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Confirming rumors that ran rampant over the weekend, Tower Records Japan Inc. and NTT DoCoMo, Inc. announced today that they will form a business alliance through a capital tie-up.
DoCoMo will purchase a significant stake in Tower Records Japan, making it the music retailer's largest shareholder. The deal is expected to be completed this month.
Japan's largest mobile carrier will purchase approximately 42% of Tower Records' outstanding shares, including part of the 32% stake held by Nikko Principal Investments Japan Ltd, which is currently the largest shareholder. DoCoMo's share comes at a price of 12.8 billion yen ($108.2 million).
The capital tie-up will enable TRJ and DoCoMo to leverage mutually beneficial strengths. TRJ, aiming "To Be The Best Place to Find Music," operates an extensive network of more than 100 outlets in Japan (including retail locations for Wave, which Tower purchased in 2004) and has developed a tremendously strong brand, particularly among young people and music lovers.
DoCoMo boasts about 50 million customers and extensive know-how in operating i-mode mobile Internet and "Osaifu-Keitai" mobile wallet services, which enable cashless transactions and the transfer of discount vouchers, among other services, using a noncontact smart card embedded in DoCoMo's new mobile phones. The combination of these strengths and resources will foster new value-added services and increase convenience for both company's customers.
The companies will also explore using NTT DoCoMo's new "ToruCa" information capture service, with the goal of providing information on music and artists from Tower Records stores to compatible cell phones.
Mobile phone-centric payment is not a new concept for DoCoMo, which has already installed readers at video rental shops, restaurants, and convenience stores around the country. Approximately 6.5 million DoCoMo users have already taken advantage of DoCoMo's payment functions to date.
The Nihon Keizai Shimbun, Japan's largest business daily, also reported today that Tower Records - which is rumored to have plans for going public in the near future -made the choice to join hands with DoCoMo with the intention of gaining a stable shareholder. DoCoMo says it intends to maintain an equity interest of at least 33.4%, which will give it decisive voting power even after Tower goes public.
In mid-October Tower Records formed a joint-venture with Napster to pursue the music download market in Japan. According to company executives, the Napster service won't be affected by the NTT DoCoMo deal and is scheduled to begin in the first half of next year.
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