Japan’s Love Affair with CDs Fades

Japan, the world’s second largest recorded music market and third-largest national economy, has produced its fifth consecutive year-over-year increase in digital music sales, according to data from the Recording Industry Association of Japan (RIAJ).

Unit production of CDs, the nation’s staple music format, is in decline, causing its overall music revenue to dip slightly.

Downloads contributed 40% of sales while music streaming accounted for 54% of sales, marking a tipping point for music streaming in Japan. The trend is now toward growth in digital formats: digital music revenues in Japan grew by 6% to just over ¥34 billion in the first half of 2019.

Subscription audio streaming formats grew 23.8% year-over-year, while all streaming formats, including revenues from subscription plus ad-supported video and audio services, climbed 27.5%.

According to the RIAJ, the physical space is still nearly three times the size of the digital music space, with physical album sales totaling ¥157.6 billion ($1.48 billion) compared to ¥64.4 billion for digital music sales ($606 million).

The results are contained in the latest data of annual industry trends and from the latest quarterly report published by the RIAJ.

Table: Digital Music Sales in Japan, Q1-Q2 2019

Format Value (¥ Mil) YOY
Master Ringtones12265%
Ringback Tones64475%
Downloads – Single Tracks7,213 88%
Downloads – Albums4,441 90%
Downloads – Music Videos107 80%
Streams – Subscription Audio18,540 124%
Streams – Subscription Music Videos554 200%
Streams – Ad-supported Audio625 421%
Streams – Ad-supported Music Videos1,660 122%
Other98 10%
TOTAL34,006 106%

Music Streaming Forces Cultural Change in Japan

Despite Japan’s tech-forward image, its music industry has remained “old school” in comparison to other major economies.

Surprisingly, that’s largely worked to its advantage, with a stable music business model that weathered the download era and is embracing music streaming on its own terms.

The reason can be traced to Japan’s commercial music culture. Japanese consumers place high value on the possession of music merchandise and on cash over credit. Brick and mortar music stores in Japan are a popular place to buy CDs. Most Japanese prefer the tangible aspect of the CD and view it more as a piece of artist merchandise than a delivery system.

In the rest of the world, music singles are exclusively released through digital download services. In Japan, not only do singles still get released on physical CD, they’re promoted as an anticipated fan moment and an important one in an artists’ career. New music singles are advertised everywhere and music stores serve as a place for artist fandom.

The popularity of CDs in Japan has nothing to do with affordability. At around ¥2,500-¥3,000, or $23-$29, the average CD album costs more than double the price in most countries. Unlike many other markets, national law puts pricing restrictions on retailers, meaning that new CDs are rarely sold under ¥2,500 (approximately $21).

Even with such pricing control, Japan never experienced a period of rampant illegal downloading.

Japanese copyright law also allows for legal CD rentals. In fact, some argue that much of the continued success of CDs in the country is due to rentals, which has been a relatively stable market, yet one that is starting to shrink.

What to Know: Music Streaming Services in Japan

Leading music streaming services in Japan in 2018, by share of users

  • Prime Music — 36.4%
  • Spotify — 16.5%
  • LINE Music — 11.3%
  • Apple Music — 8.7%
  • AIWA — 5%
  • Google Play Music — 4.5%
  • d Hits — 4.1%
  • uta Pass — 3.2%
  • Amazon Music Unlimited — 2.1%