Why music industry rapprochement with the Internet might not work to fans’ benefit

The music industry in Japan is afraid, that much is clear. Even behemoths like Sony Music Entertainment are being forced to admit that the Internet exists, industry figures are looking with greedy eyes at the attention their Korean neighbours have been gaining abroad, and artists deemed to have the potential for overseas appeal like kooky fashion icon Kyary Pamyupamyu and electro idol trio Perfume are being tentatively shipped out on carefully stage managed tours, playing tiny venues guaranteed to sell out. No one knows how things are going to play out, and they are worried. They are afraid.

And for music fans, it’s good that industry is afraid, because their fear comes from a lack of control, and the control the music business exerts over its product is bad for music. Troubled times create cracks in the system, through which unexpected things may pass. Idol music might not be everyone’s cup of heart-shaped latté, but the explosion of new acts incorporating a variety of increasingly bizarre musical and visual styles is at least something different, and is the direct result of an industry unsure of where to go. The aforementioned Ms. Pamyupamyu and Perfume are also artists who emerged from the cracks, propelled by subcultural appeal into unexpected success.Kyary Pamyupamyu: Invader Invader

And there are signs that the music industry might be starting to come to terms with its fears, finding a way to work with the still new (to them) technology of the web, and reconfiguring their marketing to deal with the way fan behaviour has changed over the past ten years. Needless to say, music fans will likely not be the first to benefit.

One way we can see these changes occurring is in music videos. Having traditionally enjoyed a healthy income from video cassette and DVD sales, the music industry’s initial reaction to video streaming sites like YouTube was one of abject horror, and they blamed them for everything from Hurricane Katrina to the Kennedy assassinations. The viral success of Kyary Pamyupamyu’s “Ponponpon” in 2011, however, did a lot to encourage them that maybe video streaming sites could be made to work for them. Nowadays, all major labels have a YouTube channel, and are raking in a smidgeon of cash from the advertising.

In terms of fans, there has been a clear decline in the amount of money what we can loosely call “mainstream” music fans are willing to spend, which leaves the industry with the option of either looking outwards like the Koreans, or consolidating inwards like, let’s say, the British Empire.

As someone who has spent the past nine years involved in indie promotion in Japan, insofar as I have any kind of strategy at all (something many who have had the misfortune to work with me may choose to strenuously doubt), it tends towards fostering a core group of fans who are genuinely into the music, and who are dedicated enough to come to the shows and buy the CDs. Everyone’s welcome, but some kinds of people are obviously going to be more receptive than others and it makes sense to give them more attention.

On the face of it, a popular, major label group is faced with a slightly different set of circumstances. If they’ve got this far, they most likely already have a core group of fans, and these fans are going to buy the records regardless, so their goal would seem to be to reach outside this core group and try to capture the stray dollars of people with a more casual interest in the band.

One thing that seems logical for both indies and majors here is the value of having a nice video, ready for people to share on YouTube. An indie video can be shared via specialist blogs or networks of genre aficionados on Twitter and Facebook, helping to introduce them to prospective fans; a major label video that goes viral shouldn’t impact on sales to core fans, and might bring in a few extra sales from elsewhere.

Not so for the Japanese music industry though, where companies seem to be even more aggressively than ever pursuing a core fan strategy. And this is where the issue of videos comes up again, because look once more at YouTube and while major labels are happy to take Google’s advertising crumbs and seed the ground with videos from smaller acts in the event of an unanticipated viral harvest, they are focusing ever harder on maintaining tight control over the image rights of their key properties.

“Gentleman”, Psy’s attempt to follow up the success of viral sensation “Gangnam Style”, racked up millions of YouTube views and posted U.S. sales of around 70,000 in its first week. For a song inevitably doomed to be seen by History as the first step in Psy’s inexorable slide back into relative international obscurity (I’ve still got money on him finally getting big in Japan about three years after everyone else has forgotten about him), those numbers aren’t too shabby. So why is the Japanese record industry running shy of these possibilities?Psy: Gentleman

Part of this is probably because they’ve decided that on balance, it isn’t worth it. My back of a fag packet calculation gives a viral video about one sale for every thousand YouTube views. I would imagine there’s a lot of variation from video to video depending on how viewers are engaging with it, and there’s probably some sort of curve involved depending on the level of saturation, but in any case, we need millions and millions of views to make any meaningful impact on a major label act’s sales figures.

