4. Spending per Capita was High, is now Down
Up until 1999 or so, Japan’s individual consumption rate for music was the highest in the world. In 1999, the per capita spending rate on music was around $53.8 a person, compared to America’s $44.7. However, if you look at the number of discs bought, Japan has consistently been ranked around 12th or 13th. In other words, the Japanese used to spend the most on music only because Japan’s CDs are the most expensive in the world. For $53.8 in Japan, the music fans can almost buy two albums, whereas the American can buy at least three if he/she shops around. (The “resell price restriction system” guarantees that Japanese consumers can’t shop around. There are used stores, however.)
In 2003, Japan’s per capita disc-buying remained at 12th or 13th, but total per capita spending dropped to $41.38 (#4). America’s went up to $47.35, but could not top Norway’s $48.38.
This reminds me of how NTT was the world’s most profitable phone company for a while only because the rates were insanely high. The high price system here has always seemed to me as a way to redistribute income fairly through the marketplace instead of government intervention or steeply graduated taxes, but this will only work if consumers have no options but to pay the high prices. Records in Japan have always been ridiculously overpriced, and I’m not sure if this created massive industry profits or was just necessary to pay the higher production costs.
No wonder kids have started to go nuts with copying rental CDs in recent years. If you really love music, you’d have to basically never talk on the phone or do anything else to be able to afford a couple of albums. Although the industry is suddenly starting to add more content (like DVD extras etc) to CDs in order to take the edge off the standard ¥3000 price, the high prices remain, and they appear to be driving non-music fans out of the market.
For the last decade and a half, Japanese companies could assume a totally inelastic demand curve for products targeted towards teenagers: kids will buy T-shirts whether they be ¥1500 (Uniqlo) or ¥5600 (Bape). Apparently, this is no longer true.