AS CD Sales Fall, HMV Japan Starts Selling Clothes

[Mulboyne]

HMV Japan recently began to expand the books and magazine section in their flagship Shibuya store. Now they are turning over part of the third floor to apparel sales beginning with the introduction of the brand "Base Control". T-shirts have often appeared on sale in CD shops before but HMV plans to offer a range including underwear, socks and caps and bags. HMV's Japan operations were recently bought by DSM Investments, a unit of Daiwa Securities SMBC's private equity business. International CD retailers have already come under pressure elsewhere in the world - one of the factors which led HMV to sell up - and it seems those same forces are starting to appear in Japan. The HMV Shibuya store is in a prime retail location where rents are high so the new owners need to find ways to keep traffic and margins high as consumers seem increasingly reluctant to spend on CDs and DVDs.

[Mulboyne]

CD retailer Sumiya, citing declining sales and little prospect of a recovery, has decided to close its Shibuya store in Cross Tower. Sumiya began as a dealer in art and imported goods in 1896. They began handling records in 1948 and opened over 50 stores nationwide - the Shibuya branch has been in business for over 30 years. The company will continue to offer products through their web based service Soundtrack Finder.

[Mulboyne]

Tower Records in Shibuya has just started selling folding chairs, tables, wellington boots and the like in a section dedicated to "accessories for the summer festivals" which I would take as another sign that CDs aren't flying off the shelves.

[Kuang_Grade]

Hmmm...on paper, that sounds like a good merchandising/marketing move (unlike amazon or itunes, we at tower understand and care about your music lifestyle needs) but some of those are pretty large sized items to be lugging around on Shibuya shopping trip.

[Mulboyne]

An Asahi op-ed piece. It covers the same kind of ground that you see in the debate in the West.

Daisuke Tsuda: Don't mistake slump in CD sales for a recession

Recently, there have been frequent reports about how the music industry is facing an unprecedented recession. To an extent, this is true insofar as the production value of music CDs is concerned. Indeed, the CD production value, which has been traditionally positioned as an important indicator to gauge the size of the musical market, drastically dropped from its peak of 587.8 billion yen in 1998 to 327.1 billion yen in 2007. Since music came to be recognized as an established industry during the 1950s, the Japanese music business kept growing steadily, centering on the sale of records and CDs produced by record companies. Based on that assumption, we can say that the music industry is facing a serious crisis today.

But this is only a one-sided way of looking at the situation. A closer look at what is actually happening in the music business tells us that consumers' needs for music remain robust. The amount of copyright royalties is a case in point. In fiscal 1998, the Japanese Society for Rights of Authors, Composers and Publishers collected a total of 98.4 billion yen in copyright royalties. The amount hit a record high 115.6 billion yen in fiscal 2007. The trend is in striking contrast with the decline in CD sales. The rise is attributed to the expansion of music download services for cellphone users and the advancement of new media such as music DVDs, which together more than offset declining royalties from CD sales. In short, the situation shows the simple fact that although consumers' need for CDs declined, their need for music itself rose.

Meanwhile, live concerts, which are viewed as another important indicator of consumers' demand for music, along with CD sales, started to attract more people around 1998 when CD sales began to decline. The rise in attendance and live performances coincides with when CD sales began to show signs of slumping. According to a survey by the All Japan Concert Tour Promoter's Conference, attendance at live concerts, which stood at 14.3 million in 1998, jumped to 19.78 million in 2006. Before, all it took to study music industry trends was to focus on CD sales. But now, with the emergence of new media and the advancement of live performances, we need to view the music market more comprehensively to grasp what is really going on. This is because what consumers are looking for in music is changing. In other words, what the industry is now facing is a "CD recession," not a "music recession."

Since CD sales started to drop, the way I see it, record companies have been doing everything to turn off music fans. For example, despite the emergence of new types of portable digital audio players, such as the iPod, that allow users to carry a large amount of music data, record companies enforced the sale of copy-controlled CDs that ban users from copying the discs through personal computers and earned the disfavor of consumers. Illegal copying of CDs by personal computers is only part of the reason behind slumping sales of music CDs. Many music listeners who freely spend money on music think Japanese CD albums that sell for around 3,000 yen are too expensive. Unlike in the past, when there were few forms of entertainment, music is now only one of many recreations in everyday life. At a time when movie DVDs are available for 1,000 yen, record companies continue to play hardball by setting high prices for music CDs. Such a defiant attitude is at the root of the CD recession.

By focusing too much on illegal users, record companies antagonized honest users by lumping them together and treating them like thieves. It is not surprising that they lost the faith of many music fans and ended up facing difficulties. Many major European and American musicians are opting to use the Internet to act independently of record companies. What record companies need to do at this juncture is to realize that the music business has entered a transitional period. Thus, they should sincerely listen to music fans and re-examine their raison d'etre. Whatever they do, they must not require iPod users to pay compensation money for allowing them to listen to music.