So what countervailing advantages does pursuing a core fan strategy have for the Japanese music industry? Well, at one extreme, just look at mass idol collective AKB48 and their legions of obsessive fans, some willing to spend millions of yen on thousands of copies of a single in order to gain multiple voting rights in the group’s annual “senbatsu election” of the most popular members. Not only the CDs, but an ever growing pile of goods that the fans are encouraged to buy and buy again in order to show their devotion to the goddess of their particular sect within the AKB cult. AKB48 are an extreme example, but they’re the big success story in the domestic industry, and their success in monetising fans within a shrinking market has been noted with interest by their competitors.

One problem with the AKB method is that it is so reliant on CD sales, which in a marketplace increasingly having to come to terms with iTunes and similar legal download sites, and where streaming services like Sony Music Unlimited and soon Spotify are gradually carving out a place for themselves (several years too late, but well done anyway), this model is already an anachronism. AKB48’s enormous sales are the Tyrannosaurus Rex stalking the late Cretaceous of the CD format’s lifespan. One download buys you the song, and if you want to download it again, well it’s already yours. If a fan who spent ¥2,000,000 on over a thousand copies of the CD single wants to give them that ¥2,000,000 via Music Unlimited, he’s going to be busy.

So it’s not music, but goods that are the key to exploiting (and I do mean exploiting) the core fanbase, and the key to goods is image rights. Videos can also be monetised, not as promotional materials, but as commodities in their own rights, and by ruthlessly shutting out YouTube users from access to the videos, they can then sell exclusive broadcast rights to the videos to certain TV channels, to which the core fans must obediently turn, or flog them as video downloads to fans’ smartphones. This shift can be seen in the way the music industry in Japan now refuses to use the term PV (“promotional video”, i.e. for promotion) and has en masse adopted the term MV (“music video”, i.e. a discrete product whose value is intrinsic).

So a group like Perfume, having taken the big step by Japanese industry standards of making their music available to buy online internationally (still few of their J-pop peers have been willing to take the risk, whatever they imagine it might be), have been preparing to embark on an international tour with a new single and a clever, imaginative and quite charming video that their management company, Amuse, has until recently been vigorously battling to make sure none of their fans were able to see.

Yet Perfume are among the radicals, the trailblazers of modernity, and as a rule, they seem to be releasing the videos from captivity eventually, allowing them to roam their natural online environment after they have completed their terms of indenture to whatever broadcast organisation into whose service they were sold (Magic of Love finally appeared on Perfume’s official channel last week). The broader picture though, of an industry suspicious of the outside, not just of other countries but now of potential domestic fans from outside core fanbase groups, turning with ever greater cynicism towards the cultivation and exploitation of those fans devotion, is a profoundly depressing one.Perfume: Magic of Love

It’s inevitable in a way that once it begins to become accustomed to a new technology, an industry will first seek ways to retain control over it, and of course it’s natural that businesses will want to protect their profits before all else. It would be naive to attempt to deny this. At the moment, the Japanese music industry is still afraid, but what’s really dispiriting in all this is the way that in the midst of seismic changes in the marketplace, they are still channeling their resources into attempts to chart a path that turns the clock not forwards but backwards.


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30 responses to “Why music industry rapprochement with the Internet might not work to fans’ benefit

  1. There are some smart numbers behind this strategy. For the right kinds of products (this is one; electricity is not), there’s the 80/20 rule, which is that 80% of profits come from the 20% who are heavy users (alcohol works the same way). I’m in the 20% for Perfume, Kyary, MEG and capsule, because I just dropped a TON of money on import CD’s. I’m not hooked by the add-ons like deluxe sets, pictures, booklets, etc, because it’s all about the music–but I’m not far from it, either. I might get that crazed eventually.
    However, there is a lesson SONY can’t control, in my own patterns. In the arts, lightning strikes. You can’t control it, and you often can’t even see it when it arrives. Managers and companies turned down the Beatles. In my case of course, it’s Yasutaka Nakata, and to the same degree with a much smaller individual catalog, MEG. I’ll buy ***anything*** they publish, period. No company can plan on that basis. It’s not an accident, in the most basic aesthetics-of-music sense, that Perfume and Kyary are pioneering breakout acts.
    The other smart piece that AKB48 reveals is that music is moving toward a services business instead of a product business. The more interactivity, the better. That is smart and forward-looking, and it will pay off.
    Two places it breaks down. One is that the Internet disintermediates the record companies. The artists literally do not need the companies, and the swifter among them already know it. Second of course is that the Internet breaks information controls, including copyrights. I don’t even have to go to the Darknet for my Yasutaka fix, but all the materials are there for those who want them (I buy the highest resolution audio available, still Redbook Audio for these products–if they had 192/24 masters, I’d pay premium for those). Not SONY nor anyone else can buck those final two trends, ever. They NEED the services model, to protect themselves from this inevitable breakdown of the products model.

