markets.

A major reason for this fall-off in Japan is the local music industry’s reluctance to embrace business models such as subscription-based music-delivery services.

There’s also an unwillingness by the management of big-selling idol acts like AKB48 and the Johnny’s Jimusho stable of boy bands to license their music to such digital-delivery services.

In addition to that, Sony Music Entertainment (Japan) still won’t license its Japanese repertoire to iTunes Japan — reportedly because Sony doesn’t like Apple infringing on its home turf.

“The Japanese music industry has fought hard to limit growth of the digital-music business in order to protect the CD format, and has succeeded to the degree that Japan is now the largest seller of CDs in the world,” notes an industry source who requested anonymity. “And it has one of the smallest digital businesses among major territories. (The industry) has succeeded in getting the digital market here to decrease in each of the last two years, while most other territories are increasing.”

But recent moves suggest the Japanese music industry is finally getting its digital act together.

Sony, for example, launched a local edition of its Music Unlimited cloud-based music-subscription service on July 3. It’s the first attempt to launch a subscription service in Japan since Napster entered the market in 2006. Napster Japan shuttered in May 2010, mainly because Japanese labels, worried about possible unauthorized copying of music, were reluctant to license their catalogs to a subscription-based streaming service.

That concern appears to be fading as digital sales steadily head south. Japanese record companies will reportedly abandon copy protection for digital music by the end of the year.

“This is a very natural development for the music industry in Japan as well as other countries, and we have already started to remove copy protection on some online services,” says a Universal Music Japan spokesperson who requested anonymity because he was not authorized to speak to the media.

Kazunari Aida, digital development group manager at EMI Music Japan, is positive about the subscription model.

“We, of course, expect that music-subscription services will have a positive impact on the entire digital-music market,” he says. “But we also hope that with greater recognition, subscription services enhance the motivation to purchase music via the Internet.”

In another sign the local industry is taking digital more seriously, Japanese record companies — including Sony — are making their music available to iPhone and iPod users via its “Club Recochoku” service. Downloaded tracks can be played back on the “RecoChoku Plus” app.

Recochoku has also started to provide its “Oazukari” service to iPhone users. It enables those who switch from conventional mobile phones to iPhones to download music they have previously bought to their new handsets free of charge. The service was already available for Android users.

This is important, because in contrast to falling sales of music delivered by conventional mobile phones, smartphone-based music sales are rising in Japan. That’s good news for foreign repertoire, because mobile content has been heavily skewed toward local domestic pop. One reason for that is that there’s simply little room on mobile screen displays for anything but the top hits of the day.

And leading local telecoms NTT DoCoMo and KDDI have recently launched music-streaming services, although their impact on the market is expected to be limited.

So those are the proverbial carrots. The stick comes in the form of the government’s recent introduction of penalties of up to two years in prison or a fine of up to ¥2 million on anyone who knowingly downloads music and video files without rights-holders’ permission. They come into effect Oct. 1.

“I think this largely serves as a deterrent — I am not expecting mass arrests,” says the local music-industry source. “It makes more sense to criminalize uploading content rather than downloading, but this might be harder to trace. Japan’s law may be heavy-handed, but to me is a step in the right direction.”

Unauthorized uploading of content is currently punishable by imprisonment of up to 10 years or a fine of up to ¥10 million. The RIAJ says that while in 2010 there were nearly 440 million legal music downloads in Japan, there were close to 10 times that number of illegal downloads.