Japan Research and Analysis
through Internet Information

by Yasuharu Dando

The Music Industry Is Sliding Down a Slope of Self-Destruction
(April 2003)(Japanese edition:21/NOV/2002)

The slump in sales in music CDs and software is serious. In 2000 there were several million-selling hits in succession, but the following year (2001) there were less than half the 22 best-selling albums produced the previous year, and only one super-seller single produced in the whole year. The Japan Record Association makes the excuse that illegal copies of CDs have had an extremely negative influence, but I wonder if that is actually the case. Even during the peak in the popularity of CDs in 1999, the author suggested that the system of selling music CDs had a very unique structure, being far too dependent on only the young generation, and as a result of the music industry's swallowing that concept wholesale, what they were actually doing was cutting off their nose to spite their face. It appears that the author's concerns at that time have in fact become reality. I would like to give a warning now that, unless the music industry, which has generally been thought to be strong in times of economic recession, protects musical culture, and amends the strategic mistakes it has made in developing the market so far, its future will inevitably mean slipping and sliding down the slope of self-destruction.

Extreme Dependence on a Unique Structure

In the 1990s, sales of music CDs were so incredible that even if four or five million copies of an item were sold annually, it was not treated especially as a social phenomenon. At that time, the "baby boomer junior generation" was slightly less than 10 million, and so among the consumers of music there was a group that could be called a "sub-division of the general public." The consumers of mega-hits were principally members of this sub-group, and did not include consumers of the middle-aged and older generations. That is the reason that the power of the impact on society of the million-sellers of the old days has been lost.

Kazuo Nomura, Professor at Kokugakuin University sees the quality of the mega-hits as follows: "It is important to pay attention to the fact that almost all of the mega-hit songs had some kind of tie-up with television networks. When music is planned by basing it on advanced marketing techniques, and marketing campaigns that center on television broadcasting are conducted, and these campaigns that are so focused on visual images are as successful as they have been, I cannot help but have my doubts as to whether the young people who are the targets of such marketing today could truly be called lovers of music."

Until recently, because this younger generation had a relatively large amount of money to use freely, the music industry unthinkingly believed that it was a safe bet to depend on this stratum of society. Moreover, those areas that were only moderate in their success and did not produce mega-hits could be cut out and thrown away. Thus there was major restructuring of, for example, the enka (Japanese-style ballads) side of the business. However, the explosive popularity of mobile telephones, and their rapid diversification meant that the average amount of money needed to cover telecommunications activities each month per person came to as much as 10,000 yen. As a result, the amount of money that young people could spend freely was considerably reduced, so the foundation for the creation of continuing mega-hits was completely destroyed. The domestic annual money spent on production of music software in Japan reached a peak of US$5 billion in 1998, but then went down three years in a row, and in 2001 was as low as $4.1 billion.

Personally, I believe that there has also been a decline in the quality of the music itself. To me both the melody lines and the power of the music's appeal seem much weaker. I can't help but think that the artificial way of bringing people up has made both the receivers of music (the listeners) and the creators and producers of music much poorer, in the same way that happens to cows which, though naturally herbivorous, are force-fed meat-based bone meal, with dire consequences.

According to a survey of trends in the entire music software industry conducted by the Ministry of Economy, Trade and Industry (METI), the scale of the music software industry market is as follows:

Year ----- Amount
1997 ----- $17.64 billion
1998 ----- $16.35 billion
1999 ----- $15.28 billion
2000 ----- $14.23 billion

The fact that every year the industry is dramatically shrinking is surely not only because of the effect of the economic slowdown. There must also be some causes inherent in the structure of the system. The negative effect of the poor sales of music CDs is not as big as all that. The reduction in the size of the karaoke market is a much more serious factor. According to data released by the Japan Karaoke Operators Association, the "karaoke population" (the number of people who participate in karaoke) reached a peak of 58.9 million in 1994, but since then has been steadily declining, to sink to 48 million in 2001.

It is true that this is indeed partly because young people who now have less spending money no longer go to karaoke boxes as often as they used to. However, I believe that this decrease is also the natural penalty to be paid by the music world for its inability to make songs that are suitable for adults for such a long period of time.

