Not to be outdone by the high profile launch of Apple's iTunes music download service in Japan, Tower Records Japan and Napster have announced that they will launch their own offering in the escalating digital music wars.

Napster and Tower Records Japan have announced a joint venture to launch Napster Japan within the next 12 months. The new venture will be based in Tower's headquarters in Tokyo, and will operate under a dedicated board of directors chaired by Tower CEO Hiroyuki Fushitani.

Initially, the pairing appears to be a good one. Tower is one of Japan's strongest music brands, with 108 retail stores and $700 million in annual revenue, and while Napster hit the digital music party a little late (at least this time...), it has developed into one of the segment's strongest brands. And the Japanese music industry, while shrinking, is still the second largest in the world - not something to be ignored.

Under the terms of the joint venture, Tower will pony up around $7 million in cash, with potentially more funding moving forward, for a 70% majority equity stake in Napster Japan. Tower will also provide most of the management team, local music content, and marketing for the new service through its retail stores, music magazines, websites, and other promotional vehicles. Napster will chip in up to $3 million in cash, its brand, technology platform, music library and ongoing technology, operational and marketing support, receiving a 30% minority equity sake in Napster Japan and guaranteed royalty income.

Japan will be Napster's fifth market, after the United States, United Kingdom, Canada, and Germany, and will be the first time the company has approached a new market through a joint venture.

As in other countries, Napster Japan will operate as a subscription model, which sets it apart from iTunes, Mora, and the others. Tower executives touted the subscription model, saying that it is the future of digital music in Japan, but the road will not be easy. While Japan already Does have a thriving music rental business, dominated by the massive Culture Convenience Club (Tsutaya), subscription services are at present nonexistent, and labels may balk. JASRAC (Japanese Society for Rights of Authors, Composers, and Publishers) may also have something to say about the model.

Meanwhile, iTunes has been shutting up the naysayers who claim that Japanese aren't interested in PC based music download services. Selling over 1 million songs in its first 4 days online, iTunes has immediately established itself as the digital leader. One million songs, by the way, is over Double the monthly average of all the other PC based music download services in Japan. Apple's iPod presently has a market segment share of around 36% in Japan (compared to over 75% in other countries), and growth has been slowed by Sony's well-designed network Walkman. However, the iTunes launch and blanket media that Apple is presently getting may reinvigorate iPod sales, which could in turn keep demand high for iTunes.

With so many formats and services available, the resale price maintenance system (saihan seido) is seeming all the more archaic. This writer thinks it's about time to abolish the outdated law and really shake things up.

Anybody listening out there?

Email:

Password:

If you are not a registered user, click here to register

Napster and Tower Announce Joint Venture

Please use a semicolon (;) to separate tags

Email:

Password:

If you are not a registered user, click here to register