This is the third in a four-part series. See Part One and Part Two for more background.

As I have suggested over the first two parts of this series, artist management companies wield an enormous amount of power in the Japanese music industry — a power with which they dominate other institutions and influence overall decision-making. This should not necessarily be self-evident: The jimusho are not particularly large companies, nor highly-profitable companies (on paper, at least). So why is it that the jimusho have historically controlled the Japanese entertainment industry rather than record labels, TV stations, or publishers? The following will show that their power originates from three main sources: possession of master and publishing rights, mass media dependence upon star talent, and perceptions of “extralegality.”

(1) Possession of Master and Publishing Rights

Owning music-related rights can be an extremely powerful tool in the Japanese entertainment industry, especially when most “talent” release music in addition to acting and variety show appearances. And since management companies usually take responsibility for songwriting coordination and recording, they are rewarded with the master rights to the recording. This bestows them with control over the work’s eventual mechanical duplication and third-party use. (Toshio Azami’s 2004 book Who makes popular music? 『ポピュラー音楽は誰が作るのか』 outlines the complex politics behind these rights in much detail.)

In the American industry model, record companies pay for their artists’ recording fees and subsequently receive the master rights. But ever since the 1960s, the larger management companies in Japan have invested heavily in recording and coordination themselves, entitling them to all consequent privileges and decision-making authority. At the time this practice began, Japanese record labels were accustomed to making licensing deals with American record labels. So the practice of leasing master recordings from outside parties was easily extended to domestic companies.

Today, large jimusho often hold master rights exclusively or share the rights with other organizations like record companies and publishing companies. Smaller jimusho usually lack the resources for investment in this area, so the artist’s record company will often finance the master tape production. When management companies hold the master recording rights, record companies must license the master tapes to be able to mass produce the audio media. This is a significant source of revenue in itself and means artist management companies are directly entitled to high profits from record sales — something that is not true in most other music markets.

In addition to master recording rights, artist management companies that organize the songwriting process for their talent often lay claim to the publishing rights which control copyrights for individual songs. These rights allow the collection of mechanical royalties on the duplication of CDs, performance royalties for public usage of the song, and variably-priced synchronization licenses for media usages. Publishing has the most potential for long-term revenue streams, because songs may be re-recorded by future artists or used in other media long after initial CD sales have dried up. As we saw in Part Two, larger jimusho often receive “tribute” from smaller jimusho by taking their artists’ publishing rights.

Holding both master rights and publishing rights gives management companies ultimate decision-making power about a song’s usage, and other parties looking to utilize the song in a new context must win approval from the jimusho. Featuring a song in a TV commercial, for example, requires permission of both the master rights holder and the publisher. With artist management companies normally holding one or both of these rights, they generally keep control over a large portion of musical content, and therefore make themselves a major player in the music market overall. The jimusho are the ones who get to say yes or no to most projects involving music, which over the last 30 years, has been a significant part of the wider geinoukai.

(2) Media Dependence Upon Star Talent

The second source of the jimusho’s industry power emanates from media companies’ profound dependence on management for access to star talent. Television networks and magazine publishers create content for the specific purpose of attracting audiences to sell to advertisers, and the simplest way to do this is to hire celebrities and well-known talent.

In Japan, decision-making authority about artist appearance and performance lays squarely with the artist management company, and therefore, media outlets must negotiate with the jimusho — not the record company nor artist — for access privileges. This may be generally true in other music markets as well, but in Japan, artists’ inability to exit these firms (as laid out in Part One) creates large-sized jimusho with a sizeable “stock” of in-demand talent — often not just in the field of music, but also in acting, sports, and modeling. The management firm’s total negotiating power is proportional to all its stars’ cachet, which means that jimusho benefit from a compounded star power.

Negotiations on the use of one star have implications for the use of other jimusho members. Often large jimusho require networks to take smaller or newer talent on the network’s other television shows as “barter” for use of well known celebrities — a form of tying. Of course, management companies rely on media exposure to sell their talent, but healthy competition between the five major networks and the firms’ ability to limit access to a wide number of talent means management firms have the upper hand: They can threaten to give better treatment to other stations if demands are not met.