Middle-aged and Older People as a Potential Market

The stated purpose of the survey conducted annually by the Japan Record Association is "the analysis of market structure divided by age group and market trends." However, the age groups referred to are limited to only six: "junior high school students," "senior high school students," "university students," "people in their 20s," "people in their 30s," and "people aged 40 to 55." There is not even a survey category for anyone aged 56 or older. I wonder if the premise behind this idea is the belief that the middle-aged and the elderly do not listen to music. Yet in the year 2000 the population aged 56 or above numbered 36.97 million, or 29% of the total. It seems a real waste to ignore this potential market, and it also reveals the arrogance of those people in the music business who have been poisoned by mega-hits.

As background information, the main points reflected in the survey report by UFJ Comprehensive Research Institute, "Consumption by the Middle-Aged and the Elderly, Pushed up by Abundant Savings" can be summarized as follows:

* At the present point in time, 2001, the average actual amount of savings per household for the middle-aged and the elderly is 3.11 million yen more than the amount of savings necessary.

* Of all the consumption by the middle-aged and the elderly, those items which have a high growth rate include many products aimed at the young or at the middle-aged.

* For products related to leisure, if the supply side can produce goods that have been adapted to suit the needs of the middle-aged and the elderly, the market holds the potential to expand enormously.

Needless to say, the genres that the music industry can provide to the middle-aged and older generations are not limited to just "enka." Please think about it. This is the generation that grew up to the sound of The Beatles, spent its youth listening to group sounds and "new music," and grew familiar with music through the medium of LP records. Even now some of them probably still own a lot of LPs. However, nowadays it goes without saying that it's more convenient to listen to music through CDs. For example, I haven't lifted up the lid of my record player for quite a few years.

Since I have been listening to a wide variety of music since I was a junior high school student, there are often times now when I wish that something I used to listen to then had been released as a CD. Can it be only me who sees in the groups of the middle-aged and the older consumers, who are at last free of child-raising and have both money and time for leisure, a potentially enormous target for the music market? We should pay attention to the fact that that is not the world of the mega-hit. Originally the music industry was, industrially speaking, a typical case of the "many kinds, small amounts of each kind" type of production. The industry must come to realize that, instead of wanting simply to make easy money through million-seller hits, if they constantly make steady efforts to link the supply and demand of the market, the way forward will open up.

I am sure that it has come to some readers' minds that the appropriate medium for the sale of goods for which there is a large diversity of goods but a small amount of each, is of course, the Internet. If we compare the surveys conducted by Video Research Net Com in September, 2001 and September, 2002, we can clearly see an obvious increase in the use of the Internet by people who are middle-aged or elderly. Many men in their 40s and 50s get the opportunity for such Internet as part of their work, as a matter of course. For men in their 60s, the rate of use of the Internet at home increased between the two survey terms from 10.5% to 15.4%. For women in their 60s the rate is still low at 5.1%, but for women in their 50s it had risen to 21.7%.

Moreover, users of broadband technology, with its permanent access, had reached more than six million at the end of 2001, and this figure is growing by more than 30,000 people each month. By the end of 2002 it had probably reached as many as ten million. The time is ripe. The potential commercial possibilities are huge. When I look at the attitude of the music industry faced with this situation, however, although there is some part of it which adds golden oldie types of songs mixed in as extra items, the basic style is unchanged and still seeks to produce mega-hits. There does not appear to be evidence of any thought being put into developing business that truly makes the most of the abundant music that has been created over many decades.

Also, the system whereby you have to pay 200 yen or 300 yen per song to buy music which you can hear only on a personal computer or through a special MD player means that there is no understanding of the psychology of fans who want to take pleasure in relaxing while listening to their music. Since the music is not sold by providing it on the Internet at the same quality of sound as that on a CD, but rather it is compressed in some way or another, there should be more efforts made at flexibility. This is especially true for those old songs that have no chance of becoming a million-seller.

If the industry remains as it is and does not change, I have no choice but to say that it is suffering from a serious sickness.

(Special thanks to translation by PHP Institute Inc.
"JAPAN CLOSE-UP" April 2003)

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