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Report-On-Japan.Pdf Contents 1. Executive Summary p. 4 2. An Introduction to the Music Market p. 6 3. The Entertainment Environment p. 7 (I)TV p. 8 (II) Radio p. 9 (III) Mobile p. 10 (IV) Online p. 12 (V) Print p. 13 (VI) Record Labels p. 14 (VII) Music Publishing p. 15 (VIII) Local Talent p. 16 (IX) Clubs and Dance p. 17 (X) Live Performance p. 18 4. The Digital Landscape p. 21 Mobile Music p. 22 Internet Music Downloads p. 24 Digital Music Services p. 26 5. Market Entry Recommendations p. 26 6. Appendices p. 28 Top 10 Selling Domestic Albums in 2011 p. 28 Top 10 Selling International Albums in 2011 p. 28 Market Statistics p. 28 Music-related Trade Bodies and Associations p. 29 2 CONFIDENTIALITY NOTICE & DISCLAIMER This document was prepared for internal use by Canadian Government and CAAMA members plus Canadian Music Week attendees only and is not for forwarding or distribution to any third party. It may not be posted on any website. All details referenced are the latest available to us at the time of writing, and all information utilized is believed to be accurate and reliable at the time of submission. However, Swat Enterprises Pte. Ltd. accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions 3 1. Executive Summary Japan, an archipelago of 6,852 islands with 47 prefectures, has the world’s tenth largest population with over 127 million people. Its area of 377,873 km2 is close to that of Germany and Switzerland. The greater Tokyo area is the largest metropolis in the world with a population of around 36 million, more than the entire population of Canada. The city of Tokyo alone has 13.6 million people and the highest population density at 6,017 persons per km2, almost 18 times more than the national average. Prefectures of Kanagawa (capital: Yokohama), Osaka, Aichi (capital: Nagoya) and Saitama each have a population of more than 7 million. Per the last census conducted by the Statistics Bureau of Japan in 2010 there are 50.93 million households in Japan and 57% of which are a nuclear-family (two or more persons) households. The country is the world’s second largest music market valued at US$4.09 billion, just US$280 million less than the US. In recent years Japan has fallen a notch to become the third largest economy after being surpassed by China. Per the World Bank its GDP per capita in 2011 is US$45,903 ahead of Germany, France and the U.K. Latest Indicators Population (m), 2011 127.8 Internet Users (m), 2011 101.23 Internet Households (m), 2011 33.8 Broadband Subscriptions (m), Q1 2012 35.6 Mobile Subscriptions (m), Q1 2012 128.2 Recorded Music, Total Revenue (US$m), 2011 4,087.7 (7%) Recorded Music, Physical Revenue (US$m), 2011 3,050.8 (4%) Recorded Music, Digital Revenue (US$m), 2011 902.4 (16%) Royalty Revenue (US$m), 2011/12 1, 341.7 4 In a significant development for the music industry, overall sales generated from which were down 7% in calendar 2011, the Japanese government on June 20th 2012 revised its copyright law to include harsher penalties for illegal downloading offences. With effect from October 2012, if found guilty, one could face a fine of up to 2 million yen (US$25,000) or a jail term of up to two years. This also applies to those in possession of pirated material (e.g. DVD, Blu-ray disc). Unauthorized uploading of copyright content is punishable by up to 10 million yen (US$126,000) in fines or 10 years in prison. This amendment is much welcomed by the country’s music industry, as the Recording Industry Association of Japan (RIAJ) estimated that the number of illegal music downloads in 2010 were 10 times more than the legal ones in 2010. This statistic alone has significantly impacted the 16% year on year downturn in digital revenues (see page 7). In conjunction with these harsher penalties, the association has also proposed the implementation of an automated mechanism for internet service providers to track user traffic for suspicious activity and block illegal uploads. The earthquake and accompanying tsunami in 2011 undoubtedly tested Japan and its people’s ability to deal and recover from devastation. As the country grapples with the costs of reconstruction the silver lining came in the form of US$230 billion in funds mutually agreed by the government and the opposition. Such public investment has helped lift the economy, and for January – March this year it grew at an annual rate of 4.1%. The country’s tourism industry is expected to bounce back, and according to the World Travel & Tourism Council, will contribute US$129 billion in 2012. Business travelers were the first to return, with inbound arrivals during the second half of 2011 approaching 2010 levels. The Japan National Tourism Organization echoed