Japan finally forced to give up CDs as pandemic causes slump in sales and shift to streaming

Tower Records remains a popular brand in Japan

Credit: Ritsuko Ando/Reuters

Japanese music enthusiasts, loyal to CDs long after the rest of the world went online, have begun reaching for the eject button and switching to streaming services as artists cancel in-store events and fans stay home because of the pandemic.

Despite a slow decline in sales in the past decade, CDs are still the most popular music format in Japan, accounting for around 70 per cent of recorded music sales last year. In the US and European markets, CDs have long been relegated to the history bin in favour of online downloads and streaming.

Streaming services, which had accounted for less than 10 per cent of sales in Japan until a few years ago, grew to 15 per cent in 2019  and will likely exceed 20 per cent this year, said Jamie MacEwan, who covers the Japanese media business for Enders Analysis.

The shift is closely watched by the global music industry because Japan is the world’s second-biggest music market after the United States, worth more than £2 billion annually.

"The crossover point where total digital revenues eclipse physical production is now just a matter of time," MacEwan said.

Beyond hurting CD retailers like Tower Records, still a big presence in Japan, the shift may also signal more growth for streaming services such as Amazon and Spotify, which only entered Japan four years ago, as well as smaller domestic rivals.

Streaming is only just taking off in Japan

Credit: Jenny Kane/AP

Tower Records Japan, which runs over 80 stores in the country, would not release data but said it has suffered a serious slump since the pandemic as consumers avoided going out and artists cancelled new releases along with events to promote them.

"It will take a long time for things to return to normal," said Tatsuro Yagawa, a spokesman for the stores which became independent from the now-bankrupt US chain after a 2002 management buyout. Still, he was optimistic about a return.

"Music fans here like buying CDs to show support for their favourite artists. I don’t think people will stop buying CDs."

One major reason CDs have remained so popular in Japan has been that record labels often bundle CD singles and albums with perks for pop idol fans, including vouchers for priority concert ticket purchases and invitations to handshake events.

Such events and concerts have mostly been cancelled or scaled-down in recent months because of the pandemic, with some moving online.

Avex, Japan’s biggest listed music label and entertainment group, held its annual music festival online in August for the first time.

Featuring acts including veteran singer Ayumi Hamasaki and K-pop group Red Velvet, the event attracted 1.6 million views including free and pay-per-view spots — a rare bit of cheer for a business by plunging sales.

But Avex CEO Katsumi Kuroiwa, talking to investors on Friday after the company reported losses for its fiscal first-half, described the financial results of its foray into large-scale online events as mixed.