TL;DR
No, you don’t actually provide that much value to the Japanese music industry when you go to a concert in Japan. You don’t actually spend that much money. They don’t want you, not because they’re racist or xenophobic, but because to their music industry, you do the equivalent of ordering a $2 taco at a Mexican restaurant and filling up on chips. You simply aren’t built into the current monetization of the JP music market. They don’t make money through ticket sales, they make money through you buying CDs and merch.
CD and Physical Goods Sales
To understand the music industry in Japan, we must start our story in Sacramento. More specifically, a small record shop in Sacramento called Tower Records. Russell Solomon founded Tower Records in the 1960s, and it eventually grew to become the dominant record and music store in the USA. The Tower in the Tower Theater was named after the nearby Tower Theatre (still the oldest continuously running “Picture Palace”), which was named after the Tower Bridge, a historic Sacramento bridge linking the floodplains of West Sacramento to Old Sacramento and the capitol proper.
Shibuya is one of those places that you just have to go to in Japan. It’s a Tokyo staple, and if you’re a weeaboo it’s most likely one of the first places that you’ll go to. Down one of the streets of Shibuya, you’ll find a giant multifloor building. That’s the mecca of Japanese music, Tower Records, the flagship store. You’ve done it, you’ve reached your dreams, you’ve come to the largest music shop in the world, 9 whole floors of Japanese music and culture. You see the giant yellow tower on the front of the building. And yes that is the Tower Bridge in Sacramento, California.
Tower Records was an icon in the music world for decades, but is now dead. It filed for bankruptcy in 2006. Part of the reason for the decline in business was the rise of mass market discounters, but also the advent of the internet and early internet piracy made access to music easier. At this point, DSL had made it fairly instantaneous. Youtube started a year earlier at this point, and with Youtube immediately ripped music from CDs was uploaded online. Limewire was already more or less mainstream if you had internet.
But there’s another place where Tower Records still lives. And that’s Japan. If you’ve ever gone on JP Twitter, you’ve seen the attitudes that they have towards piracy. Don’t copy that floppy, you dirty thief! To this day, there are still dozens of Tower Records stores in Japan. Travel protip: you don’t really have to go to the Shibuya location by the way, the other locations will still probably have your stuff, but honestly it’s much easier just to ship things from amazon.co.jp to your hotel room.
But when was the last time you went to a CD or record shop in the west? Sure if you’re a hip and trendy zoomer with a digicam and wired earbuds and a matcha you’ll performatively buy a CD or a record from a mom and pop store, but how much money do you spend as a part of your income or net worth on these goods?
We in the west, or at least America, consume our day-to-day music through streaming. The Recording Industry Association of America (RIAA) has numbers for this, with the breakdown: the vast majority (85%-90%) of revenue comes from streaming, not physical media. The streaming market mogs the physical media market. No way Tower Records would survive here.
However, for one reason or another, whether it’s social or cultural or just an older way of doing things that I don’t know enough to go into, physical media is well and alive in Japan. If you’ve been on the internet long enough you would remember the stacks of AKB CD’s in the trash, bought on the hopes of a handshake ticket. You can pull up similar reports from the RIAJ (The RIAA but for Japan) and other sources, but current estimates show that most day-to-day revenue from music consumption is around a 60/40 physical/digital split. Japan is perhaps the world’s largest physical music market. Tower Records is still going strong.
Scale vs Depth
The core of the issue is that Japan’s music industry and the western music industry have different incentives. Here’s what I mean.
At some point, you can grow an entertainment industry in two ways. You can go either broad or you can go deep.
Western artists rely deeply on streaming revenue from Spotify or Youtube Music or Amazon Music or whatever else people use these days. You have revenue per play, and you have monthly unique listens or downloads. You have Spotify charts. This is important!
While Japan has been getting into the streaming business recently, it’s still at this point a smaller percentage of revenue than physical music media. They rely heavily on IRL stuff, folks going to Tower Records to buy CDs.
The incentives are different. You don’t make money in the USA by getting people to buy your CDs, you get money in the USA by hype. You get it through attention of the masses; after all, the more listens the better. You want as many streams and clicks as possible on your Spotify because for every click you get some amount of fee. But in Japan, what do you want? You want people to whale on your CDs. You want them to spend tons of money on your other merch and records. Whether it’s a better model or not is up for debate, but it is what it is. Streaming is important, yes, but get people to buy the CD’s and records.
Keep that in mind, because it’s important for how concerts are perceived and why Japan’s model is what it is.
Ticketing Markets
So far, we’ve only talked about revenue from music consumption on a day-to-day basis, or how the money flows from the music enjoyer to the music producer. Concerts are another deal.
