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Apple eyes Japan's download market

Published: 2:25PM Sunday September 10, 2006 Source: Reuters

Fans who turned up to hear Arctic Monkeys and Metallica at a rock festival in Tokyo got a bonus - three free iTunes downloads from Apple Computer in a bid to boost its share of Japan's online music market.

Apple dominates the market for music downloads in the United States, but its iTunes online music store has about a 5% share in Japan, where most fans download songs onto mobile phones and many people prefer not to buy music online with credit cards.

"iTunes faces a dramatically different situation in Japan compared to other markets," said Gerhard Fasol, president of Eurotechnology K.K., a consultant firm in Tokyo. "iTunes is a very strong player in the market for downloads to PCs, Macs and iPods, but that makes up a small portion of the online music downloads (in Japan)."

So Apple is pursuing new innovative ways to expand iTunes in Japan by trying to entice consumers to abandon mobile phone downloads for online downloads instead.

Free downloads like the ones offered at the Summer Sonic music festival in August is one way that Apple hopes to teach Japanese consumers that buying music from iTunes is just as easy as downloading music onto their mobile phones.

Mobile phone downloads are popular in Japan; also the birthplace of the world's first camera phones and wireless Internet browsing.

Many of the phones are capable of receiving speedy music downloads and the costs are added to the customer's telephone bill.

"I usually download music on the train to school using my cell phone," a 17-year-old high school student said as she clicked away on her pink Sony Ericsson handset.

"It's quick and easy. I don't want to carry a separate player," she added.

Prepaid iTunes cards

KDDI Corp, the country's second-biggest phone operator, has since 2004 offered a service that downloads songs directly onto mobile phones in about 30 seconds without connecting to a computer or punching in credit card numbers.

"I heard about iTunes for the first time when I bought my iPod mini last year," said Misaki Masai, 20, a university student in Tokyo who doesn't own a credit card. "But I've never bought songs from iTunes. I don't like paying online."

Apple has tried to respond to that concern by selling iTunes prepaid cards at convenience stores and other retailers.

The strategy may also boost the iTunes brand as many people in Japan use convenience stores to buy lunch, pay bills, and pick up concert tickets.

At stake is Japan's mobile phone download market of $US320m in 2005, much of which could shift to online downloads.

About 80% of the world mobile phone download market is in Japan.

With iPod models such as the "Shuffle," sold at about 7,500yen ($US64.01), Apple's products are becoming more attractive to young people who can't afford other gadgets.

To lure more music fans, Apple has doubled iTunes' song line-up to 2 million in the past year. iTunes also features a free song every month to lure new users, and invites musicians to the Apple stores for music events.

"iTunes is lifting the overall music download market," the Seed Planning Inc. research company said in a report. It expects music distribution on the Internet in Japan to grow steadily and overtake the mobile music download industry by 2008.

Apple's downloads are better quality than mobile phone options. They are also cheaper.

Songs offered on mobile phones average about 300 yen ($2.56) each, while iTunes selections cost around 150 to 200 yen.

Apple's strategy might be paying off.

Sales of Internet song downloads, including iTunes, surged 457 percent to 2.5 billion yen ($21.34 million) in the first half of this year from a year earlier, the Recording Industry Association of Japan said. Mobile phone downloads grew by some 160 percent in the same period.

Japan market may shift online

Apple's competitors in Japan also see a move to online tunes.

In addition to its wireless service which has transmitted more than 50 million song downloads, KDDI has set up an Internet-based service like iTunes.

Other music distribution sites include Mora, a site backed by Sony Corp, and services supported by Microsoft Corp, which offer Windows-based music files.

Napster Japan also aims to launch a service this year.

But Apple's presence is growing with the popularity of iPods portable music players and services such as podcasting, which sends out music and video files over the Web.

Various models of iPods, which have sold more than 50 million units worldwide, dominated the top nine slots of the latest digital music player sales ranking in Japan, according to BCN Inc. Sony's Walkman-brand E-series player ranked No. 10.

Apple is winning over a greater share of Japan's music distribution industry, researchers say. But it has yet to outstrip mobile phone downloads, which are very popular.

Even the Arctic Monkeys, one of Britain's hottest bands, recognises the Japanese preference for mobile phone downloads.

"There's only music so that there's new ringtones," the group sang to it screaming fans in Tokyo.

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