Year In Review: Japan's Digital Market Takes Off

The contrast between the physical and digital sides of the record industry became ever more distinct in the world's second-biggest music market during 2005.

"It's a very tough physical market," Warner Music Asia president Lachie Rutherford says. But "there's a rise in mobile phone download business, and I have great hopes for Web-based music downloads. So I see light at the end of the tunnel in Japan."

Although CD sales slumped, PC- and mobile-based downloads showed healthy increases. Recording Industry Assn. of Japan data for the first 10 months of 2005 shows shipments from its 41 member companies fell to 352.2 million units, down 3% from the same period in 2004. Value dropped 5% to 435 billion yen ($3.6 billion).

The RIAJ published its first digital sales data during 2005. It showed mobile-based downloads (full songs, polyphonic ringtones and master ringtones) from its members to total 72.1 million units in July-September, up 25% over the previous quarter. Trade value rose 23% to 9.1 billion yen ($76.5 million).

PC-based downloads totaled 2.3 million units, up 125% over April-June, with trade value rising 87% to 436.7 million yen ($3.7 million).

That growth was boosted by the Aug. 4 Japanese launch of Apple's iTunes Music Store, which claimed 1 million sales in its first four days of operation.

Apple Computer's iPod digital music player was also a major hit, with Apple claiming to have a 60% share of Japan's portable digital music player market in 2005.

However, BMG Japan president/CEO Hidehiko Tashiro is among those sounding a cautious note about the iPod's apparent success. "iPod growth may be driven by cheap CD rentals," he says. Unique among major music markets, Japan has a thriving, legal CD-rental sector.

The line between the "old" and "new" music businesses began to blur in 2005, with music merchant Tower Records Japan and Napster announcing a joint venture, Napster Japan, in October. The service will launch in spring 2006.

Telecom operator NTT DoCoMo's subsequent purchase of a 42% stake in TRJ sparked industry speculation as to what future synergies the companies might develop.

On the talent front, one of the more unexpected hits in 2004 was the album "Soukana" by veteran male vocalist Kazumasa Oda (BMG Japan).

It reached No. 1 on music trade magazine Oricon's album chart the week of June 27, making 57-year-old Oda the oldest person to score a No. 1 album in Japan.

Elsewhere, the accent was on youth, with one key trend being the emergence of several mature-sounding teenage female vocalists.

They included 17-year-old Miriya Kato (Sony Records), whose string of pop/R&B singles preceded her debut album, "Rose," in late October.

Warner Music Japan, meanwhile, has high hopes for 18-year-old Ayaka, whose debut single, "I Believe," is due Feb. 1, 2006.

Another notable trend was the growing popularity in Japan of such South Korean artists as 18-year-old vocalist BoA. Her album "Best of Soul" (Avex) topped the Japanese charts in February, and has shipped more than 1 million copies, according to the RIAJ. ••••