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 Despite a slow decline in sales
in the past decade, CDs are still the most
popular music format in Japan, accounting for
around 70% of recorded music sales last year. In
the U.S. and European markets, CDs have long
been relegated to the history bin in favour of
online downloads and recently, streaming.
Streaming services, which had accounted for less
than 10% of sales in Japan until a few years
ago, grew to 15% last year and will likely
exceed 20% this year, said Jamie MacEwan, who
covers the Japanese media business for Enders
Analysis.
The shift is closely watched by the global music
industry because Japan is the world's
second-biggest music market after the United
States, worth nearly $3 billion annually.
"The crossover point where total digital
revenues eclipse physical production is now just
a matter of time," MacEwan said.
Beyond hurting CD retailers like Tower Records,
still a big presence in Japan, the shift may
also signal more growth for streaming services
such as Amazon, Spotify, which only entered
Japan four years ago, as well as smaller
domestic rivals.
Tower Records Japan, which runs over 80 stores
in the country, would not release data but said
it has suffered a serious slump since the
pandemic as consumers avoided going out and
artists cancelled new releases along with events
to promote them.
"It will take a long time for things to return
to normal," said Tatsuro Yagawa, a spokesman for
the stores which became independent from the
now-bankrupt U.S. chain after a 2002 management
buyout. Still, he was optimistic about a return.
"Music fans here like buying CDs to show support
for their favourite artists. I don't think
people will stop buying CDs."
NO HANDSHAKES
One major reason CDs have remained so popular in
Japan has been that record labels often bundle
CD singles and albums with perks for pop idol
fans, including vouchers for priority concert
ticket purchases and invitations to handshake
events.
Such events and concerts have mostly been
cancelled or scaled down in recent months
because of the pandemic, with some moving
online.
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 Avex, Japan's biggest listed
music label and entertainment group, held its
annual music festival online in August for the
first time.
Featuring acts including veteran singer Ayumi
Hamasaki and K-pop group Red Velvet, the event
attracted 1.6 million views including free and
pay-per-view spots - a rare bit of cheer for a
business by plunging sales. But
Avex CEO Katsumi Kuroiwa, talking to investors
on Friday after the company reported losses for
its fiscal first-half, described the financial
results of its foray into large-scale online
events as mixed.
On one hand, he said, Avex learned it could
attract huge audiences online, but tickets had
to be priced much lower than physical events - a
predicament it will grapple with as it seeks to
livestream more events.
So far, CD sales have been buttressed by a lack
of new hits on streaming services as record
companies sought to avoid cannibalizing physical
sales.
But this, too, is seen changing as CD sales
decline and record companies recognise money
shifting to streaming. Recent chart-hitting
singles by singer-songwriter Kenshi Yonezu and
veteran boy-band Arashi are now available on
Spotify.
"Domestic labels are likely to make more of
their catalogues available to stream closer to
physical release, which will accelerate the
digital transition in the coming years," MacEwan
said.
But he also said that unlike in other markets
where Spotify and Apple Music are the main
streaming services, local Japanese streaming
services such as LINE Music, Avex's own AWA and
RecoChoku may have an advantage by offering
livestreaming and other content aimed at J-pop
fans.
"This will prevent the emergence of an Apple-Spotify
duopoly as seen elsewhere," MacEwan said.
(Reporting by Ritsuko Ando; Editing by Raju
Gopalakrishnan)
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