Using pre-established celebrities as leverage, large firms are therefore able to get more of their new talent into the media, which in turn, creates more overall popularity for their artists. Celebrity stature thus directly shapes market power for artist management companies, and networks are beholden to the firms for access to creative inputs. Networks may be able to forgo the use of one specific artist, but the jimusho system raises the stakes of negotiation to all artists under a companies’ auspices. This can be a huge number in the case of Burning, who controls hundreds of talents organized into dozens and dozens of subsidiary companies.

Johnny’s Jimusho have been one of the companies to conspicuously leverage this power with the media. As a general principle, the company refuses to allow its boy bands to appear on any TV shows with other rival boy bands. In the 1990s, this meant popular groups like Da Pump or w-inds from the Burning-backed Rising Production had a very difficult time appearing on the Johnny’s-dominated music show “Music Station.” In recent years, hit Korean group Toho Shinki (TVXQ) had similar issues. So when Fuji TV music show “Hey! Hey! Hey! Music Champ” decided to throw its lot in with Da Pump and the rival Johnny’s groups in the late-1990s, Johnny’s Jimusho effectively would not let their talent appear on the show for over five years. When a new producer came in and stopped offering guest spots to non-Johnny’s boy bands, Johnny’s acts came back with full force. (More here.) This is a perfect example of jimusho power in action: Even when the TV station tried to challenge Johnny’s Jimusho, they eventually had to give up the strategy.

(3) Perceptions of “Extralegality”

A few of Japan’s largest jimusho bolster their market power through widespread perceptions within the industry that they are likely to carry out punitive actions outside of legal and commercial barriers. In other words, the more powerful jimusho are understood to be linked to organized crime. While the first two reasons for jimusho power focus on measurable economic advantages that can be used as leverage in industry negotiations, the final one may be primarily psychological.

So are the yakuza involved in the Japanese entertainment world? Unfortunately there are no clear answers to this question, as the mainstream media rarely handles the topic, not even to debunk it as “myth.” What we do have, however, is a lot of compelling circumstantial evidence.

Many writers and scholars of Japan have mentioned the general idea of links between the two worlds. In Islands of Eight Million Smiles idol scholar Hiroshi Aoyagi writes of friends warning that “some agencies might be acquainted with the underworld.” Kaplan and Dublo’s Yakuza: Japan’s Criminal Underworld makes note that the Yamaguchi-gumi syndicate was deeply involved in the entertainment business. Most famously, members of that family directly managed the career of enka singer Misora Hibari.

In Takarajima’s Complete True Record of Taboos of Heisei Japan 『実録!平成日本タブー大全』, author Suzuki Tomohiko writes that crime syndicates openly managed and coordinated artist performances in various creative fields for the first half of the 20th century. While police since 1964 have apparently fought to keep the yakuza from working in the entertainment industry, links dating from the prewar have not been fully eradicated. Ugaya Hiro, writing in What is J-Pop? 『Jポップとは何か』, notes that the “dark side” remains strong in the music industry despite its absence in contemporary film and video game production fields. Veteran entertainment writer Honda Kei meanwhile has named specific links between the industry and yakuza bosses, but for this he has been sued multiple times for libel.

Police action of recent years, however, has at least highlighted some of the more structural corruption of the market. Jimusho heads have been arrested and jailed for tax evasion, including Taira Tetsuo from the market leader Rising Production (now Vision Factory) and Yamada Eiji from AG Communication (a Burning subsidiary that produced Suzuki Ami). Tax evasion does not necessarily imply organized crime, but consider the case of Rising’s Taira: At his trial, he begged for leniency from the courts, citing the necessity of “underground” (urashakai) financial measures in the music business. In general, the tendency of artist management companies to keep financial information private, change official firm names on an extremely frequent basis, and splinter into informal groupings creates an industry environment in which improper financial transactions can go easily undetected by authorities. While this would likely be how organized crime would run the music business, this is not solid proof of their involvement.

