Your browser does not support the element
WPrince hen sang “Tonight I’m Gonna Party Like It’s 1999” on his 1982 hit “1999,” he described a party during a turn-of-the-millennium apocalypse. He could have sung about the music industry. In 1999, according to the International Federation of the Phonographic Industry (IFPI), global recorded music revenues soared to $22 billion ($40 billion in 2023 prices). These revenues came largely from compact discs (CD). Over the next 15 years, these revenues will decline as consumers shift to streaming. THE IFPI recently reported that streaming accounts for 67% of revenue. CDThis only represents 10%.
But in Japan, it seems like time has stood still. In 2023, 39% of recorded revenues came from CDs there, making Japan the second largest music market in the world (see chart). At first glance, this could be due to demographics. Nearly 30% of the Japanese population is 65 or older. But older listeners have turned to streaming elsewhere: even though 24% of Italian citizens are 65 or older, 65% of recorded music revenue comes from streaming.
Instead, two factors explain the Japanese market for CDs. The first concerns price controls. In 1953, the Japanese government, concerned about the devaluation of its products, created Saihan Seido, or its “retail price maintenance system”. This system gave copyright owners the ability to set prices for certain categories of intellectual property, including physical products such as CDs. Because retailers and resellers could not compete on prices, prices were inflated and consumers had few alternatives. Music companies are able to exploit this monopolistic power to maintain the status quo. Japanese talent agencies have also blocked their artists from being present on streaming platforms.
The second factor is that, in the decades following the creation of Saihan Seido, these talent agencies began marketing artists as “idols.” This idol status is partly maintained through events, which fans can usually only claim if they purchase a CD. Some people buy several to increase their chances of meeting a pop star. The Tokyo branch of Tower Records, a record store, has several floors dedicated to idols. This type of fan culture has kept the CD also living in South Korea. 33% of recorded music revenue came from CDI was there last year.
Despite this, however, the CD seems to be losing its grip on Japanese music fans. In 2019 CDAds accounted for 49% of recorded music revenue in the island nation, while streaming accounted for just 18%. Last year, streaming’s share jumped to 36%. It seems that soon Japanese listening habits will mirror those of the rest of the rich world. ■
