Japan Is About to Become the Largest Music Market In the World…

Last year, Japan startled the industry by almost beating the US in total recording sales.  Now, it appears that Japan may grab the crown as the biggest music market in 2013, with relatively healthy physical sales a big part of the reason.

Updated, 6/18, 8:15 pm PCT: Yesterday, we misread digital sales in Japan as trending up substantially in the first quarter.  The opposite is actually the case: slipping mobile sales are pushing digital downward, though the overall impact on totals (physical+digital) is somewhat modest against far larger, and somewhat stable, physical sales.  The updated version follows.

Here’s what the year-end, 2012 tally looked like, according to industry trade group IFPI (for a more complete breakdown of all countries, check out this unbelievable infographic).

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Combined, the US and Japan accounted for more than half the entire global recording industry total in 2012, though the US was only 1.3 percent larger than Japan.  And while the US was struggling and losing money, Japan was one of the few markets that actually gained ground last year (by 4 percent).

Which brings us to right now: during the initial months of 2013, Japanese digital sales have been sinking, while physical sales have remained level.  But the bleeding looks far worse in the States: during the same period in the US, album sales drop 4.9 percent, while paid downloads slipped 1.3 percent according to Nielsen Soundscan.

Here’s what the digital picture currently looks like in Japan.  Overall, unit sales slipped 25 percent year-over-year, while valuations tanked about 30 percent.  It’s not a pretty picture, and potentially part of a broader, global slowdown in digital sales.

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But the far bigger story is happening on the physical side, with some potentially massive lessons for the broader industry to ponder.  Last year, CDs and physical formats suddenly started ticking upward in Japan, thanks partly to a reinvestment in physical packaging and sales by J-Pop, K-Pop, and other genres (more on that fascinating trend, here).

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Whether that continues into 2013 remains an open question, though things could remain stable.  CD sales are slumping several percentage points during the first quarter, though overall physical sales (including assets like music DVDs) are entirely level.

So in that ol’ distressed industry parlance, flat = the new ‘up’.  But physical means a lot more industry revenue, simply because pound-for-pound, physical pays more and supports far greater product bundling.  And in Japan, physical is easily ten times larger than digital in terms of valuation.  Here’s the math.

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All of which raises the uncomfortable question:

Are markets like the US guilty of over-zealously embracing digital, at the expense of investing in creative presentations of CDs, vinyl, and other physical formats?

46 Responses

  1. Visitor

    Thanks to Japan’s tough anti-piracy laws from June 2012.

    This will inspire governments all over the world…

    • Visitor

      Nothing to do with anti-piracy laws. Only fan buying tons of under age girls band so they can go handshake them. It’s the more disgusting music business model you can possibly think about. Regular, talented, REAL artists are dropping fare behind in the charts and sell peanuts. Nothing to be proud of.

      • Visitor

        “Nothing to do with anti-piracy laws”
        Of course not, just a funny coincidence, eh… 🙂

        • Visitor

          Go check the Oricon charts and tell me how many big artists outside of the idols business are actually making good money (= sales). I tell you: they are very, very few !

          • Visitor

            Don’t try to weasel your way out of this.
            Japan introduced jail sentences for illegal downloaders in 2012.
            Now, we see the consequence. And they are exactly as predicted.

          • Visitor

            Believe what you want, you just show how much you’re ignorant of the Japanese market and how it works. Don’t want to do a dick contest here, but the fact that I do work with Japanese companies for years give some insight you DO NOT have. And that’s the bottom line.

          • Visitor

            “Believe what you want”
            Belief is not involved:
            1) Did Japanese girl bands suddenly appear in 2012? NO!
            2) Did Japanese consumers suddenly develope a love for elaborate merchandise in 2012? NO!
            3) Did Japan suddenly introduce jail sentences for illegal downloaders in 2012? YES!

          • Visitor

            1) No but it’s fad the come and goes. The actual idols boom started in 2011 and thoses sales are reflected in 2012.

            2) Yes, the fact you can vote for your favorite girl or go handshake her is something fairly new.

