Japan may be an early adopter of new technology, but the situation is completely opposite when it comes to music. While CD sales have been heading south elsewhere in the world, in Japan the physical media still reigns supreme, accounting for as much as 85 percent of music sales.
Music retailer Tower Records, which filed for bankruptcy and went out of business in the US in 2006, still exists in Japan, with around 85 stores, all bringing in a combined $500 million in sales a year. In fact, digital music sales have been going down in the Land of Rising Sun; while the figure stood at $1 billion five years ago, it came down to $400 million last year.
So, why is this happening? One of the main reasons is the "protectionist business climate" within the Japanese music industry, which still sees the digital business with suspicion.
It's difficult to make licensing deals in Japan, which is the world’s second-largest music market. Take for example Spotify, the biggest of the music-streaming companies, with over 10 million customers in 57 markets worldwide, has no presence in Japan yet. In fact, Sony's Music Unlimited, which is the country's top online service, lacks many of the top hits.
Another driving reason is that people in Japan love to collect things. To give you an idea of their love for collectible goods, when stores or artists run promotions that include event tickets or special artwork, the Japanese do not hesitate to buy more than one copy of the same album, helping spur sales.
Despite its robust CD market, Japan's overall music sales have been receding for a decade now, witnessing a drop of 17 percent as recent as last year. Although CDs still account for 41% of recorded music sales worldwide, analysts believe that decline in CD sales is inevitable, and worry that if big markets like Japan and Germany (another country that relies on CD sales), do not embrace online music, it will further damage the music industry.
“If Japan sneezes and Germany catches a cold, that’s it — we’re done,” said Alice Enders, a media analyst with Enders Analysis in London.