Sound Decision
Shaun Iwase: Page 2

by Jonathan Mays,
Are you concentrating on the US, UK, elsewhere?

Our target is the world but we are starting off by concentrating on major territories like the US and UK. We will gradually focus on other countries, possibly Asia, where demand for Japanese music and media remains constantly high.

Is this all meant to get an iTunes audience, or is there a broader goal?

The ultimate goal is to promote the exchange of Japanese Music around the world. Japan imports 10 times more songs than they export, and we'd like to see that gap close a bit. SXSW and In The City provides us with the opportunity to shatter the typical stereotype that people have towards Japanese music. Although iTunes is currently our main retailer, it is not our only goal.

The prevailing attitude I've heard from J-Pop executives towards iTunes and digital music is sort of a blend of concern and dismissal.

That general consensus is accurate, as many Japanese music industry personnel remain fairly skeptic of digital media downloads. However, the launch of iTunes has caused a rift within that, and many new retailers and aggregators have started in the last few months. The two most common mistakes people have are believing that digital downloads will ruin CD sales. CD's in Japan are a real money maker, costing nearly 1.5 ~ 2 times more than what it costs in the states. Therefore even a slight decline in CD sales can result in massive losses. The US should pose as a good example for them, as CD sales actually rose after the spread of digital music.

I guess Japan just has to realize what the term digital really encompasses. The upload process, the pricing and payments, royalties... The vague idea should be visible if they just sit down and calculate, rather than panicking at the emergence of a new market.

I assume Rightsscale has that done those calculations.

We at Rightsscale understand the vast potential of the digital download market but also realize that it will take a while for it to become a "common fixture" within the music industry. Japan is like the United States a few years ago when iTunes just opened. The digital media bubble era has arrived in Japan and will change the industry here in many spectrums.

Wait a minute: Aren't there are some big differences in the way Japanese music works now and US music used to work when iTunes opened? You cited the CD prices—Japanese labels have more at risk.

CD prices may eventually fall in Japan but it will take a long time before any changes are seen. Labels and manufacturers already know from experience that people will still buy CD's no matter how expensive it is (double the US price, etc). I believe that the only way the prices will change is if CD sales drop dramatically. And by dramatically, I mean like in Korea where digital and mobile sales exceed CD sales to the point where CD is only seen as a source of promotion—not a revenue generator.

How about when people import overseas versions of their local music because it's cheaper?

Reverse importing has been a big problem, especially because the exact same CD can have a $10 difference in price. However these reverse-imports are often delayed for a while and do not reach the market until the Japanese version CD has sold enough.

The real problem lies in the foreign titles. Say, a US version of Coldplay could be sold at the same time, or even before the Japanese release, and at a significantly lower price. The Japanese versions often include special bonus tracks and feature-DVDs to counter the price discrepancy.

I'm still not sold on the US-Japan analogy, but let's get to the big question: What's next for the Japanese music industry?

I believe that the current music scene will eventually lead to the demise of the conventional "CD is everything" view, unless a dramatic change occurs in the way Digital Media is managed. The current DRM still posts many problems. It's not universal, not compatible to multiple portable players, and can't be played on different operating systems, which is one of the reasons that digital music is not selling too well in Japan.

I am certain that at least some sort of long-tail effect will take place in the coming years. Consumers now are able to choose from a wider range of music, whereas previously what they hear and see was predetermined by the labels and outlet medias, resulting in a huge flood of major artists with indies artists getting very little coverage.

Digital services like iTunes are only a start - although a much wider range of artists can put songs up on the store than in normal retail stores, that service is still limited to those who have the requirements (encoding capability, necessary information of the songs, etc) which limits the uploadable to aggregators and large labels. Eventually services may start that offers digital downloads that anyone can join - imagine a MySpace Music Page where you can buy any of the artist's songs. However that will dilute the quality of music in general as more amateurs join the scene, so I won't venture in it too much.

What about something that can happen soon?

A change that can happen very soon is the launch of a large digital retailer that can rival iTunes Japan. Currently iTunes Music Store dominates the PC download market; no other retailer even comes close to them in sales and catalog size. Compared to other countries, Japan's iTunes seems to lack the special touch that made the original iTunes Store so popular - special features, songs from major artists (Japan doesn't have Sony or Warner yet), video, music videos...

The rise of a competitor may force Apple to enhance their services, and that along with the competitor's strategies should drive another monster interest among the Japanese music industry.

As more and more consumers begin to use PC downloads, the market value of it will rise, and labels will take it more seriously.

Right now it's all about cell phone downloads, right?

Yes, mobile network downloads account for huge revenue for labels, and thus their main focus goes towards that. The sales figures themselves prove how dominant mobile downloads are: Truetone's download service, "Chaku-uta FULL", has sold over 100 million songs within a year of its launch.

If PC downloads can create a ripple within this market share, things may change in Japan. Album sales are not available through mobile downloads, so that may be something that can attract consumers. However the industry is way too rigid and hard-headed to change that quickly.

When all of this comes together, who wins, and who loses?

The losers will be those who cannot adapt. The winners will be those who can establish themselves as a core part of the new market, the companies that can establish a direct and secure connection with the new venture companies.

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