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One element that sets the Japanese music industry apart from those of other countries is the ubiquitous presence of record and CD rental shops. Much like the DVD and video rental shops that have long existed in most countries, with the difference being the product available for rent, these shops offer a wide selection of rental music at a fraction of what it would cost to buy - especially when one takes into consideration the hefty price tag on music in Japan.
The first record rental shop appeared in Mitaka (an area in Tokyo) in 1980 - a venture business started by a student at Tokyo's Rikkyo University. The shop was a hit, and the concept soon caught on nationwide, spurring the rapid establishment of thousands of similar shops across the country in both large cities and suburban areas.
Initially, the rental shops were deemed public enemy number one by the industry, which believed their activities would negatively impact sales (which, by the way, did not peak until 1989).
Thirteen record labels, backed by the Recording Industry Association of Japan, filed suit in October 1981 against the stores, on the grounds that the rental shops' business was an infringement of Japan's Copyright Law.
The suit dragged on until the law was modified to address music rental rights, part of which included a newly established rental prohibition period (three weeks for domestic repertoire and one year for foreign repertoire) and a charge for the license to rent music to consumers.
Despite the new limitations installed by the industry, the number of CD and record rental shops continued to spike upwards throughout the decade, peaking in 1989 at 6,000 - massive penetration in a country roughly with roughly the same geographical area as California. While originally seen as a bête noire, in retrospect many labels and vendors now feel that CD rental shops actually helped to expand the size of the market rather than hurting it as intially feared, and that these shops provide an easy and inexpensive way for consumers to test out a wide variety of music, leading to increased sales. The fact that both packaged music sales and the CD and record rental industry peaked in the same year certainaly backs this up.
For various possible reasons, however, the number of rental shops began to decrease significantly shortly after the peak, with just over 3,300 reported in 2004. As the trend began to fade, many of the shops (several of which had become giant chains by this time) diversified to include retail sales of new and used CDs, video and DVD rental and sales, and other media products, creating a type of hybrid shop that addressed multiple entertainment needs of Japanese consumers. The strongest player to emerge from this shift was Tsutaya (Culture Convenience Club), which presently operates over 1,100 rental locations, along with over 2,000 music retail stores, book retail stores, video game retail stores, and recycle shops.
While considerably off the 1989 high, rental shops still play a major role in the way that music is accessed by Japanese consumers, and are one of the most interesting factors to consider when discussing the impact that music downloads will have on the sales of packaged music as this new channel becomes more user-friendly. While the resale price maintenance system (saihan seido) does not apply to digital music, digital is still priced considerably above what it costs to rent a CD - between 200 to 300 yen - and this alone is one reason to wonder how big of an impact digital music can really make in the short-run.
Rentals are dead. Long live rentals.
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