Japanese consumers turning away from mobile music formats in ever greater numbers

Music buyers in Japan are continuing to confound the rest of world, with digital sales falling and physical-format sales rising. Recent figures published by Japanese music trade association the RIAJ show that the once loved mobile music formats are continuing to suffer big drops in sales. Internet sales are growing but nowhere near fast enough to stem Japan’s digital-music collapse.

For most developed countries around the world, it would be safe to assume that the sales trend in the recorded-music industry is one of falling physical-format sales and rising revenues from a growing number of digital-music formats and delivery means. No country has avoided an overall contraction from the physical-to-digital transition, but some have managed to turn things around faster than others. One or two have already seen digital sales overtake physical and have returned to the days of rising annual sales with good prospects for a healthy future. Others remain stubbornly unmoved and continue to record annual sales contractions. And then there is Japan, where physical sales are going up and digital sales are falling.

According to the RIAJ, total unit sales and the value of digital-music trade revenues fell sharply between January and September this year compared with the same nine months of last year. Digital-music unit sales dropped 27%, from 284.7 million to 209.1 million, while the trade value slumped 26%, from ¥55.5 billion to ¥41.2 billion.

Mobile-music sales fell a staggering 36% in unit terms, to 152.9 million, and 39% in value, to ¥27.9 billion. For the same nine-month period in 2011, mobile music sales were down 20% year-on-year in both unit terms and value, meaning unit sales and the trade value of mobile music sales in Japan have more than halved in just two years.

In contrast to mobile, Internet sales performed well in the first nine months of 2012. Total online unit sales increased 23%, to 54.7 million, with the trade value of those units up 34%, to ¥12.3 billion. This year’s growth followed a 22% year-on-year rise in both unit sales and value in the first nine months of 2011. Single tracks accounted for 67.1% of the online trade value this year, up from 61.6% in the same nine-month period of 2011.

Japan continued selling digital music with DRM copy-protection long after it was deemed not consumer-friendly elsewhere. Mobile operators maintained that the use of DRM limited piracy and prevented the illegal distribution of downloaded content. Tying content to handsets also acted as a way to reduce subscriber churn to other mobile networks. But the use of DRM is now slowly being lifted, meaning consumers have greater flexibility in what they can do with a download.

The Japanese government has also introduced tough measures to deal with the unauthorized distribution of digital music. In June, Japan’s parliament passed a bill amending the country’s copyright law and the level of punishment for illegal downloading. Internet users who download music and video knowingly from an illegal source can face up to two years in prison and a fine of ¥2 million. Making music and video available without authorization was already illegal in Japan, with maximum punishments for doing so set at 10 years in jail and a fine of up to ¥10 million.

Short-term gain, but uncertainty remains
Since the dropping of DRM and the introduction of stiff penalties are recent initiatives, their effects on recorded-music sales have been limited. To a certain extent, the two initiatives go hand-in-hand in that digital music without DRM will be easier to share and therefore stiffer penalties for sharing make sense. But the removal of DRM has played no part in the rise of physical-format sales. Between January and September, the production of physical recorded-music units (audio and video) was up 11% year-on-year, to 203.9 million units. The production value of those units increased 7%, to ¥214.5 billion. Physical audio production in the nine-month period was up 9% in unit terms and 5% in value. Music-video production had an equally good nine months, with the production of music videos up 18% in unit terms and 15% in value.

Despite the massive demise of all mobile formats this year, the positive performance of physical formats and Internet sales just may have stopped what has become an annual recorded-music sales decline. It should be noted that production details for physical sales published by the RIAJ differ from trade figures, but loosely based on the RIAJ’s physical and digital figures for the first nine months of this year, revenues are almost identical compared with the same period of 2011. Should a similar sales pattern continue for physical and digital recorded-music formats in the final three months of this year, trade revenues might well shown an increase. In the short term, this will be welcome news for Japan’s recorded-music industry, which has seen trade revenues fall each year since 2008. But with few people expecting physical sales to maintain their revival, uncertainty about the performance of Japan’s recorded-music sector will remain for the foreseeable future.

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One comment

  1. Jack

    No wonder why someone would refuse to buy a digital format since it costs almost the same as a phisical, you can’t make backup copies, you can’t have them inherited and a lot of other matters.