The best concrete evidence we have of links between top jimusho and organized crime comes from the Tokyo Metropolitan Police Department — although not intentionally. In 2007, a not-so-net-savvy cop leaked many confidential police files to the Internet, including a spreadsheet outlining companies related to the Goto-gumi crime family. As reported in magazines like Cyzo and Jake Adelstein’s Tokyo Vice, the file lists top jimusho Burning Productions as a “client business” (クライアント企業). A footnote in Adelstein and David McNeill’s Japan Focus article “Yakuza Wars,” also mentions, “In December of 2007, the National Police Agency sent out a formal request to the Federation of Civilian Broadcasters asking them to sever ties with organized crime groups.” If there was no organized crime in entertainment, the National Police Agency would clearly not need to make such a request.

While the role of organized crime in the Japanese entertainment business is still shrouded in mystery, the most important thing to understand is that industry workers act under the assumption these rumors are true. All of the industry sources for my master’s thesis believed that many of the top jimusho have links to organized crime. Few are interested in talking about this on the record, of course, but the entire idea — even if an urban myth — still rules the psyche of people working within the entertainment market. Needless to say, jimusho that did have mob backing would grow stronger by being able to make credible threats of violence and being able to tap into a free flow of dirty money. Yet even if these links do not exist or are weaker than imagined, the widespread perception of extralegal punishments would guide actors to avoid unnecessary conflicts with firms alleged to be allied with the underworld.

These suggestions of criminal connections cannot explain artist management companies’ power, and it is good to remember that there are plenty of strong artist management companies like Sony Music Artists who operate above the board. But the possibility of connections to the underworld has the effect of making smaller firms’ deferential to the larger, possibly dangerous management companies. Organized crime presence creates significant market distortions since conflicts would be solved outside of market and legal spheres and decisions made for reasons other than rational market logic. A member of the production team for a network music television program commented to me that one of the larger jimusho received preferred treatment in casting because the firm was “scary.”

Final installment: Why jimusho “production logic” rules the Japanese content industry

Part Two: Organizational Characteristics of Jimusho — Size and Keiretsu

In Part One we looked at labor relations within Japanese entertainment industry management companies. This time, we will look at the jimushos’ relations to each other. As we will see, the industrial field of Japanese entertainment offers less than perfect transparency, and our general understanding must come from a mix of industry accounts backed up by third-party verifications — where available.

Small size firms

For being so powerful within the entertainment industry, most jimusho are relatively small companies. For example, moderate-sized record label EMI Music Japan (formerly Toshiba-EMI) has over ¥1.667 billion in capital. Meanwhile, Burning Production — the management company said to dominate the industry — only has a mere ¥20 million (source here as the current corporate website for Burning lacks almost all company information). Burning Production itself has a very limited number of talent, almost none of whom are particularly young. It is almost fair to say that Burning’s talent list appears at first to be a bit underwhelming for an agency reputed to be so powerful.

Another key characteristic is that almost all jimusho are privately-held companies, with the exception of Avex, Hori Pro, Amuse, and Yoshimoto Kogyo (which the major TV stations will soon buy out together). Without being publicly-traded on stock exchanges, the companies have no legal impedance impetus to reveal information about earnings. We have no way of knowing how much money is coming in and out of these companies. For example, despite decades-long domination of the pop charts and television dramas, young male idol purveyor Johnny’s Jimusho still controls its image as a mysterious, family-run enterprise with only the slightest presence as a “business” — one with growth, acquisitions, etc.

So there are thousands of relatively tiny privately-held artist management companies across Japan, with Hiroshi Aoyagi (author of Islands of Eight Million Smiles) estimating 1,600 in Tokyo alone. Oricon Nenkan 2005 listed 975 operating in Eastern Japan. We can easily say there are around 1,000 in the country who do significant levels of business within the industry.

The keiretsu system

1,000 firms makes the Japanese entertainment management business sound like an industrial field with heavy levels of competition and diversity. This number, however, is a misleading figure. Although most of these companies appear to be independent, they are in reality organized into very hierarchical keiretsu-type organizations.