            3) They introduced it in June 2012 but sales were already up in the first half of 2012, BEFORE THE LAW.

            Now, kiddy, how long time will keep showing you have 0 knwoledge of Japanese market ?

          • Visitor

            Here is what we are discussing:
            “Japan may grab the crown as the biggest music market in 2013, with healthy physical sales a big part of the reason.”
            “According to stats just released by Japanese trade group RIAJ, first-quarter digital sales ballooned 70 percent over 2012”
            Again, I understand that you don’t like the facts, but here they are, and they obviously demonstrate how Japan’s new anti-piracy laws work exactly as predicted.
            And your posts show that pro-pirates react exactly as predicted, too… 🙂

          • Visitor

            Dude, you’re so far from the truth.

            I’m nothing “pro-pirates”. I’m someone who has been writing and producing songs for Japanese artists. I do know that outside of the idols / anisong business it gest harder and harder to make a living for Japanese artits. I have a lot of friends who write regular pop / rock songs for some big publishing companies. They almost all need a “day job” to pay the bills ! If they want to actually make money, they need to write for idols production OR work for hire with company that makes DL contents for phones (social games, karaoke and the like). If this is the futur you want for musiciens, then yeah you’ll love the Japanese business model.

    • Visitor

      An important detail in order to understand the huge Japanese success is that illegal downloaders have been facing two-year jail sentences since 2012.
      Makes all the difference…

  2. Visitor

    Meanwhile in the real world….
    Daft Punk with record Streaming numbers

    • Visitor

      The greatest music success in the world is not real to you? 🙂
      It is to everybody who makes a living from music!
      Japan did the right thing. We’re all going to listen and learn now.

      • Visitor

        “Are markets like the US guilty of over-zealously embracing digital, at the expense of investing in creative presentations of CDs, vinyl, and other physical formats?”
        Are you kidding me!!! It took the US music biz so long to get their collective head out the ground and realize that digital change was happening that they almost killed themselves. And now they are being called over-zealous??
        We are talking about execs who still have their emails printed out every morning.
        BTW. Ever been in Japan? or in a Japanese shop. The Japs are crazy about packaging. Always have been. There is no way in hell that Europe or the US will ever care about packaging in the same way, above and beyond a few diehard fans. Move on already.

        • Visitor

          “Japs are crazy about packaging. Always have been.”
          Exactly, nothing new about this.
          The only new thing is that Japan introduced jail sentences for illegal downloaders last year.

          • GGG

            You keep saying this, can you please show some data of people actually being arrested or something that proves beyond speculation that fear of arrests are working?

          • Visitor

            lol, you don’t think fear of jail is working?
            Fear of jail is the only thing that keeps people from stealing, my friend.
            That’s why it’s used in all countries all over the world…

          • GGG

            Don’t be stupid, I’m obviously talking about this specific case. I don’t know if it’s working, that’s why I’m asking you to cite more than your speculation. It can still be an empty threat. Fear of jail keeps people in line for other things because people go to jail all the time for other things. Fear of fines didn’t stop people from pirating because it happened so few times. I guarantee you piracy is not 100% eradicated in Japan, so have people been sent to jail for piracy?
            So far a few people have cited multiple reasons for higher sales, and cited data that preceeded the jail threat. All you’re doing is posting the same thing over and over.

          • Visitor

            “So far a few people have cited multiple reasons for higher sales”
            Not correct; one thing — and one thing only — changed in 2012:
            The introduction of jail sentences to illegal downloaders.
            You may not take the threat of jail seriously. Many don’t. But most ordinary people do. And Japanese jails are not particularly lovely places to spend a couple of years.
            “and cited data that preceeded the jail threat”
            Not correct; the exploding sales in 2013 that triggered this article obviously took place after the laws were approved in June 2012.

          • GGG

            And for the record, I’m not going after you to disprove you. I’m legitimately interested if there is hard correlation.

