IDG Connect

   Screen Shot 2015-07-29 at 1.02.57 pm


Screen Shot 2015-07-29 at 12.52.06 pm

For artists and labels yearning for closer access to their fans, music content startup Tokyo Digital Music Syndicates recently launched its vinyl pressing platform Qrates in Japan. Qrates provides artists with controlled distribution of their vinyl, and lowers production risks by collecting pre-orders from fans prior to production and thus eliminating the problem of dead stock. Artists can select the minimum pre-order requirement (starting from 100 orders) with Qrates offering handy tools along the way, such as a break-even calculator and sales statistics and reports.

While it’s easy to immediately discount Qrates as another Kickstarter or Indiegogo, Qrates markets itself as much more than just a funding portal, offering support across all stages of the distribution process. This includes custom record and sleeve design via a 3D imaging tool, promotion and website integration, plus the option to sell exclusive items along with your vinyl, all within a six-week turnaround. Artists can also opt to have Qrates pack and send orders direct to customers, thereby completing a 360-degree supply chain circle.

Because it has developed a streamlined, end-to-end distribution service, Qrates is also able to cut out several intermediaries traditionally involved in the complex production chain of vinyl pressing. This should in theory, put some of the profit back in artists’ pocket, with Qrates taking a 15% cut on all vinyl pressing orders, and 10% for artists who wish to sell back-catalogue vinyl.

While a vinyl pressing startup may sound out of tune in the digital age, the launch of Qrates in Japan is not without cultural significance. As the world’s second biggest music market, following the US, Japan is unusually attached to physical forms of music. According to the International Federation of the Phonographic Industry (IFPI), 78% of Japan’s music revenue comes from CDs and physical media such as vinyl which makes up 6% of the Japanese music market. This is in stark contrast to the rest of the world, with the global average of physical music sales at 46% and global vinyl sales contributing to 2% of total sales.

Part of the reason for Japan’s divergence in music consumption can be attributed to a lag in the adoption of streaming services such as Spotify and Rdio, which, conversely, dominate Western music markets. Spotify has been at a standstill for two years attempting to enter the Japanese market due to licensing negotiations with music companies. Unlike other world markets, Japan also shows a strong allegiance to local acts, and sales of Japanese pop continue to triumph over western artists.

In addition to structural disparity, Japanese consumers place higher importance on music merchandise and collectables than the majority of consumers in the West. Greatest hits albums tend to generate consistently high sales in Japan, most likely due to the artist-focused design of the packaging.

What the Japanese music market demonstrates is that rather than adhering to a blanket trend, the music industry still contains sufficient diversity to allow for marked differentiation around the globe. At least for now.

But back to Qrates. Since the 1990s, vinyl has remained a niche product, with the large majority of vinyl pressing factories closing their doors. Yet vinyl is seeing a resurgence in markets like Japan, as well as in the US, where both vinyl sales and music streaming rose by over 50% last year, according to one music industry monitor.

Due to the severe lack of resources coupled with this unexpected rise in demand, some vinyl producers are struggling to deliver on orders. There are even reports of large record companies paying in advance for vinyl runs just to ensure they reserve their spot in limited capacity production lines. This ultimately forces smaller labels and artists right to the back of the queue.

This is the gap Qrates obviously hopes to fill in Japan, and its emergence may add momentum to the theory that digital adoption is not always a linear process. Much like smartphone adoption in Japan, certainly what music consumption has shown is that consumers are still exercising their right to choose in this market, often yoyo-ing between past and present technologies, rather than steadily climbing the ladder of digital progression.