The keiretsu are the key to understanding the jimusho system, but unfortunately, this is also the most oblique characteristic of the field to measure and observe. While some jimusho openly admit formal subsidiaries (Topcoat, for example, is part of Watanabe Productions), in the vast majority of cases, there is no official or otherwise publicly-revealed relation between companies in the same keiretsu. This becomes a major problem for objective reporting and analysis. Insiders and insider publications like Cyzo refer to certain talent agencies as being part of the Burning Keiretsu, for example, but there is no evidence on paper or public pronouncements from Burning itself that this corporate group exists. And most actors and models within these agencies may have no idea that their small firm answers to a larger one.

Wikipedia Japan in the past had a long internal debate as whether to acknowledge the mythic “Burning Keiretsu” or not. In the end, Wikipedia editors killed the article as the mass media has never confirmed its existence. Yet, most industry insiders — and talent in my acquaintance within the jimushos alleged to be in the Burning Keiretsu — talk about the Burning Keiretsu being real. For example, Fujiwara Norika of agency Someday is widely understood to be part of the Burning group. Same goes for Nakayama Miho of Big Apple or Mizukawa Asami of Atlantis. Without this knowledge, all of these firms look to be independent, and therefore, in heavy competition. Yet, the real structure is that the boss at the main agency at top of the keiretsu doles out work to each of the subsidiaries and makes final decisions about which talents get what projects.

The best insider account of how these jimusho are organized into hierarchies was a website called Geinokai Sogo Kenkyujo. Unfortunately the site went dark a few years ago. (A cached copy here). Many of the site’s allegations about the Burning Keiretsu, however, can be confirmed by looking at publishing rights transfers or cataloging the specific jimusho who use Burning’s official subsidiary Proceed to build their web pages. On the other hand, many claims — such as the idea that Nagara Production controls a group overseeing most Visual-Kei bands and the Being/Giza group — have almost no public record and are essentially insider information that we must judge by our assessment of the author’s credibility.

According to industry contacts, membership to a keiretsu can also be set by a simple phone call: the “boss” from the parent company calls a new management company and asks whether the new jimusho is in the group or out. Most subsidiaries, however, are formed by managers inside the group branching out and opening up their own agency.

What does a small company get in return for being in a part of the keiretsu? Being in a keiretsu means use of the larger company’s network and power — at a price. Without any formal capital relations, we can only speculate on the nature of “payback” to the parent company — anything from complicated “consulting service” schemes to cash in envelopes to the more common and (completely legal) transferral of publishing rights. This is not to say that the relationship is necessarily illegal, but we in the public have little way to measure how the companies interact.

Proving the keiretsu exist

So how can we prove the insider accounts that these keiretsu do exist? The most effective way is to look at the transfer of publishing rights in the record industry. Many small companies alleged to be part of a larger organization will give their talens’ publishing rights to the “parent” company. Oricon shows that most of the alleged members of the Burning keiretsu did give Burning Publishing their rights back in the 1980s. (For whatever reason, this practice stopped or stopped being recorded by Oricon in the 1990s.) Southern All-Stars’ jimusho Amuse famously gave the band’s early publishing to Burning, which was speculated as a way to be “let inside” the industry. Amuse is no longer part of the Burning keiretsu, but Burning still owns the rights to “Katte ni Sinbad” and other early SAS songs.

Let’s take the example of Avex Trax — the incredibly popular record label with a management company wing. Geinokai Sogo Kenkyujo alleged that Avex was a member of the Burning Production keiretsu, which seems odd in that Avex is a much larger company than Burning on paper. Why would Avex need to be in Burning’s group? This seems like a ludicrous claim when viewed from outside the industry.

