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Business News (more headlines) 08-03-2008

The Japanese Mobile Music Difference

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Many mobile carriers and music labels are taking a closer look at Japan to find situations in which better marketing is leading to better mobile music outcomes.

In August 2007, the Japanese band GReeeeN became the first music group in the world to sell over 1 million full-track downloads of a song over mobile. Their single "Aiuta" ("Love Song" in Japanese) was released in May 2007 as a full-track download for mobile, eschewing a CD or even online digital first release. Using nontraditional marketing through the Internet, social networks and word-of-mouth, "Aiuta" sold more than 3 million ringtones, ringback tones and ring videos in addition to its platinum-selling full-track release.

GReeeeN is not an anomaly in Japan. In 2007, Utada Hikaru's song "Flavor of Life" sold 7.2 million digital units—mainly master ringtones, ringback tones and full-track downloads—while her CD only sold around 660,000 physical units.

EMI Group initially marketed "Flavor of Life" as a mastertone to tie in with the launch of a TV drama. "Flavor of Life" also hit numerous social media channels through the release of a blog tag, which enabled users to post the video into their personal blog pages. In one 30-day period, the video played over 600,000 times.

Music acts such as GReeeeN and Utada Hikaru have embraced the mobile phone as their leading distribution and monetization channel. According to the Recording Industry Association of Japan (RIAJ), mobile music accounted for 92% of all digital music sales of ¥75.5 billion ($641 million) in 2007. Particularly noticeable was massive growth in full-track downloads, which accounted for 46% of overall digital music revenues, according to the RIAJ. Within the mobile music category itself, revenues from full-track downloads overtook revenues from ringtones in 2007.

Digital Music Sales in Japan, by Format, Q1-Q4 2007 (millions of ¥)

The RIAJ reported that full-track mobile music downloads in Japan grew by 48% in Q1 2008 compared with Q1 2007. The revenues from those downloads increased by 58%. In contrast, ringtone volume dropped 16%, with revenues declining by 13%. However, ringback tones continued to gain in popularity, with volume growing 18% and revenues increasing by 47%.

Smart innovations play an important role in Japan as well.

Japanese consumers typically purchase mobile music via direct debit to their monthly phone bill. Aside from ease-of-use, tethering music consumption to the monthly bill is necessary in a country with historically low credit card use. (Credit cards account for 8% of consumer purchases in Japan compared with 25% in the US.)

"Conditions across the world differ widely, but the ease with which Japanese kids can legitimately get music on their phones, which also offer them other services they want, is a good pointer to the future for other countries, " said Max Hole, president of Universal Music Group Asia-Pacific, in a December 2007 issue of Billboard Magazine.

Japan's record labels have simplified mobile music distribution through Label Mobile, a jointly owned company. Launched in 2001, Label Mobile is the leading provider of mobile music content to Japan's mobile operators.

This one-two punch of simplicity at both the consumer and industry levels is as much a part of Japan's mobile music story as its 3G networks and dazzling phones.


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