Feature - Back Numbers

Saihan Seido - Japan's Resale Price Maintenance System (2005.02.05)

For both domestic and overseas fans of Japanese music, the comparatively high price of Japanese CDs can be a real turn-off.

According to the Recording Industry Association of Japan (RIAJ), which represents Japan's major record companies, the average retail price for a new CD release in Japan is between 2,500 and 3,000 (between $24 and $29 as of February 2005) - more than 20% higher than in the United States and at least Double the price of music in most other Asian countries.

A key reason for Japan's high CD prices is its resale price maintenance system - known as the saihanbai kakaku iji seido, or saihan seido for short. The saihan system applies to six categories of copyrighted material: CDs, records, cassettes, books, magazines, and newspapers. The system, established in 1953, allows owners of copyrighted material to set the minimum retail price of newly released or re-released products, thus eliminating any possiblilty of discounting.

The stated logic behind the implementation and preservation of this unique system is that it reduces price competition between retail outlets, enhancing stability and competitiveness. Additionally, the recording industry defends the saihan system by saying that it ensures that a wider variety of recordings will be released. In that connection, it is interesting to note that the number of individual titles released by the RIAJ's member companies fell from 20,930 in 1994 to 14,678 in 2003. Of the 2003 total, 10,900 titles were new recordings, up 2% from 2002, but down 13% from 1999 .

The future of the saihan system has been a hot topic since 1995, when the Japanese government's Administrative Reform Committee's Subcommittee on Deregulation released a report recommending its abolition within five years. Copyright owners countered by claiming that the products protected by the system didn't fall into the category of "commercial product" and thus are not subject to the same rules as other commercial products.

In 1996, the subcommittee further determined that the system contravenes the Antimonopoly Law, and that in order to make a special exception for the system, a "just and special" reason would be necessary. The subcommittee stated that it would consider the issue until 1998, at which time it would make a final ruling. The 1998 ruling allowed for the continuation of the system.

The government's Fair Trade Commission (FTC) also undertook a review of the saihan system, publishing a document in 1998 recommending its abolition. In March 2001, the FTC announced that for the time being it would retain the saihan system, thus ending the discussion about the controversial system. Explaining its decision, the FTC said a "national consensus" on the abolition of saihan had yet to be reached, citing what it claimed was widespread public support for resale price maintenance.

As of today, the system remains in place, but some inevitable cracks are beginning to form.

Record companies are choosing to shorten the length of time before some new releases or re-releases can be discounted, thus reducing prices for consumers who don't mind waiting a while before they buy.

Additionally, the adoption of point cards or loyalty programs has been widely adopted by Japanese retailers, who use them to effectively circumvent the system by indirect discounting of product.

The recent mass availability of used CDs also appears to be putting a strain on the system, with online channels like Amazon's Japan site and Yahoo Japan's auction service providing high availability and shifting hundreds of thousands of used CDs at prices usually considerably lower than new CD prices.

The concept of downloadable music is also seeping deeper into the Japanese music buyer's conscience, with Microsoft and others offering traditional Web-based downloads, and NTT DoCoMo coming out with a convenient service that allows on-the-move downloads to dedicated wireless music players. Per-song downloads are still more expensive in Japan compared to the United States - roughly Double - but in Japan it's nonethless cheaper to download music than it is to buy it in the form of a physical CD.

A related issue is the "re-importation" of Japanese repertoire licensed to record companies in Asia, where prices are lower than in Japan. In order to address this issue, an amendment to the copyright law giving Japanese labels the right to ban imports of Japanese repertoire licensed to overseas record companies went into effect on Jan. 1. Many retailers fear that the combination of the saihan system and the right to control imports gives Japanese labels too much power.

Sales of recorded music in Japan are down about 20% from their all-time high of 608 billion ($5.8 billion) in 1998. Reasons for the market's decline include the spread of file-sharing networks, the Japanese economy's prolonged recession, the allegedly lower quality of music releases and the recent widespread availability of used CDs - not to mention the obvious fact that most young people are spending a lot if not most of their disposable income on computer games and mobile phones.

A sudden alignment with global CD prices could, admittedly, hurt a lot of retailers in the country, but even a slight adjustment could help to re-spark CD consumption, and it wouldn't take the abolition of the saihan system to do it.

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Originally submitted by: bill | See Edit History | Edit Article