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MUSIC STREAMING

Can Spotify dent streaming-averse Japan?

by

Staff Writer

Spotify’s long-awaited launch last month has industry watchers wondering whether it will make a major breakthrough in altering Japan’s $3 billion music industry, where 80 percent of sales still come from CDs and other physical formats.

With most of the world’s major streaming services now available in Japan, including Apple Music and Line Music, the global shift toward digital platforms is more likely to grow.

According to IFPI Global Music Report 2016, the global music market hit a “key milestone” in 2015 as digital became the primary revenue stream for recorded music, topping sales generated by CDs and other physical formats for the first time.

But as Japan’s streaming services struggle to increase the amount of Japanese tunes available, experts say the shift may remain an uphill battle.

Here are some questions and answers about the future of music streaming in Japan:

What are Japan’s popular music streaming services?

The local pioneer is Music Unlimited, which was launched in 2012 by Sony. But experts say the industry began blooming last year with the arrival of Apple Music, Google Play Music, Amazon Prime Music, Line Music and AWA.

Line Music may be the front-runner in subscription-based streaming in Japan, as it offers a fair amount of Japanese music, which younger listeners find attractive, said Akiko Senoo, a senior researcher at Mobile Marketing Data (MMD) Labo. Line’s service allows customers to share music via its popular messaging app, which has roughly 68 million users.

But Senoo also said that YouTube remains a major music platform, posing a hurdle for music-only services.

“There are young people who believe YouTube is the place to listen to music,” she said.

A report titled “The World’s Largest Music Streaming Service?” released by the Statista website in September said YouTube had 820 million users worldwide, dwarfing the 100 million at Spotify and the 17 million at Apple Music.

It also said 82 percent of 10,552 surveyed YouTube users from 13 countries said they use the Google-owned video site to listen to music.

The situation is similar in Japan. As of Oct. 19, MusicNote topped Apple’s chart for top free apps, followed by Line Music, Spotify and AWA.

MusicNote works by streaming tunes uploaded to YouTube.

“That’s how most high school students would listen to music,” said Tomohiro Konuta, the 27-year-old owner of online label Maltine Records. Konuta also works at the independent record label Toy’s Factory.

“Japanese record labels upload music videos to YouTube, and despite the occasional ads, young people are fully satisfied with them,” he said.

Why is streaming struggling in Japan?

When Spotify entered Japan last month, digital music consultant Mikiro Enomoto complained on Twitter that it and the other services are short on Japanese songs, offering less than half of the tunes listed on Japan’s Oricon Music Chart. That’s one of the main reasons for streaming’s struggles in Japan, he said.

According to a 2015 survey by MMD Labo on how people select music streaming services, 61.1 percent said they decide based on the number of available songs, followed by 57 percent who are looking for their favorite artists.

Tetsunori Watanabe, president of online marketing company Version7, wrote in the online marketing site MarkeZine in February that “Japanese listeners prefer Japanese music over Western music. Increasing the lineup of Japanese music is the key to making music streaming popular in Japan.”

And trying to increase the number of Japanese songs on Spotify, which would require the approval of musicians and record labels, was the reason Spotify couldn’t kick off its service earlier.

Akira Nomoto, an official at Spotify Japan in charge of licensing, admitted the delay was because Japanese artists, management companies and record labels were reluctant to offer songs to streaming services.

The reason Japanese music is little represented in streaming is because “Japanese record labels are getting enough benefit out of physical products such as CDs,” Nomoto said.

The most notable hurdle has been Johnny & Associates, the agent for Japan’s most popular boy bands, including SMAP, Arashi and Kinki Kids. None of the bands’ tunes are distributed via streaming or other digital platforms.

As of Oct. 19, the songs of the bulk of Japan’s most popular artists as listed on the Oricon Music Chart, including the all-girl idol group AKB48, rock band Mr. Children and pop singer Hikaru Utada, were not available on Spotify.

Besides AKB48, songs for those artists were also absent from the RecoChoku Best service, which is known to have the largest catalog of Japanese music.

Is Spotify likely to succeed?

The major reason streaming services are struggling to provide Japanese music is that in most cases, the major record labels, like Sony Music, Victor Entertainment and Universal Music, own only half of the rights to their catalogs, with the other half owned by management firms and independent labels, according to Rise Up Club, a website for small and midsize firms run by Bank of Tokyo-Mitsubishi UFJ.

Rise Up Club noted how the situation differs overseas, where a deal with a major label would cover nearly its entire catalog.

Given the circumstances, Nomoto of Spotify said he is recommending its service to artists and record labels as a strong platform for promoting and receiving royalties.

“There are many services in Japan that allow people to listen to music for free, such as video-sharing websites. Record labels are trying so many ways to promote music on such platforms, such as by editing music videos into shorter versions. But as a result, people are satisfied with the music, which doesn’t lead to consumption. It’s also just taking away the opportunity for people to listen,” he said.

“Spotify on the other hand provides users a chance to listen with fewer regulations, basically for free,” he said.

In Japan, Spotify offers two plans: Spotify Free and Spotify Premium. Spotify Free costs nothing but occasionally plays ads between songs. Spotify Premium costs ¥980 a month and plays no ads.

More subscribers to the premium service would bring the company more, but Maltine Records’ Konuta said achieving that could prove difficult unless Spotify can differentiate itself significantly from YouTube.

“Other than core music lovers, I don’t think people want to pay money to listen to music. It’s true that streaming is growing larger than the market for physical copies of music in the U.S., but I don’t think this will happen in Japan,” he said.

But Senoo at MMD Labo is more optimistic.

With many services kicking off last year, the industry has become very lively, she said.

Although it could take a long time, free plans would be a good way to reach out to users who could “potentially change over to premium accounts if the music they like is available when they want to listen to it,” she said.