TK Deep Inside" is an interview program that delves deep into the work and life philosophies of pioneers and experts in a variety of industries. In the first episode, we spoke to SKY-HI , founder and CEO of music production company BMSG , about the structural issues facing the Japanese music industry, its future potential, his own management philosophy, and more. *The contents of this article are excerpts from Toyo Keizai's "TK Deep Inside." As the video may not be viewable on external streaming sites, please view it on Toyo Keizai Online or on Toyo Keizai Online's YouTube.
[Chart] The size of Japan's music market continues to shrink
■Stuck to a system that was created 30 years ago Misa Kurazawa (hereafter, Kurazawa): SKY-HI, you've always said that the problem with the Japanese music industry is the business model that relies too heavily on CDs, but how has the situation changed in the four years since you launched BMSG? SKY-HI: I think it's gradually changing. For 20 to 30 years, the music industry has had a structurally hopeless system, and even when I was a player, there were a lot of irrational and absurd things going on in the business. But when I talked about it, people in the industry would say, "That's just the way it is, so there's nothing you can do about it."
I think there are about 50,000 to 100,000 CD players in Japan right now. Looking at the number of Vaundy and Kenshi Yonezu, who seem to be in the most demand in Japan right now, I think it's about that much. There are people who collect records as a collective, but it's a media that's already over. Even so, for 30 years, record companies have not been able to change the way they make their budgets from that. This is because the whole industry has a big company disease, and they think that there is no way to change it because that system has been established, so if they use that money to make music videos and advertisements, that will decrease every year. No matter how good the song is, no matter how big the hit it is, the budget will decrease.
It's a difficult decision for record companies, but unless they fundamentally break away from this system, for example, if they use the pure feelings of fans who want to support them as a way of driving the economy by "selling more copies," it will have a negative impact. Solo artists are one of the first to experience this. The promotion infrastructure of major labels in Japan is so powerful that it could be called a world-class agency, but in the case of solo artists, even if they sign a contract, it becomes a matter of what to do with 800,000 yen in advertising expenses, so it is difficult to get adequate promotion.
Nowadays, we have the internet, social media is so widespread, and viral hits can easily come from TikTok, so I think the opportunities for songs to be listened to have increased, and the means of monetization have actually increased. However, even if there is a talented artist who has a viral hit on TikTok, the structure is no longer such that a record company can use a huge budget to promote the artist and let the world know that there are such great artists in Japan.
■What's needed now is to "not lie" Kurazawa: In the case of BMSG, does that mean that your business model has diversified your sources of income?
SKY-HI : Yes. That's a really big part. I feel like what artists and talent agencies like ours really need now is to not lie anymore, and to have people trust that. I think the strongest thing is that fans have trust in us, which comes from their expectations. I don't want to rely too much on fans' feelings of support to make the business work. It's no good to incite greed.
I learned this from the words of Nintendo's (former) president, Satoru Iwata, but a business that is based on inciting gambling greed will not gain the trust of customers in the long term. Even if it makes a short-term profit, it will not become an asset for the company. The most important thing is to gain trust, and he said bluntly that inciting gambling greed in order to turn it into short-term money is not right as a business. I think he made this comment at a time when Nintendo did not enter the market when so-called social games were popular, but I think it's really the same thing.
■Artists get a small share of the CD market
Kurasawa: One of the reasons why fans want to support their artists by buying a lot of CDs is that they think that the artist gets a higher share of the CD market when compared to,
say, streaming.SKY -HI : The artist's share of the CD market is extremely low. That's because they think that one CD and one streamed play are the same. It's about how much you get for one play, but at some point, I think there will be negotiations about, "If we get this many subscribers, we could raise the return to this amount."
In fact, I think that America has already entered that phase. If you consider that rate of return, I think artists would be happiest if people bought their goods. Among the groups that sold the most CDs in the 2010s, is there anyone who became rich just from CD sales, without acting, advertising, or other work? On the other hand, if you think about how many artists have become rich without releasing a single CD and only streaming, it seems pretty obvious.