  2. perfumeophile

    really interesting article…..but i have a few quibbles…first the japanese physical to digital music sales is still a huge worldwide outlier…80-20.

    the world average is 57-43 and in the states its now 49-51.

    as for perfume, while it’s nice that amuse and universal finally bought in to youtube, there’s near unanimous griping among fans about the lousy [480] video quality. [“what year do they think this is?” was a recurring comment]

    and compared to asobisystem’s handling of kyary, amuse’s on-line strategy for perfume [facebook, twitter, etc] is hopelessly behind the curve.

    however, the big labels need to understand one simple truth…virtually every non-japanese fan of both prfm and kpp discovered them through an online video website.

    as for sony, i discovered negoto via clear and refreshing and the company blocks their videos in the us despite having zero intention of ever selling their product in the market.


    • Japanese physical sales are such an outlier because Sony has been holding the industry back because it didn’t want to harm its CD player sales. That ended last year when SME finally went onto iTunes and Sony Music Unlimited properly got underway. CDs are dying here too, they’re just further back on the same curve.

      Amuse are old-skool with their roots in the 70s agency system (they were founded by the Candies’ old manager) while Asobisystem are a Harajuku-based street fashion modeling agency, so I guess they have more freedom to move with the times. They’re just as controlling and detail-obsessed as any Japanese talent agency though. They also seem like a bit of a one-trick pony music-wise, and without Nakata, they’d be nothing. Literally all their other products are dreadful Nakata ripoffs produced by idiots like Ram Rider and 80Kidz.

      • perfumeophile

        a few more quickies…

        in 2012 japan did more business than the u.s. in total prerecorded music sales….$4.3 billion to $4.1 billion…if this is the last gasp, they went out with a bang
        “Japan in 2012 ranked near the bottom of all countries being tracked for digital music transition, at No. 20 out of a total of 21 nations. Only 13.7 percent of music sales in Japan were digital in 2012.

        The physical-music market has held on for much longer in Japan than compared to almost any other country. Japan is the only country that still sells tangible amounts of physical singles, a category that is all but non-existent elsewhere.”

        as for sony, in the last three to five years their entertainment divisions have been profit engines, while the electronics division has been posting losses.
        as always…. a pleasure to “talk” to you

      • Also, was just thinking that the figures you give are in raw dollar values. Remember Japan has a bit under half America’s population and a bit over double its music prices. Plus throughout 2012 the Yen was at an unusually high value against the dollar. Coupled with the one-off spike in oldies CD sales, that figure is I think of more symbolic value than a sign of Japan getting anything “right” as it were.

      • Yeah, Japan beat the US last year, and last year was a bit of an oddity in that lots of best-ofs and comebacks of popular old groups came out all at one time, which gave a huge boost and actually drove yearly industry sales up for the first time since I think 1998 (certainly in the last ten years).

        And the slow motion nature of the music industry in Japan’s decline shouldn’t let us close our eyes to the fact that it is definitely still happening. AKB48 are a strange sort of outlier because their singles sales are supported by all sorts of mad gimmicks, but their album sales are much more realistic and reliable indicators of their popularity. They tend to sell similar numbers to the other top J-Pop acts and a look at their year-end sales figures tends to show something in the region of 850,000 units. These are good numbers, but in 1997 Mr. Children sold double that number of its album “Bolero” in its first week (and it’s telling that Mr. Children held three of the top ten bestselling slots in 2012’s year-end Oricon charts). Namie Amuro sold more than 2 million copies of her single “Can You Celebrate” the same year, and a look at Wikipedia’s list of bestselling Japanese singles of all time is dominated by 90s stuff.

        In fact these mad sales that artists were racking up in the 90s is part of the reason the industry’s being so grasping now I think, because it set a sales benchmark that they now can’t reach. Music has to compete with so many other things for consumers’ money these days so in that context, the sales J-Pop artists are getting probably shouldn’t be considered so bad.

        And yes, Sony Entertainment is supporting Sony Electronics, and the people in entertainment division hate the electronics division. SME were held back for years from putting their music online because of the consumer electronics division and now head office is trying to undermine their sales by foisting Music Unlimited on them, which they’re resisting. It’s a dysfunctional entity for sure.

