CD-Loving Japan Resists Move to Online Music

Friday, September 19, 2014
CD-Loving Japan Resists Move to Online Music
TOKYO —€” Around the world, the music business has shifted toward downloads and streaming. But in Japan, the compact disc is still king.
On a drizzly Sunday afternoon recently, Tower Records'€™ nine-level flagship store here was packed with customers like Kimiaki Koinuma. A 23-year-old engineer in a Dee Dee Ramone T-shirt, Mr. Koinuma said that, unlike most men his age around the world, he spends little time with digital services and prefers his music on disc.
€"I buy around three CDs a month,"€ he said, showing off a haul of six new albums, including the Rolling Stones€' classic "€œExile on Main St."€ and an assortment of the latest Japanese pop hits.
Japan may be one of the world'€™s perennial early adopters of new technologies, but its continuing attachment to the CD puts it sharply at odds with the rest of the global music industry. While CD sales are falling worldwide, including in Japan, they still account for about 85 percent of sales here, compared with as little as 20 percent in some countries, like Sweden, where online streaming is dominant.
"€œJapan is utterly, totally unique,"€ said Lucian Grainge, the chairman of the Universal Music Group, the world'€™s largest music conglomerate.
That uniqueness has the rest of the music business worried. Despite its robust CD market, sales in Japan — the world'€™s second-largest music market, after the United States —€” have been sliding for a decade, and last year they dropped 17 percent, dragging worldwide results down 3.9 percent.
Digital sales —€” rising in every other top market —€” are quickly eroding in Japan, going from almost $1 billion in 2009 to just $400 million last year, according to the Recording Industry Association of Japan.
Turning Japan around has become a priority for the global music business, which has struggled to regain its footing after losing about half its value since 2000, when digital technology began to disrupt the album-based business model.
But accomplishing change has been difficult, according to analysts and music executives in Japan and the West, in part because of a protectionist business climate in Japan that still views the digital business with suspicion.
Streaming music services like Spotify and Rdio, widely seen as the industry'€™s best new hope for new revenue, have stalled in efforts to enter Japan. Spotify, the biggest such player, has been stuck for two years in licensing negotiations with music companies in Japan, where homegrown pop idols by far outsell Western acts.

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PANDORA MEDIA Topped 5 Billion Listener Hours 2nd QTR 2014.

Friday, July 25, 2014
Pandora Media topped 5 billion listener hours for the first time during the second quarter of 2014.
Pandora Media topped 5 billion listener hours for the first time during the second quarter of 2014, while beating its own revenue expectations but posting a wider loss than the same period last year.
The Oakland, Calif.-based internet radio service posted revenue of $218.9 million during the April-to-June period, its highest-ever figure and 43 percent more than the $153.1 million in revenue it reaped during the second quarter of 2013. But it withstood a loss of $11.7 million, or 6 cents per share -- a bigger shortfall than the 4 cents per share it lost a year ago. The mobile segment delivered $167.5 million, or 76 percent of total revenue.
The company and analysts had expected flat earnings growth or a profit of up to 3 cents during the quarter, and investors punished Pandora in after-hours trading. Shares were off $2.92 to $25.80, or 10.17 percent, at 6 p.m. ET as the company ended its conference call discussing the earnings.
The company continues to face competition from other online radio providers, such as fast-growing iHeartRadio, as well as burgeoning interest in music subscription services such as Spotify that allow users to choose individual songs or listen to online radio stations and playlists. But Pandora's brand has proven resilient, especially as other tech giants have edged into online radio and unveiled new products as well. Apple introduced iTunes Radio last year, while Google has delayed the launch of a service based on YouTube to complement its Google Play service.
Pandora beat its own revenue estimate of $213 million to $218 million for the quarter, and expects to outdo itself during the year's second half as well. The company raised its full-year revenue guidance upward by $15 million to a range of $895 million to $915 million.
Along with its financials, Pandora released statistics showing 5.04 billion listener hours during the second quarter, about 29 percent more than the 3.91 billion in the same period last year and 5 percent more than the 4.8 billion during 2014's first quarter.
Among its more than 250 million registered accounts, Pandora counted 76.4 million active users as of June, just off from a May peak of 77 million. The company also claims a 77.6 percent share of Internet radio and an 8.9 percent share of all U.S. radio-listening time in June, also just below an April peak of 9.28 percent. During the call, CEO Brian McAndrews called June "a traditional low point" in the annual listening cycle.
The company's content acquisition costs dipped to 50.9 percent of overall revenue,  markedly less than the 62.6 percent it paid during last year's second quarter and the 53.8 percent it paid during the full year of 2013. Both McAndrews and chief financial officer Mike Herring noted during the conference call that the company has paid out $1 billion in royalties during its lifespan thus far and topped $100 million for the second consecutive quarter.
One of Pandora's measures of financial performance is revenue per thousand listener hours. Ad sales generated $62.4 in so-called RPMs on traditional computers, while mobile and tablet RPMs reached $36. Combined advertising RPMs were $40.11 during the quarter, up 5.9 percent over the same period in 2013.


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