Kurazawa: So fans, calm down and don't buy so many CDs... SKY-HI: I understand that it's not that simple. This is a very complicated issue, and in the end, it's about how to "direct" the pure feelings of wanting to support. (The CD-based business) is a business failure, unsustainable, and has had an impact on solo artists, putting a strain on the music industry itself. It's been like strangling the industry with a silk scarf for almost 20 years. It's become like a chicken before it's lined up for the kitchen.
It's a pretty bad situation for almost all artists, but there are people who have been expressing their support in this way for 20 years, 10 years, or even just the past year with pure intentions. I think it's really unpleasant to have to be criticized as if it's evil, even though they were just doing it because everyone said it was good and they thought it was right, and I understand that. But if someone doesn't do this, everyone will die...
■What is the potential of the Japanese music market? Kurazawa: Currently, the size of the Japanese music market is about 330 billion yen. Even if it doesn't suddenly become
streaming in the future, how much potential do you think the Japanese market has if we can move away from the CD-dependent business? SKY-HI : You might say "Huh?" when I say this, but I think it can recover to at least 500 to 600 billion yen. Kurazawa: When we aim for 500 to 600 billion yen, does that mean that we won't only rely on domestic demand, but also expand overseas?
SKY-HI: That's right. For example, when I'm listening to charts from various countries on streaming services, suddenly a Mongolian artist comes up in my suggestions. If we don't see the Japanese market and the global market as separate, but can work as part of East Asia, I think the opportunities are almost limitless. There are as many opportunities as there are populations. Kurazawa: For example, right now, with YOASOBI , Kenshi Yonezu, XG, Fujii Kaze , and others, it feels like there's a bit of a tailwind for J-POP.
SKY-HI: I do feel that way. However, when that happens, it may be tough because the system to create a tailwind is not yet in place. Kurazawa: When you say it's not in place, do you mean that music companies are not there yet? SKY-HI: It might be a different story if they had a certain amount of experience and budget, but instead of "Japan in the world," we have come this far with strategies for Japan and the world being quite separate. This has both merits and demerits, because the infrastructure is so well established that many overseas people who have had hits on streaming services want to get on board with Japan's infrastructure.
If an artist has fans, the system is in place to hold live performances, tour, and release merchandise. On the other hand, when (Japanese artists) gain attention from overseas, I really think it's a waste that they can't go in large numbers like K-POP. Kurazawa: BE:FIRST is also planning a world tour, but what does "the world" mean when SKY-HI or BMSG go to the world?
SKY-HI : I think there are a few numbers that indicate a successful international expansion, but when we say "this artist is truly world-class," we mean a world-class artist whose name is listed in the second row as the main act at a mega festival in the world, such as Glastonbury, even if they're not the headliner.
■I want to be recognized by music fans more than by "authority"
Kurazawa: It's not like a Grammy Award or anything like that.
SKY-HI: I guess it's about what the essence of entertainment is, but rather than being recognized by authorities, don't you think it's more about being someone that the music fans who gather there want to see? Kurazawa: Being recognized by the fans. SKY-HI: I think the interesting thing about entertainment is that sushi made by a chef with 30 years of experience and cup ramen are on the same level. However, between the two dishes I just gave as examples, I think sushi always wins.
But then what went wrong? Should I make it healthier? Is it the ingredients that are bad? Then the cost of ingredients will go up, but we have to raise the cost of ingredients, and by doing that, we have been creating the world's most delicious and healthy cup ramen, and our technology has improved to an unbelievable extent compared to a few decades ago. The strength of entertainment is that it can be delivered to everyone, whether they are educated or not, whether they understand the language or not, so rather than saying that we have been recognized by such and such authorities, that we have conquered such and such vested interests, that we have achieved such figures, or that we have made such sales, I think it makes more sense to say that we have been listed as one of the artists that music fans around the world most want to see.
) but an article published on Yahoo! Japan on New Year's Day talked about how the CD market is dwindling and how streaming can open up the Japanese music industry to "limitless" possibilities. 