  3. JTV Digital

    Japan is performing well with digital as well, the second biggest digital music income after iTunes for major record labels is Recochoku…

    JTV Digital | affordable music distribution

  4. Visitor

    Japan sales have NOTHING to do with anti-piracy low. The reason the y sell so much is that their is a giant young girls “idols” boom right now. Fans buy CD in order to get the chance to handshake with the girls or vote for their favorite one in dumb elections to chose the No1 girl in a band.

    The latest AKB48 CD sold near 2 millions units just because of this election thing. The next day, you could find hundreds thousands of second hand CD for 1/100 of the original price ! Is this REALLY the music business you want ? You need to think twice…

    • Visitor

      “Japan sales have NOTHING to do with anti-piracy low”
      Oh please… 🙂

      • Visitor

        If you knew the Japanese market as I do, you would know what I’m talking about. But it’s fine, just go to http://www.oricon.co.jp (Japanese equivalent of Billboard) and check the 2012 annual charts. You’ll notice that artists that have actually well sold are almost onyl girls or boy band.
        The fact is, I’ve been working with Japanese publishers and productions for over 6 yearts and I do know where the money come from. If you don’t believe it, that’s fine but it won’t change the reality of the market.

        • Visitor

          “You’ll notice that artists that have actually well sold are almost onyl girls or boy band.”
          But of course — and they all conveniently materialized out of the blue and became overnight sensations at the exact moment when Japan introduced jail sentences to pirates, eh? 🙂

          Last summer, we said this would happen.
          Here’s what the torrentfreaks said:

          “Yo-ho-ho, you can’t stop us! The Japanese music industry will continue its free fall!”

          • Visitor

            Again, please do your research before speaking.
            This idols boom slowly started in 2010 when every other genre were struggling. The big break came in 2011 with sales already way up in first half 2012, months before the law was in effect.
            Now I’ll ask you, if this has to do with anti-piracy, can you tell me why it only affect idols business and almost do nothing for real artists ? How do you explain that in 2012 single charts, the first single from non idols band is ranks only 23th ???

          • Visitor

            I understand that this is threat to pirates all over the world, but the world is changing and here are the facts:
            In 2011, the Japanese music industry was going down the drain.
            As a direct result, Japan approved an amendment to its Copyright Law in June 2012.
            The consequences are clear for anyone to see.
            And they are exactly as predicted.

          • Logic fail

            Correlation does not equal causation, you unbelievable muppet.

  5. PP Shivaknen

    Ah…., unfortunately, Japanese Music market IS Oricon chart TOP 20 only. Every Tom, Dick and Harry says “AKB 48” add to say they never listen music, just loving how “Kawaii” girls. So, super easy to forget about like this Idols, just one time consume. 😉

  6. Visitor

    As a songwriter, I’m particularly intrigued by this!
    And I’m probably not the only one who’s interested in working with Japanese colleagues now.
    In fact, why go on producing music for Americans and Europeans when they can steal your property without consequences?
    Japan could be the future. Sayounara…

    • Visitor

      If you like to write songs for 12-18 years old gilrs who use their supposed “virginity” as their best salespoint, then you’re welcome ! If you like more deep music creation, be prepared to work for (almost) free.

      • Visitor

        “If you like to write songs for 12-18 years old girls”
        I certainly do!

    • Case

      Did it appear to anyone that all this might be the result of all mentioned reasons combined? It is almost funny to see how each side (the “it’s the idols!” and the “it’s the jail!” side) tries so hard to fully dismiss everything the other side says. The idol boom with all this voting nonsense is obviously a big factor, just as this strict new law (even tho it would be kinda logical to assume that it would affect the digital sales more, which it interestingly does not). Also there might just have been more music lately that people want to buy with all these Korean craze going on and yeah, packing might be a factor as well, just as the continously growing tendency of releasing the same material in different types (like… the same single in 3 or 4 different versions, with the same main track, but with different covers and bonus tracks).
      On a different note: it actually surprises me a lot that after all these years, this piracy = stealing thing still seems like a valid point for some people. It would be especially interesting to see some statistics about the overseas sales of Japanese CDs & DVDs and how they grew in the last approx. 10 years. As, without the “piracy” working as a free way of promotion, sales for Japanese artists (with the exception of the likes of Melt-Banana, AMT, DJ Krush and such) would be around zero.

