A new Merlin report indicates that Japan is poised to make the shift to music streaming.
A new report by independent global music rights agency Merlin, has highlighted the slow but stable growth of music streaming in Japan. One of the world’s last bastions of physical music, Japan remains the second largest music market in the world. Despite advanced technological and broadband capabilities, Japan has been slow to make the shift towards music streaming.
According to the Recording Industry Association of Japan (RIAJ), in 2017, 80% of music sold in Japan came via physical products, with the CD still dominating the sales mix. In 1992, the country introduced the Compensation System for Digital Private Recording, which reflected royalties rights into retail prices for digital recording equipment and media. Traditionally, record rental stores allow music fans to rent music CDs and purchase blank recordable CD-RWs. These rental stores also pay compulsory licensing to record labels, to cover potential sales losses to the music rightsholders.
Akin to the decline of physical record stores across the globe, those rental stores are slowly on the decline. According to the RIAJ, the stores are down from a peak of 6,200 in 1990, to just 2,100. The private copying levy and rental remuneration rates have also fallen dramatically, down Y324m (£2.24m) in 2007 to just Y14m (£97,006) in 2016.
According to research conducted by Tokyo-based ICT Research & Consulting, monthly fees for subscription services could be holding Japanese consumers back from the streaming switch. Consumers in Japan are deterred by monthly fees for such services, with ad-supported alternatives such as YouTube available.
Despite this, the streaming shift finally appears to be taking place. In 2017, RIAJ started releasing data on streaming services for the first time. The industry recorded streaming sales of Y26.3bn (£182m), amounting to 9% of total music sales, represents 46% of digital music sales.
“Comparative to other major music markets, streaming services came to Japan quite late. We are yet to reach critical mass, although the signs ahead look positive,” Danger Crue CEO Masahiro “Jack” Oishi told Merlin.
Japan’s slow shift away from physical music has not stopped DSPs from entering the market. Spotify has been operating in Japan since 2016, with Deezer and Amazon also launching last year.