the same positive sentiment and aims to top the 2010 record of 18.6 million tourist arrivals in this year. Japan may be struggling from the 2011 disaster and global economic downturn but as a result of the incremental growth in various sectors such as exports and domestic consumption, together with the resilient nature of the Japanese people, the country is expected to recover sooner than later. More importantly, for the music industry’s second largest world market, the recently introduced harsh penalties on copyright abuse are anticipated to slow (better yet, halt) the decline of mobile music revenues, where piracy is rampant as a result of users swapping songs via message boards (instead of PC file sharing which is common in the rest of the world). The 24% increase in online sales illustrates a growing trend in purchasing habits which can only benefit new and catalogue sales of international music in the future. The IMF estimates that the country’s GDP will grow 2.9% in 2012. 5 2. An Introduction to the Music Market In comparison with the rest of Asia, Japan has an advanced music culture and a well established industry infrastructure which has been a signatory to most international copyright treaties for more than 100 years. The RIAJ and Japanese Society for Rights of Authors, Composers and Publishers (JASRAC) are recognized internationally and have affiliations and reciprocal agreements with major societies worldwide. Music fans from this market are among the most knowledgeable and dedicated in the world. They are exposed to western culture and influences through trade, tourism, media and the Internet, and the levels of their dedication and cultural sophistication are strong. Japanese fans have diverse music tastes (Bluegrass, Emo, House, Metal, Gospel, Latin and etc) and the perceived ‘niche’ groups can be large. Canadian Christian Rock/Hip Hop artist Manafest has sold 30,000 records in Japan. Music fans in the 30 to 40 age group do not tend to follow trends or charts and their open minded demands can potentially be targeted and met by Canadian artists and repertoire. Catalogue demand also runs deep, for example, Roxy Music’s Phil Manzanera has his entire range of solo albums available via one company. International friendly indie labels in Japan are equipped and experienced in liaising with the West, providing marketing, promotion, distribution and localization (e.g. translation) of physical products and digital content. Some also have publishing arms to administer/manage publishing copyright. 6 Despite the country’s shrinking economy, Japan remains one of the top music markets in the world and is the global leader in terms of physical sales. It represents close to 25% of the global trade value of US$16.6 billion and almost all genres of music will find fans here. According to the IFPI Japan ranks number 3 for both performance rights and synchronization revenues in 2011, collecting US$102 million and US$32.4 million respectively. With the contracting global music market being “Big in Japan” is no longer a cynical jab, but a very sustainable and essential objective. Non-Japanese repertoire has a market share of about 18% and valued at US$497.2 million, more than the total recorded revenues of Canada (US$434 million) and Australia (US$475 million), it makes this market hugely attractive to international labels and artists. Visiting the market and making in-person connections, while a time consuming exercise that usually requires sponsorship, is paramount to ensure success. Many countries (e.g. Finland and the UK) have sponsored and organized multiple trade missions to Japan for this purpose. Physical formats accounted for 75% of total recorded music sales in Japan during 2011. This figure includes revenue from the sale of Music Videos, which did very well due to the dramatic 294% increase in the Blu-ray Disc shipments. In 2006 Japan became the first market where digital music sales fully compensated for the sales decline in physical formats. Despite the fact that since 2010 its digital music market has contracted, it is still ranked number two in the world. Revenue from mobile represents the larger portion (83%) of the total digital music income but is also on the decline. Internet downloads on the other hand, have recorded a healthy 24% increase in 2011 and this figure is likely to increase following the recent copyright ruling. Source: IFPI, World Bank, JASRAC, Informa Telecoms & Media 3. The Entertainment Environment According to PricewaterhouseCoopers (PwC), Japan is the world’s second largest entertainment and media market (just behind the US) with E&M spending at US$193 billion, accounting for 42% of total spending in Asia Pacific.
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