  3. perfumeophile

    the two us venues [nyc and la] that kyary played out were 2200+ seaters…..not sure i’d call them small and/or guaranteed sellouts.

    perfume was originally booked into an 800 capacity london club, but the show was quickly moved to one that fits 2000…they could have played an even bigger venue there

    • I guess so, although the limited number of dates is also a factor. Kyary played I think a 500-capacity venue in London when she first visited.

      • perfumeophile

        ian, sadly here in the states there still lots of art [galleries, movies, theater, music] that can’t draw a viable audience beyond nyc and la

        and you’re right about that london venue kyary played…i saw photos of the inside and 500 might actually be a stretch….it was small enough that local bands without labels played there on off nights…

  4. I wonder what Sony Japan thinks of us Western fans. If they’re thinking I don’t understand Japanese, they’re right. For my favorite groups, that just doesn’t make any difference! I’m already up to quite a few in terms of Things To Buy: capsule, MEG, Perfume, Kyary, Judy and Mary, Ami Suzuki, Momoiro Clover–that’s more than I follow in **American** music now. And my daughters go crazy over this stuff. They learn it phonetically and sing along! My Country & Western-loving neighbors aren’t going to rush out for the next capsule release, obviously, but I think language is dwindling as a barrier.

    • I find the image of this one family going mad to Japanese electropop in the middle of a neighbourhood that only ever listens to country & western just wonderful. There’s probably a quirky, offbeat comedy drama in it somewhere.

      • perfumeophile

        most of my same-age friends think i’ve lost my mind with my
        enthusiastic embrace of japanese electro pop

      • LOL to both. We’re talking about a former long-time New York City family transplanted to deep South Texas (it’s a good thing, most ways). My girls dress in half-harajuku fashion (they’d go out full-on harajuku if we let them)–one local model agency owner did notice that they were on the forward edge of style in this respect. Speaking musically, Daft Punk *does* have a foothold among a minority, mostly my college students I’d say. That’s where J-Pop ought to strike, if it’s going to, U.S. college campuses.
        re perfumeophile: I’ve decided to explain away my own crazed-fan behavior as late-onset mid-life crisis…

  5. perfumeophile

    it’s just my 6th childhood…….

    • @perfumeophile: I enjoyed ‘our’ music as it happened, 70s and 80s. But I’ve listened to Led Zeppelin enough, now, and Aerosmith and Van Halen et al. Might pull out Talking Heads albums again once in a while. But otherwise, it’s an enormous relief to find something so great (selected J-Pop; highly selective, actually, but still) that is so completely fresh to my ears. Nowadays I’d rather drive in the car with the radio off, than with the Classic Rock station on.

  6. miffy

    Well, maybe the Japanese companies been reading David Lowery’s blog. A lot of hyperbole but some pretty damning evidence on this new digital economy. And which brand new artists has benefited from this? All i can think of is Macklemore (the dude with no recording contract)

    • They’re probably looking at all kinds of stuff, including stuff like David Lowery, but I think what really scares them is that whatever they do, they aren’t going to know what the result will be until someone’s done it. To take a rather dramatic tone, what we’re seeing here is in a way a dreadful failure of capitalism, because looking at it in terms of a supply/demand curve, the Internet has made the supply infinite, which means that even though demand remains fairly high, the infinite supply still means the market assigns an effective value of zero to the product. There are lots of mitigating factors holding up sales to a certain degree, but none of them really strike me as a “solution” (and the Japanese music industry treating all listeners as potential thieves and cutting them off from such an obvious promotional tool as YouTube definitely isn’t).

      • miffy

        ‘Cept that Google seems to profit the most of it…… well at least, according to David Lowery and other pro copyright ppl….

        But keeping it to Japan, if they want a digital future, then they will need to have a global outlook. The problem is that the international Jpop scene are dominated by a vocal minority that skews feedback. See foreign idol fans and visual kei scenes.

        The only way to bypass these vocal fangroups is to have a editor who has good taste to look for the good stuff. At least with the push of Perfume and Kyary, Dentsu and other entertainment companies seems to have learn that but as you pointed out, if Nakata decides to be farmer, then it falls apart.

        The companies cannot depend on normal market forces in Japan as its now heavily favours the super consumers (otaku). And the foreign fans have deeply skewed perspective that does not reflect mainstream or even universal values.

        First thing first though, is to get away from the addiction of physical media sales. And to actually hire foreign producers / brand coordinators who are not shills or apologist (hello there marty friedman!).

