Why has Japan's CD market suddenly gone into decline?

After years of defying Western trends, the drop is causing a big dent in global music sales

With tales of the music industry's demise being relayed for a while now, it should come as little surprise that a 3.9 per cent slump in 2013 global music sales was announced last week.

What is perhaps more interesting was the reason behind the decline in sales: industry commenters have pointed the finger at Japan. The country, which has the second largest music market in the world after the US, suffered a 16.7 per cent decrease in revenue.

But why the sudden slide? Robert Poole, of Something Drastic, a Tokyo-based music promotion and events company, says that Japan is seen as unique in the developed world for its reliance on CDs and the lack of user-friendly music download services on smartphones.

"The rest of the world has seen a huge decline in music sales in the last decade, due to the very rocky transition to digital downloads. With physical sales of CDs having fallen off a cliff and rampant piracy, Japan has long been responsible for propping up world sales. International markets are naturally increasing, as they find ways to recover from years of decline and better enforce legal music downloading and streaming. Meanwhile, Japan's music market bubble is only now deflating to levels that might be expected."

CDs in Japan are sold on a fixed-price system (each one about £18), and Poole points to the popularity of Japanese idol pop groups such as AKB48 and HKT48, who encourage fans to buy multiple copies of the same single, for artificially bloating Japan's sales figures over the previous few years. "Each purchase allows the fan to vote in elections that allow them to nominate which members of the group get promoted to the front of the group or sing the next song," he says. "These groups regularly sell over one million units per single. Compared to the UK, where only a few thousand sales can top the charts… Japan is an exceptional market."

It might seem curious that a country famed for its love of the latest technology is still buying CDs. But Poole suggests this might have more to do with the Japanese being less likely to be involved with music piracy. "It's a feature of a unique society in which stealing is considered immoral even on this level. As the CD market remained strong, the major labels were under less pressure than other nations to develop a digital sales system."

While the first digital services in the West were illegal ones such as Napster, the major labels in Japan created their own system, called Rekochoku. However, this was created before smartphones, so users can download a song but are unable to transfer it when they buy a new phone. "Since then, numerous systems for streaming and downloading have been launched and developed, but none have taken a firm hold on the market," observes Poole. "And none, including iTunes, have a big enough catalogue from all labels to be considered the go-to option." There appears to be a gap in the market and it's affecting sales.

Along with South Korea, Japan is the only country in 2013 to have a top 10 album rundown comprising entirely local artists. A few Western acts, such as One Direction and Taylor Swift, sell well, but really, the industry is more or less self-contained.

"Japan is often dubbed the Galapagos Island for technology and entertainment, due to its inward, domestic-centric industry," notes Poole. "Local music is not developed for overseas markets. Because domestic revenues are so much higher, the labels don't see value in investing in local acts with overseas appeal. By the same token, international acts usually find their music doesn't resonate."

That's not to say acts never make waves in the West. The latest act to show crossover appeal is Babymetal, a trio of teenage girls that combines two of Japan's favourite genres: J-pop and metal. Their eponymous debut album has entered the iTunes top 10 in seven countries, including the UK. But Ayumi Hamasaki, the best-selling Japanese solo artist of all time, is little-known outside her home country. As is B'z, a Japanese rock duo that boasts 80 million record sales. What they don't have is global fame. But with a music market the size of Japan's, they're probably not too bothered about that.