  7. Paul Resnikoff

    Here’s a tranche of additional data on the Japanese market, for the data deep-divers.
    Also, since we’ve got some regional experts in the comment thread, wondering if you can tell me if there are still 3,600 CD rental establishments in Japan, as this page from JASRAC claims?
    (scroll down, left column)
    Written while listening to Generationals.

    • Visitor

      Also, I’m not certain it is even illegal to copy a rented cd for personal use in Japan. I’ve heard that the practice is quite common and accepted. Seems odd to me if true.

    • Visitor

      I can’t confirm you if the 3600 number is 100% accurate, but I can confirm you there is still a strong rental offer accross Japan.
      It worth to note that the JASRAC receive a fee each and every time a rental CD is rent by someone. That mean a nice royalty stream without the need to press additionnal CDs or stock them.The fee has even been raised a couple years ago.
      Also, it’s true you can copy them as long as it is for use in the household and that they are not copy protected (breaking copy protection is illegal).

    • Faza (TCM)

      The whole issue of CD rentals is probably a good illustration of what Stan Liebowitz calls “indirect appropriability” – one way in which unlicensed copying can actually be beneficial to rightsholders.
      Assuming that it is legal to copy a rented CD and Japan and that the rental shops do pay a royalty each time the CD is rented, the net effect is to charge for the copies being made indirectly (hence the name). Of the people who rent CDs, some will make copies, some won’t; however, the rental shop that facilitates such copying (by making the source discs available) pays extra for this – by way of royalties over and above what they paid for stocking their library.

      • Visitor

        In fact, the rental business is nothing new. It was already strong in the 90′ when CD sales were also at their top.

        It’s a good exemple of Japanese business too, because it’s not only about music. CD rental in the 90′ allowed companies like Sony, Toshiba or Victor / JVC (who also own music labels / publishers) to sell loads of MD (Mini Disc). You could buy blank MD packs in every rental shop ! Then came CD-R and now MP3 players. The bottom line is that the are using music as a way to sell other products and also manage to get royalties from rental shops.

  8. Steve McClure

    You might want to check that RIAJ data again. You’ve misread it: the 70% figure means that January-March 2013 digital-music sales were down 30% year-on-year. This is how Japanese industry bodies such as the RIAJ always present data.

    • Paul Resnikoff

      Rookie mistake!
      That’s quite a different percentage presentation than I’m used to, thanks for pointing that out. Digging deeper into this, I’m actually surprised at how modest digital revenues are alongside physical (far less than 10 percent at least according to these RIAJ counts).
      Looking closer at physical sales, everything seems to be level (across audio and video assets), and a few percentage points down on the physical audio side.
      The US market is still showing downward progress, so a level seems like it could still position Japan as number one for 2013. Here’s to a good horse race!
      And, thanks again for going through that data and correcting accordingly.

      • Steve McClure

        No problem, Paul! Dealing with Japanese statistics can be a bit of a minefield, all right.
        And yes, physical-music sales (excluding music videos) are still much larger than digital. The RIAJ shipped about 47 billion’s yen worth of physical product in January-March 2013, compared with just under 11 billion yen for digital in the same period.

        • Bill Hochberg

          A big reason the physical DOLLARS (albeit not units) are bigger in Japan than USA is the Japanese love (fetish?) with packaging and elaborate box sets. E.g. This box set from 80’s J pop star Keiko Matsuda at over US $600,

          AND others at over US$1000 (with audio, video, figureines, etc.) selling briskly even in bad Japanese economy. Go figure-ine.

  9. @tshfkym

    I gotta agree that the anti-piracy law is not the dominant factor to the the digital sale stats in Japan.
    Digital sales continue to slide in Japan:

  10. eagletina56@aol.com

    Don’t sleep on Japan. We beat them years ago re Pearl Harbor. They have not forgotten, neither should we. Hello