      • perfumeophile

        ian…i wanted to thank you for your additional replies to the sales numbers i put up, but couldn’t leave it as a direct reply…

        i’ve got one more number. i just read that kyary’s first week album sales were a bit over 125K…to put that in perspective…the newest albums by bowie and bon jovi didn’t even sell 100K in the u.s. on week one [and that’s physical and download combined]

        #1 albums with less that 100K first week sales are now the norm, not the exception in the states.

        japan’s population is 40% of america’s

    • I mean, isn’t it mad that we’ll happily spend ¥150 on a bottle of Coke as if it’s nothing, but ask people to spend the same or even less for an MP3 on iTunes and suddenly it’s like, “Nah mate, it’s not worth it!”?

      • miffy

        Ha! Using yen as a benchmark! I bet you start using Japanese numeral lingo when speaking about money even with other English speakers (signs that you have been too long in Japan)

      • perfumeophile

        i have to wonder if it’s a simple as the coke bottle is a physical object and the mp3 isn’t….

        the other problem with buying an mp3 from, say, the apple store [back when they were 99¢ ] is that the artist gets around 8¢, while the label gets around 70¢

  7. “…looking at it in terms of a supply/demand curve, the Internet has made the supply infinite, which means that even though demand remains fairly high, the infinite supply still means the market assigns an effective value of zero to the product.”
    Exactly, this is classic information economics. The AKB48 practices shift the business model away from the infinitely reproducible good (non-excludable, in economics jargon), and towards the profitable service (excludable–you don’t get it unless you pay, period).
    There are bands benefiting from the new digital economy, but they mostly have not risen to the notice that mainstream top-of-the-charts musicians receive. One example is Einsturzende Neubauten (http://en.wikipedia.org/wiki/Einst%C3%BCrzende_Neubauten). They’ve leveraged the digital economy in multiple ways, to powerful effect–for their own purposes, to a niche market.
    Of course, the REALLY big money in the Internet has always been, and still is, to be an information broker, a clearinghouse taking users to the information they want.

  8. Gag Halfrunt

    Avex are launching a new girlgroup called FAKY which, according to the official blurb (in English as well as Japanese), “consists of bilingual members as it looks to expand its reach outside of Japan as the next generation girls group from Tokyo”. That sounds as if Avex have set out to assemble a group that can attract the same kind of international following that K-Pop idol groups enjoy, using idols who are fluent in English and perhaps other languages and so are better able to build relationships with international fans.

    They’ve only revealed one member so far, Diane, ahalf-American from Okinawa who Avex recruited through auditions in April.. She already has official Twitter and Instagram accounts, so I imagine that Avex plan to emulate Korean agencies and use social media in a strategic way to promote FAKY internationally, with the members writing in English (and any other languages they speak — perhaps there will be a Mandarin or Korean speaking member) to give international fans a much stronger sense of connection.

    • Interesting. I suppose the next question though, is where are the songs going to come from? Where are the producers going to come from? Oh, and they should also under no circumstances whatsoever allow these girls to write their own lyrics!

      • Gag Ha;frunt

        The teaser music sounds rather like a mashup of LMFAO and capsule, so I suppose they’re aiming for America-friendly EDM with a Japanese flavour. But probably more important than that are the clubbing outfits (“the fashion and culture of Tokyo”) no doubt blagged from Japanese labels keen for international exposure.

        On that note, I’m amused that the hippest place in Tokyo, at least in Avex’s opinion, is a subway station. 🙂

        P.S. Why shouldn’t the girls write their own lyrics? At least there wouldn’t be any horrible Engrish — or are you worried about dodgy Japanese and/or party girl airheadedness?

      • perfumeophile

        video is up now…one of the commenters at youtube says “Actually this song is by dSign Music, a Norwegian group that works with several J-Pop, K-Pop and even C-Pop acts.”

    • perfumeophile

      there’s a certain irony [or perhaps avex is being meta] to calling a made up group “faky”

      or as perfume once said, “fake it!”

  9. perfumeophile

    going back to the original subject…i just learned that in the first part of 2013 japanese digital sales are dropping while physical sales are steady….

    and, according to paul resnikoff, “in japan, in terms of valuation, physical is easily ten times larger than digital.”


    • Looking at the breakdown of digital sales, I think I can see what’s happening there. The move to smartphones accounts for most of that drop, with the ringtone and mobile content markets tanking, while computer downloads continue to boom. You’ve also got a drop in video downloads, presumably because of YouTube, and a massive increase in subscription-based services, presumably a significant part of that down to Sony starting to push Music Unlimited. I suppose all we can do is see how things develop, although I’d add that personally I’ve never thought ringtones should count as “music” anyway. They’re more like t-shirts and other branded goods to me so fuck ’em.

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