In its Jan. 12 edition, the Japanese business magazine Diamond Weekly decided to ring in the new year with a 10-page feature titled, “Who’s Killing Music?” It was the topic of much discussion and reaction in the music business, and the article even made the agenda during a meeting of the Japanese music industry’s trade group the Recording Industry Association of Japan.
As for the question raised in the provocative headline, Diamond gives a short answer and a longer answer. The short answer is “Sony.” The long answer is “Sony and a lingering inability of the industry as a whole to adapt to technological changes that have fatally undermined their outdated business model.”
Bashing Sony has become something of a hobby in the media of late, to the point where I’ve almost begun to feel sorry for them, but there is clearly something dysfunctional about the company. While 2012 saw the company’s music division, Sony Music Entertainment (SME), finally wake up to reality and begin releasing its music on iTunes (an event DJ Takkyu Ishino likened on Twitter to the collapse of the Berlin Wall, with Sony cast in the role of East Germany and Apple as West Germany), the fact that it took so long is revealing of one of the dysfunctions that is hobbling the firm. It appears that at least part of SME’s reluctance to embrace downloadable music was due to pressure from the parent company, a major manufacturer of CD players.
Similar problems seem to be running the other way too, with Sony Entertainment desperate to push their (actually pretty good) “Music Unlimited” service and grab a slice of the online music-streaming pie before Recochoku and Spotify gobble it all up, but SME is holding off from releasing Sony artists onto the service. As long as different sections within the Sony group are undermining each other in this way, problems for the company are going to continue.
But Sony weren’t the only people angry with the Diamond article, and it exposed wider problems in an industry that so far has been way too keen to lay the blame for declining sales (which currently stand at about one third of their 1998 peak) on external factors, be they iTunes, smart phones, YouTube, and especially illegal downloads (which account for 95 percent of all music downloaded).
While CD sales in 2012 actually increased, they were buoyed by a lucky confluence of multiple “Best of” releases by big-hitting veteran artists such as Mr. Children, Keisuke Kuwata, Tatsuro Yamashita and Yumi Matsutoya. With no such slew of releases in the pipeline for 2013, and a year-on-year decline in the number of new artists debuting, and with recording budgets plummeting across the board, musicians and composers are finding it increasingly difficult to scrape together a living and many are simply giving up, which is feeding into a spiral of declining quality among the talent resources from which labels can draw.
Diamond points out that record labels in Japan have been reluctant to move on from CDs partly because of the extremely high profit margins (albums from major artists regularly retail here for ¥2,500-¥3,000 for around 12 songs). In addition, major labels have become very used to and perhaps much too comfortable with the stranglehold over the distribution network that has allowed them to shut out competitors from access to small CD shops and mom-and-pop stores in rural areas. This grip on distribution is threatened by the Internet and labels have been unwilling to make the technological leap until they could be sure that this control could be replicated across online platforms, something that was possible via old-school mobile phones but which iTunes-equipped computers and smart phones make impossible.
The marketing model has also fallen apart. Where TV appearances used to lead to an immediate and noticeable spike in sales, now there isn’t even a blip. Diamond also points out that, traditionally, labels cultivated a close relationship with radio, buying chunks of airtime during which the radio station would guarantee that they would push that label’s artists. However, with radio playing a lesser role in the dissemination of new information about music, this promotion model is outdated.
What the article doesn’t go into is that a similar relationship exists between labels and Japan’s toothless music press, in which content in magazines is again largely paid for by labels. With the feature articles of music magazines composed largely of what amounts to little more than advertorial content, it’s no surprise that music fans consider them little more than a joke, and in turn that labels are increasingly unwilling to pay for what they have to offer.
While the big bad wolf of the Diamond article is undoubtedly Sony, the handsome huntsman appears to be the newer, less set-in-their-ways Avex Trax. Avex have delivered profits in a shrinking market by diversifying into musician management, merchandise, and investing in online platforms in collaboration with mobile carriers such as NTT and Softbank.
It also points out that the overseas success of Psy and “Gangnam Style” has been a late wake-up call to labels about the potential of online video in international viral marketing, suggesting as well that the strict new antidownloading laws that came into force in October 2012 will make it easier for labels to channel viewers toward their own online content.
That said, if there is progress being made in that area, it is slow. Even the good guys of this story, Avex Trax, are feeling their way toward platforms such as YouTube tentatively and with seeming reluctance. Korean girl group 2NE1, widely tipped Korean labelmates of Psy, regularly rack up YouTube hits in the tens of millions, and yet Avex restrict the videos of their Japanese versions largely to one-minute previews. This suggests that even companies at the leading edge who currently view YouTube as a neat way to get a few iTunes sales overseas without spending much money on proper promotion, are still trying to milk the last drops out of the cash cow of Japanese audiences.
While the anger directed against Diamond by the music industry is perhaps expected, writer Jun Morikawa (who has written for this newspaper occasionally in the past) told me that he’d also received criticism from some within the industry expressing dissatisfaction at how tame his article was. This suggests to me that the industry’s painfully slow acclimatization to the new business realities it faces might not just be the result of greed and institutional conservatism, but also a black, paralyzing terror.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
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