<div dir="ltr">===============================================================<br><br>J@pan Inc Magazine Presents:<br>M U S I C M E D I A W A T C H<br>Commentary on Japan's music technology news<br>===============================================================<br>
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<a href="mailto:info@pbxl.jp">info@pbxl.jp</a><br>-----------------------------------------------------------<br>----------------------------------------------------------<br><br>CONTENTS<br><br>++ FEATURE: Japanese Fair Trade Commission Rules Against Label <br>
Mobile<br><br>++ NOTEWORTHY NEWS:<br>** Eurotechnology says at least 75,000 iPhones sold in Japan <br> for July<br>** Yamaha announces release of Sequel 2<br>** mF247 to suspend operations at end of August<br>** Tsutaya to partner with Usen on music service<br>
** JRC becomes first Japanese company to join DDEX consortium<br><br>++ FEATURE: Japanese Fair Trade Commission Rules Against Label <br>Mobile<br><br>After nearly four years of investigation, the Japanese Fair <br>Trade Commission (JFTC) handed down a ruling last month against <br>
the founding companies of Label Mobile, the joint venture that <br>is Japan's overwhelmingly dominant mobile music content <br>provider.<br><br>As first reported in our feature for MMW #74 (March 2005),<br>these companies - Sony Music Entertainment, Avex Networks, <br>
Toshiba EMI (now EMI), Universal Music and Victor <br>Entertainment - were issued an official advisory notice <br>by the Japan Fair Trade Commission in March 2005 over their <br>refusal to grant licenses to third-party chaku-uta (master <br>
ringtone) providers. This notice followed a nine-month <br>preliminary investigation which included a raid on the <br>offices of several record companies back in August 2004. <br>The investigation was reportedly triggered by complaints <br>
from mobile music providers accusing the record companies <br>of colluding to exclude other mobile music providers from <br>the highly lucrative market for chaku-uta in Japan.<br><br>The original notice issued to the five record companies <br>
contained several specific findings, including the following <br>(initially reported in MMW #74):<br><br>1. Due to their dissatisfaction at losing income to providers <br>of MIDI-based ringtones, the five record companies decided in <br>
2001 to collaborate on the development of a new mobile music <br>service that would take advantage of their control over the <br>master rights to popular songs.<br><br>2. Because any provider of Musical Instrument Digital Interface <br>
(MIDI)-based ringtones can obtain song rights by paying a <br>standard royalty to JASRAC (Japanese Society for Rights of <br>Authors, Composers and Publishers), there are a large number <br>of providers and a lot of competition based on price. In order <br>
to avoid this situation, the labels established a joint venture <br>called Label Mobile which would be the exclusive content <br>provider for the new service.<br><br>3. From its inception, the Label Mobile Board of Directors has <br>
consisted solely of executives from the five labels.<br><br>4. At a Label Mobile management meeting in May 2002, Sony Music <br>proposed to the other labels the idea of a "chaku-uta" service <br>requiring the master rights to songs. The service would be <br>
inaccessible to companies other than record labels, thereby <br>avoiding price competition.<br><br>5. The five labels agreed to make Label Mobile the exclusive <br>provider of songs for the chaku-uta service and to refuse <br>
license requests made to any of the five companies by other <br>chaku-uta providers.<br><br>6. Chaku-uta providers other than Label Mobile have since been <br>denied song license requests for no justifiable reason.<br><br>
Of the five record labels named in the original notice, four of <br>the companies decided to fight the ruling and subsequently <br>submitted their counter-arguments to the JFTC. Only Toshiba <br>EMI opted to accept the findings of the notice and begin <br>
licensing its catalog to other content providers. As the legal <br>arguments dragged on, Label Mobile further expanded its already <br>dominant position as the only mobile music content provider <br>able to offer catalog from all major Japanese labels. In fact, <br>
it is now estimated that 70% to 80% of all paid mobile music <br>downloads are made from a Label Mobile service.<br><br>The JFTC ruling in July was a long time coming, but did not <br>come as much of a surprise to anyone involved in the mobile <br>
music industry. While Sony and the other labels argued that <br>they refused third-party license requests based solely on the <br>business merits of each request, the evidence made it clear <br>that Label Mobile was established largely for the purpose of <br>
