Japan should look to China for future streaming growth according to media and technology analysts, MIDiA Research. Despite being the world’s second largest recorded music market accounting for 14% of the global total, Japanese recorded music revenues fell by 3.3% in 2018 (US dollar value) or 1.8% (Yen value). Although streaming was up 30% in 2018, physical sales still accounted for 69% of all revenues.
CD sales and monetising fandom
One of the major drivers of the Japanese recorded music market in recent years has been pop CD sales. The reason is that J-Pop artists are releasing multiple editions of the same album with different free gifts, and Idol artists like Nogizaka46 and AKB48 are issuing in CDs voting cards that fans can use to help choose the band membership. Fans are also able to get handshakes with their favourite artists through vouchers in purchased CDs. This creates a CD market that has less to do with music sales than it does with monetising fandom. Whilst this is good for monetising fandom it has been at the expense of streaming where monetising does not occur.
Monetising streaming fandom in China
In China, Tencent has built a portfolio of music app sthat have fandom culture at their core; whether that be the live streaming, social features and in-app gaming of Kuwo, virtual tipping on KuGuo Live or VIP passes to get access to special virtual gifts in karaoke app Quanmin K Ge (We Sing). In short, Tencent has built a digital music empire that monetises fandom rather than consumption, a logical move in a market where piracy was rampant and had changed consumers’ perceptions of where value lies. This has not gone unnoticed by the money markets where spin off venture Tencent Music Entertainment (TME) is trading above $15 on the NYSE, after opening at $14 in late 2018.
Can the TME model work in Japan?
A big difference between Japan and China’s music markets is that Japan has a long tradition of consumers paying for music, and paying a lot. So it is at a very different starting point to China, but the role of monetising fandom in CD sales means that it is also at a different starting position compared to Western music markets. An approach that combines elements of the Western streaming model and the Chinese model is required. Japanese messaging app Line is perhaps the best placed to capitalise, having already built a vibrant virtual gifts business and also having a music service with around a million subscribers at the end of 2017. Sony Music Japan recently launched its own service, mora qualitas, but its focus on quality is targeting a very different segment and a smaller one – MIDiA’s Q3 2018 survey showed that just 12% of Japanese consumers prefer to listen to higher-quality audio, well below the all-country average of 23%.
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