The parties involved in the transactions within the US concert ecosystem are numerous, with each middleman wanting to take their cut. But let’s just talk about the supply and demand aspect of shows in the US. For the purposes of this blogpost let’s refer to them as lives. We all talk about how evil Ticketmaster or Stubhub or AXS or whatever is, but let’s define them as what they are: they’re market makers that attempt to match supply of tickets or seats to demand for those tickets or seats. The main problem with this is that supply is relatively more finite to demand, and as we’ve become more of an interconnected entity regarding similar tastes in music, demand can completely outstrip supply and drive the price up at a rate faster than linearly. AKA Taylor Swift has millions of fans around the US (and world), but she can only have so many concerts as she is only one person. Thus, her supply is significantly more finite than the amount of demand, even within a single city of her Eras tour, driving up nosebleed tickets to many hundreds or thousands of dollars. The average price paid was, I believe, around $700.
But how much were ticket prices in Japan for Taylor’s Eras tour? Around $140 for SS seats. So why the discrepancy? Logically, it would make sense for it to be at least a little bit more, as Swift is an international superstar. So why is that so?
The difference is in the markets.
The US concert market increasingly behaves like a financialized speculative market, where tickets are not just admission to the concert but tradable assets whose prices discover market-clearing demand. Secondary markets create liquidity almost to a fault, where tickets are exchanged willy nilly at free market rates and speculative arbitrage is normalized and even encouraged (well I don’t have a problem with it personally, at least!) You can make big money by buying that ticket, and if you can’t go, sell it later! The ticket itself is a real-time monetized asset that’s dynamically priced by the market maker, like flights booked with Southwest points that you cancel once prices drop. Additional value is captured through fees across day-to-day trades of the asset!
However, Japan essentially (not totally, but they do it really well) blocks this market mechanism. There is (pretty much) no secondary market for tickets, and there is no auction. Many live shows are done via lottery, where you enter for a chance to win, but if you win, the prices are more or less reasonable. Your seats may even be completely random within a section as well. Either you win, or you don’t, and you accept the results. Sure, there are ways around that, such as applying for multiple tickets, but from a pure social perspective, it can be considered a more equitable method of finding well-deserved butts to seats. After all, the folks who can often pay the most aren’t usually the ones who are the biggest fans of the artist. The main problem is this: if JP suppresses speculative resale and market-clearing ticket prices, how does the industry capture all the additional value that could have been extracted from the ticket as an asset?
But more importantly, why care who the biggest fans of the artist are? Why aren’t we optimizing here for pure economic profit, Japan? Who really cares who gets to see your show?
In the west, there are huge amounts of value captured by promoters, Ticketmaster, on these transactions. The artist does, to an extent, care that their fans fill seats with butts, and cannot actually raise the face prices of the tickets without pissing off the fans. But then, how do we ensure proper allocation of resources across the market? Thus, we have the fall guy, the secondary market maker, to take the blame. We all hate Ticketmaster, right? It’s about preserving the image of the artist.
But, suppose a secondary market cannot exist legally, as in Japan. What would the proper pricing to match butts to seats be? Could Taylor charge $700 a ticket at face value? No! Her JP fans who expect $100 tickets would seek to Twitter and complain! So Taylor leaves money on the table. And so do Love Live or Im@s or Momoclo or Mrs Green Apple or anyone else.
So is Japan just bad at extracting willingness-to-pay? Where does all that spending power that’s on the table go? Well, it’s captured elsewhere in the fandom.
Value Capture
We in the west treat the concert itself as a monetizable scarce asset. The show is the company, and the ticket price is its share price. The Spotify or Youtube Music price is fixed, and the product is infinitely reproducible, so it’s not scarce. It doesn’t mean anything to have the CDs anymore. Concerts are where willingness-to-pay gets aggressively extracted and distributed to producers, platforms, scalpers, and middlemen.
Japan’s incentives for concerts are different. With the majority of revenue still coming from physical goods, there’s less pressure to extract every last dollar of willingness-to-pay from the live itself. Instead, fans can dump that remaining spending power into CDs, merch, fan clubs, acrylics, collectibles, and the rest of the ecosystem. The Japanese concert ecosystem is designed (or organically came to be?) to be a catalyst for consumer spending across the artist’s products, and the value is captured long-term through deepening fandoms and increased spend through physical goods and other associated products instead of the concert itself, and the fandoms and spend eventually reinforce each other. Lives are special little treats for the fans, reaffirmation rituals acting as retention mechanisms for current fans and conversion mechanisms for new ones.
Who do we blame?
As to which system captures value more equitably or efficiently, I don’t really know and can’t speak to that. However, it’s important to understand that concerts serve different purposes in the US vs Japan.
