By Eric de Fontenay, MusicDish e-Journal
MusicDish e-Journal - Music Matters - A Window Into The Asian Music Market

I've been a regular to several of the major worldwide music conferences over the years, from MIDEM (Cannes) and Popkomm (Berlin) to Canadian Music Week (Toronto). These have not only been a great opportunity to meet and do business with companies in major Western markets, but to also gain a true perspective on the challenges and opportunities specific to those markets. So, it was with quite some excitement that I made my way to Hong Kong for my first trip to Asia, and the 4th edition of Music Matters at the Grand Hyatt from June 2-4 ( Music Matters ).

From the start, it was clear that Music Matters has a distinctly different feel from most other conferences, more of what I'd call a 'family affair'. Unlike other conferences that offer a plethora of simultaneous, often lightly attended, Music Matters sets a unified program followed by all delegates. The message is clear: If you want to understand the Asian market, here is the information you will need. And whereas the other conferences make participants available to facilitate scheduling meetings in advance, Music Matters takes a completely opposite approach. "We want a free-flowing networking event where everyone has access to everyone else in a open format," explained Commercial Director Stan Ruza.

While I was initially skeptical that this would work, it ended up being a nice and productive change, especially for someone looking to build up a broad base of contacts in Asia. I left with as many contacts as I do from other conferences, even though it was much smaller -- composed mostly of decision makers from all the major Asian markets: from Tokyo to Mumbai, Sidney to Kuala Lumpur.

Japanese Nirvana

While I learned a lot about the Asian market in those 2 days, the most surprising "revelation" was actually a question: when will the Japanese music market surpass the US for the #1 position? More shocking were the estimates ranging from only 5-10 years.

So what exactly is happening to justify this doomsday scenario (at least from the US perspective)? Simple: the Japanese love music, and are still more than willing to pay for it, whether old or young. Kei Ishizaka, CEO & Chairman of Universal Music LLC Japan and RIAJ (Recording Industry Association of Japan) Chairman presented some facts in his opening keynote "New Strategies & Opportunities in Japan" that might make some in the West red with envy:

* Digital sales in Japan have increased from 7.5% in 2005 to 20% in 2008
* Mobile is the driver, accounting for 89% digital sales in 2008
* Note that this is a slight drop from 94% in 2005, credited to iTunes Japan which, accounts for 50% of online sales
* Japan is the only music market where digital sales have made up for losses in physical sales - that is until 2008, when physical losses appear to be outpacing the growth of digital sales
* Japanese music consumers appear relatively price inelastic, with a willingness to pay the highest prices of any country for music: up to $4/ringtone and $30+/CD album
* The Japanese music industry is still a hit-driven one

Perhaps most importantly, the Japanese music industry has not abandoned its most profitable customers: those over 40. The dirty little secret in the US is that according to Soundscan, CD sales have fallen faster amongst those over 40, largely out of neglect by labels focused on the youth market. The Japanese music companies on the other hand, have consciously developed products for the over 40 demographic, which (i) do not download music and (ii) are willing to pay big bucks ($30+) for a high-quality CD (ie music, packaging...).

This is not to say that Japan is a complete musical nirvana: more music was acquired via illegal means (407 million tracks) than legal (329 million tracks) on mobile platforms. In 2006, the RIAJ sent over 220,000 takedown notices, and have since filed criminal charges against mobile BBS (Bulletin Board System) site operators. But despite these challenges, the Japanese market has been growing non- stop, with the exception of 2008 when it recorded a measly 3% drop in sales, which is not generally viewed as a trend for the coming years.

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