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Japan's packaged music industry got a welcome shot of adrenaline in September. Amid iTunes hype, strong mobile-based download sales, and a perplexing insistence on maintaining the saihan system, which sets retail prices for packaged music that are noncompetitive with increasingly popular digital music options, the Recording Industry of Japan reported September production value at 41.7 billion yen ($369 million). This represents 30% year over year growth for September, and pulls year to date 2005 sales to within 3% of 2004.
As of March this year, the industry was down a whopping 26% to date year over year, recovering to pull within 7% by August, then closing the gap further to the recently reported 3%. A blockbuster release in early October from perennial favorites Southern All Stars, as well as ongoing strong sales of Kumi Koda's late September release should help power impressive numbers for October as well.
If the recent trend continues through Q4, there's a chance that 2005 industry sales will surpass those of 2004. So why is this news?
Well, comparing recent industry performance to that of a decade ago, the picture has not been particularly rosy. In 1995, sales for the year were 574 billion yen ($5.1 billion), bubbling up to an all-time high of 607 billion yen ($5.4 billion) in 1998. Since that year, the industry has been in steady decline, hitting a nose-skinning 16 year low of 377 billion yen ($3.3 billion) in 2004. Do the math (mathematically challenged readers can just check out the below graph) and you'll see that this is 38% off the 1998 high, so even if the industry can pull out of its screaming six year nosedive, it's doubtful it will approach its former peak again.
Optimists might say, however, that 2005 is shaping up to be a turningpoint. The buzz around iTunes and mobile-centric music delivery systems seems to have put music back into the spotlight in trend-crazy Japan, and online retailers, led by powerhouse Amazon.co.jp, are making it all the more convenient and fun for people to purchase packaged music, offering rich content, quick fulfillment, and a giant selection that can't be matched by traditional offline retailers, with attractive discounts on non-saihan products to boot.
What will happen during the rest of this year and into 2006 is anybody's guess, but the labels can certainly do their part to keep the momentum going. First on my Christmas wishlist would getting rid of the saihan system. Now that iTunes is selling tracks for 150 yen apiece, a system forcing retailers to sell CDs at upwards of 3,000 yen (around 300 yen per track) seems counter-intuitive at best, self-destructive at worst. Allowing retailers to more closely align packaged music prices with those of digital music might just be the ticket for significant industry growth next year, which ought to make everybody happy.
* Industry production value data: Recording Industry of Japan
** All dollar amounts are calculated using exchange rates as of 9/30/2005.
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