The publishing rights database on JASRAC, however, reveals how the relationship between the companies may possibly work. Burning owns an enormous number of songs from artists in the Avex management company, including mega-hits from Hamasaki Ayumi and Every Little Thing. (Here is a list of all the artists Burning owns publishing from.) From a purely rational business perspective, Avex should have no reason to give up publishing rights, in that it has its own highly-profitable publishing company. This transfer of rights best makes sense as a “tribute” to the top company in its hierarchy. (Another strange thing is that Burning’s ownership of these Avex rights has never been disclosed on the Oricon charts, which always prints the owner of publishing during the time of the song release.)

The “odd” behavior of keeping firms small and separate

So why do the major jimusho in the industry work in this non-transparent, small-firm structure rather than just expanding the size of their own firms? This is not behavior seen in most industries where firms want to grow in size, hold an IPO to raise cash, and possibly acquire other firms.

The small size has certain perks. In a private email exchange, Néojaponisme commenter Mulboyne pointed out that the Japanese tax code generally encourages company formation rather than corporate expansion and that the service sector suits a multiple-company structure. Having this structure helps the main company avoid paying tax. This does not necessarily mean that the companies are engaging in tax evasion, but it lessens the tax burden. This, however, puts them on a different level of corporate legitimacy than, say, Sony, Toyota, or Nintendo.

This structure also allows the major jimusho to control the industry without audiences having any idea of what is happening. For example, the three main models of magazine CanCam during its peak in 2007 all came from the K-Dash keiretsu, but on paper Ebihara Yuri and Oshikiri Moe were from Pearl while Yamada Yu was from K-Dash proper. This arrangement made it look less like a monopoly to people outside of the industry.

The small size also fits with the somewhat unique jimusho culture of avoiding the public eye. In general, the giants of the industry, who sit atop the keiretsu structure, rarely give interviews to the media, show up in front of the camera or otherwise leave traces of their existence. There are basically zero public photographs of Suho Ikuo, the head of Burning Productions and so-called “don” of the industry. (Lately, a single grainy image has appeared on the net.) Same goes for Tetsuo Taira, once of Rising Production (now Vision Factory), who spent some years in jail for tax evasion. Johnny Kitagawa of Johnny’s Jimusho is also famously reclusive. (Tatsuo Kawamura of entertainment group K-Dash — and pro wrestling management — tends to appear in public more often than his peers.) These business leaders tend to fit the image of the kuromaku — the man behind-the-curtain. This is a very different culture than Hollywood’s extravagant industry moguls like David Geffen. But even holding for American ego-centricism, there is something a bit eerie that the Japanese industry’s most powerful men (and they are almost always men) work so hard to make sure the public does not know who they are.

What the keiretsu structure means

If we go ahead and assume that the industry is run in these keiretsu groups, we then can understand how there can be heavy oligopoly even in a field with a large number of firms. Essentially, only the top jimusho groups have access to placing talent on TV shows, in commercials, and in other high-profile work. As I stated above, the main bosses of about a dozen groups dictate to the media and advertising agencies whom from their keiretsu they want used rather than having an open audition process, where even small firms can provide upcoming talent. (Even the bit roles in Japanese TV shows are usually fleshed out by junior members of the stars’ agency.) The keiretsu arrangement allows the jimusho to control access to hundreds of celebrities, which in turn gives them market power in transactional relationships between themselves and the media. If the media does not want to use a new star, the boss can then threaten to pull all of his talents from use in that media.

The end result is that new stars who score big advertising campaigns or TV spots for their debut singles almost exclusively come from one of the big jimusho groups. This means that independent jimusho who are not aligned with one of the big keiretsu are essentially locked out of the more lucrative parts of the industry system. There are always spots on TV for “popular” talent who come from outside the keiretsu system but they are always “last hired, first fired.” In other words, they only get access to the media after they have proven success at a grass-roots level, and they are not invited back if they cease to show popularity.

The end result is that innovation or change in talent type must come from the big groups, and ultimately, the men at the top of those few companies make the decisions about which entertainers appear in the industry. Deductively-speaking it does not make sense that the jimusho would launch stars who would pose a threat to their business model.

Next time, we will look why the jimusho have become so powerful and how the system’s needs — rather than the market’s — determines what kind of star the jimusho pushes.

Click here for The Jimusho System Part Three.