Why do you still exist?

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It looks to me like the world’s second largest music market is living in the 90’s. The ten-story Tower Records is humming with CD sales, dominated by bubbly boy bands and girl groups. Last year in Japan, physical sale of CDs actually rose while digital music sales fell. Looking for answers, I sat down this week with the Tokyo bureau chief for Billboard Magazine, Rob Schwartz. Most of what I report here is based on that conversation.

Japan’s brick and mortar music stores are supported on two sides: by consumers who favor their product, and an industry that profits greatly from their business model. On the demand side, Japanese music fans seem to place more value on a physical product than do their counterparts in America and Europe. The music store also fits well with the Japanese shopping culture; people would rather shop on the streets of trendy neighborhoods than on their computers. This habit is supported by the city’s train network, which generates constant foot traffic around subway stops and commuter hubs. The use of trains over cars has helped sustain many institutions considered moribund in the west: video rental stores, arcades, and bookshops to name a few.

On the supply side, to understand how Japan can hold steady against the digital tide, you have to consider the unique nature of the Japanese market. First of all, it is huge, behind only the US in size and well ahead of any European country. Second, that market is dominated by domestic music; over 80% of the music sold in Japan is made in Japan. Again, only the United States is more self-absorbed in its music tastes. These two facts put the Japanese music industry in a powerful position: it depends on neither imports nor exports to survive. It can stand alone, unconcerned with penetrating global markets or conforming to international trends.

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Only 2 foreign records cracked Tower’s top 20 this week

The handful of giant companies that dominate Japanese music have largely shut out digital competition. Sony Music will not license its Japanese artists to iTunes. Napster opened in Japan in 2006, and shut four years later because the industry was not responsive. Spotify and other streaming services have yet to try. Most of the digital market that does exist consists of mobile-phone ring tones and singles downloads: low quality audio that can’t even be transferred to a computer or mp3 player. But change is on the way. Last year both Sony and Rekochoku, the largest seller of mobile-phone downloads, launched their own online services. A few months ago, the Japanese parliament created harsh fines for illegal downloading, which could encourage more companies to go digital. Still, the industry is advancing cautiously, always protective of the highly profitable physical market.

The marketing end of business is perhaps even more old-fashioned. A recent survey of music industry executives asked which media outlets were most effective for reaching consumers. Responses were varied: radio spots, targeted web ads, online videos, and so forth. Every single Japanese executive gave the same answer: television. Morning variety shows are the number one tastemakers in Japan; if you have the money to buy airtime, you can be a rock star. Following the release of Justin Timberlake’s latest single and album, you can see the approach is completely different: it started with a Tweet that led to a YouTube video of Justin introducing his new track, followed by an online countdown to the actual video release, supported by ads on the MySpace home page and other sites. When the song went live, it sold 350,000 online downloads in a week. No part of that would happen in here, which is half the reason that Psy and his Gungnam Style invasion came from Korea, not Japan.

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Trucks advertising new music groups; they circle my office all day long

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On the ground, I don’t see signs of a digital revolution. When I try to look up bands that play the clubs and “Live Bars” of Tokyo, I often find little or no internet presence: maybe a few YouTube videos and a forlorn Myspace page. Taking in the whole picture, from the Sony monolith to the unlisted indie-rocker, I get the sense that music in this country is not experiencing the democratizing effects of the internet felt in the United States and other markets. Small acts aren’t going viral, and bigger acts aren’t choosing to ditch major labels in favor of online distribution and more independent marketing. Instead, talent houses and major labels run the show, taking on unknown artists and making them into stars. The company shapes their look, provides their material, markets their product, and to a degree unknown in the US, controls their lives. The process takes big time backing because it costs big time money. All those television spots are paid for, even the feature articles in Japanese Rolling Stone are paid for by labels.

My conversation with Rob Schwartz drifted between music, film, marriage, sexual morays, and industry intrigue, but the end of the night take-away for me was clear: I won’t be a rockstar in Japan. Like every high-schooler with a band, I dreamed of our Japanese tour with posters covered in Chinese characters and mobs of adoring fans. That is not going to happen. Japan is in many ways the most impenetrable market on Earth, dominated by domestic music produced by giant companies. They make the music, buy the TV ad time, and keep the teenagers lining up around the corner at Tower Records.

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