Why doesn’t Japan transition to America’s model? Surely if there’s a third-party market maker like Ticketmaster then people can blame their lack of access due to overwhelming demand on the market maker instead of on the producer, right? The main reason is that it’s kind of just illegal to do it, but the reasoning I think (at least my personal opinion) is that it feels better to leave the ticketing gods to RNG. If you don’t get in, it wasn’t meant to be, and oh well! Next time! The venue can only be a certain size after all, we get it.
There are other benefits to their model. Instead of scalpers or market makers capturing that remaining willingness-to-pay through resale, their deeply loyal fans can spend it on hundreds of dollars of CDs instead. Penlights, can badges, fan clubs, acrylics, oshikatsu, whatever else - the money (in theory) will go into the ecosystem anyway, and long term good will is generated. In the end, the money is not just left on the table; some or most of it just enters elsewhere.
Think of the $1.50 Costco hotdog (180 yen in JP). No way they’re earning money on that Costco hotdog. But that’s fine, because you’ll go in and spend money on some dumb stuff that you didn’t need. But more importantly, you’re thankful for Jim Sinegal for an environment where you can get a hotdog for $1.50. Costco shoppers are some of the most loyal shoppers out there, and once you’re a Costco shopper, unless you move out of the area, you’re most likely a Costco shopper for life. It’s the JP fandom way. You’re into Im@s for 20 years, and you dress up your kids in Im@s, and you’re a producer for life!
However, if we applied the JP ticketing system to western audiences, there’s no similar money sink that fans can dump their extra money into! They aren’t going to buy CD’s - who do you know still has a CD player who isn’t performative or a boomer? Spotify only costs a certain amount a month, so does Youtube or whatever, and the companies themselves and all the other parties take a cut out of that anyway. So the concerts need to capture the willingness-to-pay! Otherwise, it just never gets monetized! Sure, they might be long-term fans, but who cares? There is no Costco for them to shop in so you have to raise the price of that hotdog to $8 to capture their money.
I’m not saying the Japanese system is better than the west’s. In fact, I think it is often worse. I’d personally much rather have Ticketmaster than chuusen.
Building Scarcity
These are more or less my opinions, but I believe that as concerts nowadays are a form of participating in luxury activities and developing caste in one way or another with regards to your position in the fandom is important to the experience. And what is more luxurious than scarcity? It’s all about scarcity.
The key is differentiation, JP builds scarcity by products, the west does it by price.
Posting about something is akin to proving your worth, and in the US, the biggest fans are the ones who go to concerts. In JP the biggest fans are the ones who have the most merch, the ones who perform oshikatsu, the ones who buy all the CDs and are in the fan club, and have the most acrylics and can badges on their itabag. Because in Japan, if you didn’t get concerts, it’s “oh well, what can I do?”
Why the Japanese Market doesn’t care to make it easier to foreigners
Simply put, you don’t really spend that much on goods.
“Well, I buy my idol CD’s every time from Mandarake.” The artist and the music industry do not capture the value from resale markets.
“Well I contribute towards Japan’s economy through flights, hotel stays, etc.” The artist and the music industry do not care. Sure, it’s great for the taxpayers, but Pony Canyon doesn’t care (well, as much)
Every spot a foreigner takes up in a domestic JP live is a lost opportunity to retain a loyal domestic fan or convert a new JP fan who will then proceed to generate revenue for the artist for a long time through merch and other purchases. Costco doesn’t want you to access their food court if you’re not a member or you aren’t going to ever be one because you don’t live in a place near a Costco.
It’s not that they don’t want your money; you’re just not integrated into the monetization loop and if you aren’t, then they aren’t going to cater to you.
Is this good?
No, but it’s the way they do things. There are existing networks of scale that US artists and promoters and groups can leverage to capture more value in concerts that I imagine JP artists are able to, so it’s probably extra hard to do business here. I don’t really know too much about the percentages of revenue and kickbacks that Swift gets from her shows but it’s probably more than what Love Live would be able to get at Levi Stadium.
What can US fans do
Nothing really, JP might switch to more streaming platforms and less of a physical merch ecosystem but who really knows? But I don’t think complaining at them will do anything because they really don’t have an incentive (well, that they recognize) to make JP stuff available worldwide.
One of the main issues with merch and physical goods is that they don’t actually have amazing margins, and that it’s well, physical. You have to make it, you have to transfer it, you have to have it in shops or online, or available at events. If you’ve ever done buppan at a live you know it’s an absolute bear. The logistics of doing that at overseas events and capturing enough overseas monetization is not, well, great.
So there’s not much incentive to make the process easier for you. Some folks do it, like for instance Holo, but as Cover has expanded internationally already, it makes more sense for them. But for more niche stuff, lol.
I think the best way is probably to just more Spotify listens & Twitter follows lol.