excluding third party providers in order to avoid competition <br>and save on distribution costs.<br><br>Despite all of the time and effort spent in the four-year <br>investigation, though, it is highly unlikely that the ruling <br>
will have any real impact on the industry. Provided that the <br>labels agree to comply with the ruling this time, there will <br>be no penalties or fines levied against any of the companies. <br>And of course, at this point, it really doesn't matter much <br>
whether or not the labels increase their licensing activity <br>to outside companies. Simply by keeping other providers out <br>of the competition for the first six years of real-music mobile <br>downloads in Japan, the record companies have more than <br>
accomplished their objective of exclusivity and control.<br><br>It's hard to imagine this kind of scenario occurring outside <br>of Japan. Cooperation among business rivals here regularly <br>approaches levels not often seen in the West, and can be very <br>
effective in keeping outsiders at bay. Even iTunes, after <br>three years of business here, has been unable to make much <br>of a dent in Japan's highly exclusive market for mobile music. <br>Similarly, Napster has had little success in Japan with its <br>
subscription model, due in no small part to a lack of major <br>Japanese catalog.<br><br>Whatever your views on collusive business practices and the <br>JFTC ruling, the bottom line for the music industry here is <br>that Japan remains the only major market where digital revenues <br>
have compensated for the decline in physical sales. Because <br>the labels were able to come up with a system that has worked <br>for all of them, there has been no real incentive for them to <br>experiment with other business models and services such as <br>
subscriptions or streaming. And this will likely remain the <br>case for as long as mobile revenues are able to hold strong.<br><br>++ NOTEWORTHY NEWS:<br><br>** Eurotechnology says that at least 75,000 iPhones were sold <br>
in Japan during July<br>In brief: During a panel discussion at the Foreign <br>Correspondents Club of Japan on August 13, Gerhard Fasol, CEO <br>of Eurotechnology, estimated that between 75,000 and 125,000 <br>iPhones were sold in Japan from July 11 through July 30. Fasol <br>
went on to predict that Apple will sell between 640,000 and 1 <br>million iPhones in Japan by the end of 2008.<br>Source:<br><a href="http://www.eurotechnology.com/blog/">http://www.eurotechnology.com/blog/</a><br><br>** Yamaha announces release of Sequel 2<br>
In brief: On September 1, Yamaha will begin selling Sequel 2, <br>the latest version of its music production software developed <br>by Steinberg. Sequel is a simplified version of Steinberg's <br>Cubase software, similar in features and functionality to <br>
Apple's GarageBand. Steinberg is a wholly-owned subsidiary <br>of Yamaha.<br>Source:<br><a href="http://www.yamaha.co.jp/news/2008/08080701.html">http://www.yamaha.co.jp/news/2008/08080701.html</a><br><br>** mF247 to suspend operations at end of August<br>
In brief: mF247, a site that distributes DRM-free independent <br>J-Pop music, announced that it will suspend operations after <br>August 31. Shigeo Maruyama, the president of mF247 and former <br>president of Sony Music Entertainment, said in a written <br>
statement that mF247 had accomplished its initial objectives. <br>The site opened in August 2005, and became known for its <br>realtones that featured complete musical works which were under <br>47 seconds in length.<br>Source:<br>
<a href="http://www.itmedia.co.jp/news/articles/0808/01/news049.html">http://www.itmedia.co.jp/news/articles/0808/01/news049.html</a><br><br>** Tsutaya to partner with Usen on music service<br>In brief: Tsutaya Discas, which operates the large Tsutaya <br>
chain of CD and DVD rental shops throughout Japan, announced on <br>July 31 that it would team up with Usen to offer its own online <br>music store called 'Tsutaya Discas Ongaku Haishin.' The new <br>service will offer essentially the same catalog and pricing <br>
currently found on Usen's 'Ongen' store. In addition, users <br>will also be able to order CDs for rental from the site.<br>Source:<br><a href="http://www.j-cast.com/2008/07/31024369.html">http://www.j-cast.com/2008/07/31024369.html</a><br>
<br>** JRC becomes first Japanese company to join DDEX consortium<br>In brief: In July, JRC (Japan Rights Clearance) became a member <br>company of DDEX, a consortium of companies working on <br>international standards for distribution of digital content and <br>
data. Included among the 14 charter members of DDEX are Apple, <br>Microsoft and RealNetworks.<br>Source:<br><a href="http://www.japanrights.com/whatsnew.html?whatsnewId=20">http://www.japanrights.com/whatsnew.html?whatsnewId=20</a><br>
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