The music business reinvents itself every 20 years or so — basically every time a new format comes down the pike. But the industry has never faced the kind of fundamental challenge presented by the digital file-sharing revolution.

The Internet looks set to destroy a business model that’s been in place ever since Thomas Edison began hawking wax cylinders. While the Japanese music industry’s major players tend to take a defensive stance as a tide of change sweeps away old certainties, others are riding the crest of the digital wave by coming up with new musical products and services to woo today’s music fans.

Internet radio, a standard item on the media menu internationally, is finally coming into its own here in Japan — sort of. A service called Radiko, launched on March 15, simulcasts 13 Tokyo- and Osaka-area radio stations via the Internet. While many community-based FM stations provide simultaneous Internet-based broadcasting services, this is the first time that major Japanese commercial radio stations have offered such a service. Reasons for the move include declining ratings, as more people enjoy music and other forms of entertainment on the Internet and via mobile phones, falling ad revenues, and the fact that high-rise buildings block radio signals in many urban areas. Radiko is available on a trial basis until Aug. 31.

Japanese rights-holders such as record labels and music publishers have historically resisted Internet radio, due to fears of possible copyright violation. But the Recording Industry Association of Japan and copyright-fee collection society JASRAC have worked out a deal with Radiko. What’s odd about Internet radio’s long-delayed Japanese debut is that each of the 13 stations available via Radiko can only be listened to by people in the station’s local broadcast range, “out of consideration to stations in other regions.” Even so, Radiko couldn’t cope with the large number of users trying to log onto the service on its first day. It will be interesting to see whether Internet radio can revive Japan’s moribund radio industry.

Look for ever-more inventive (and just plain cool) iPhone music applications to come out of Japan this year. My personal favorite right now is Japanese Smash Girls, which features female indie-band guitarists bashing their axes to smithereens against a banshee-chord soundtrack while the handset vibrates violently. Just the thing you need to unleash some of that pent-up stress. Japanese Smash Girls is linked to Apple’s iTunes Music Store so that users can download the music performed. At the other end of the musical spectrum there’s the iShakuhachi, which turns your iPhone into a bamboo flute — just blow into the handset mic and move your fingers over the five holes in the flute shown on the iPhone screen. An iKoto is also available, but unfortunately you cannot smash these virtual instruments.

The iPhone’s burgeoning popularity here is probably the best hope for digital music sales in Japan, which have flagged of late because of the lack of a killer app to take up the slack now that the chakumero (ringtone) and chaku-uta (master ringtone) markets have reached saturation point. Meanwhile, Tokyo-based indie label Rekords is throwing all its musical eggs in one basket by selling tracks via iPhone only. The interface features a virtual vinyl record (remember them?) that lets you turn the “record” over by flipping your iPhone and skip ahead to another part of a song by moving the virtual tone arm.

Twitter is steadily catching on in Japan, but as with other forms of social media, major Japanese music companies have been slow to develop it as a promotional tool. JASRAC recently caused conniptions among Japanese Twitter users when Mitsuo Sugawara, the music-copyright society’s managing director, told an online forum that rights-holders’ permission is needed to tweet song lyrics. A JASRAC spokesman later explained that the society is merely “studying” the possibility of charging Twitter users when they tweet lyrics by working out a blanket licensing deal with the microblog service. Meanwhile, music fans, independent artists and labels (such as the aforementioned Rekords) are leading the way in using Twitter, Facebook and MySpace Music to spread the viral word about the sounds coming out of the Japanese music scene. And independent Tokyo-based promoter Benny Rubin has been shaking things up in the local music business by working with major labels here to provide Japanese fans of foreign acts with localized (i.e., Japanese-language) versions of content from labels, management companies and fans culled from overseas social-media services.

As in other major media markets around the world, the Japanese music industry faces a huge challenge in trying to figure out a way of monetizing online content (i.e., music). Will someone come up with a magic-bullet solution to this knotty problem in 2010? Hard to say. MusicFanTV.com (for which this writer performs some consulting work) represents one attempt to do so, by enabling rights-holders to share revenues from ads that run concurrently with music videos. But it is still very much early days as far as the venture is concerned.

As for wildly popular European ad-based streaming-music service Spotify, don’t hold your breath waiting for it to debut in Japan anytime soon. Once again, the defensive stance taken by local rights-holders plays a large part in holding back the growth of what many people in the music industry see as a promising medium that could kick-start slumping music sales.

“Judging by the fees that people pay for cable TV and online access, it does seem people will pay for content if the interface is good, the price seems reasonable, and the system does not jam them with spam or unwanted tracking,” says one local music-biz source.

With its ATM, online event-ticket terminals and computerized merchandise-tracking system, the local convenience store is already very high-tech indeed. With the recent purchase of a 21 percent stake in Tower Records Japan by Seven & I Holdings (which operates supermarket Ito-Yokado and convenience-store chain Seven- Eleven Japan), convenience stores could soon become a one-stop destination for Japanese music fans. Look for announcements in the coming months about synergies between Seven-Eleven and Tower, and possibly with mobile carrier NTT DoCoMo, which remains Tower Records Japan’s biggest shareholder, with a stake of some 40 percent. I’d like a bowl of oden, two tickets to the Eikiichi Yazawa show and AKB48’s Greatest Hits, please!

Steve McClure is based in Tokyo and is the executive editor of online newsletter McClure’s Asia Music News.

Consenus develops on file-sharing model

At the end of January I went to Cannes, France, to attend MIDEM, the world’s biggest music trade fair and conference (you could choose worse places for an industry talkfest, by the way). I overdosed on info about where the global music industry is headed. The consensus was that it’s time to stop griping about how file-sharing is destroying the music business and get on with the job of building a new model that works for everybody who produces, distributes and listens to music.

It’s obvious that any new model will be based on treating recorded music as a utility like running water or electricity, as David Bowie presciently predicted way back in 2002. Participants in a MIDEM seminar held by the International Association of Entertainment Lawyers agreed that collective licensing is probably the most promising and realistic solution to the vexed question of how to get people to pay for music. As John Ingham, CEO of technology company ESP, put it: “Grant licenses (for streaming or downloading music) to consumers via ISPs (Internet service providers), and then ask the ISPs for money.” The only problem with this scenario is getting the ISPs to play ball, which so far they’ve been decidedly reluctant to do.

The other key point to come out of MIDEM is how to promote new music. Given the all-penetrating reach of the Internet and the explosive growth of social media, you might think this wouldn’t be a problem. But it is, simply because of the sheer volume of information that’s available to music fans these days. According to digital-music guru Ted Cohen, in 1999, there were roughly 25,000 album releases, while it’s estimated that more than 100,000 albums were put into digital distribution in 2009. That’s why artists, managers and labels need to learn how to use new media effectively, focus on key demographics and develop and nurture fan loyalty.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.