MMW-51 -- Japanese Ringtone Providers Continue to Move Overseas

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J@pan Inc Magazine Presents:
M U S I C M E D I A W A T C H
Commentary on the week's music technology news
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Issue No. 51
Wednesday, October 22, 2003
Tokyo

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CONTENTS

++ FEATURE: Japanese Ringtone Providers Continue to Move Overseas

++ NOTEWORTHY NEWS:
** iTunes for Windows Tops Million Downloads in First Few Days
** Webcasting Stations Must Pay Royalties
** More than 200 Music Swappers Receive Warnings

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++ FEATURE: Japanese Ringtone Providers Continue to Move Overseas

For much of the past year, the domestic Japanese ringtone industry has
been in a state of stagnation. While revenues are still strong,
subscriber growth has slowed considerably, and the providers are
engaged in a constant uphill struggle to adapt their songs and
software for new handsets. Faced with a saturated domestic market and
stiff competition from other music-related services such as chaku-uta
(KDDI's songclip download service), most Japanese ringtone providers
are looking for ways to continue their growth without major changes to
their basic business. One strategy is overseas expansion.

For providers here, setting up shop in a foreign market offers a great
chance to leverage their immense song catalogs and technical
expertise. Yamaha and Faith have been quick to establish not only
services, but also their ringtone file formats and authoring software
in European, US and Asian markets. In particular, the US market
(Verizon and AT&T Wireless) is attractive to many Japanese companies
at the moment, and providers such as For-side.com and Oricon are
rumored to be in discussions with the carriers there about setting up
services in the coming months.

In Europe, while DoCoMo's i-mode service has yet to really take off,
other carriers and platforms are welcoming Japanese ringtone providers
with open arms. Telefonica in Spain, Wind in Italy and, of course, the
growing Vodafone Live service are all capable of supporting polyphonic
ringtone download services and are attracting growing numbers of
Japanese providers, as are carriers in South Korea and Hong Kong. In
some cases, the carrier may take as much as 40 percent of the total
revenue (hence the warm welcome extended to Japanese ringtone
services), but the sheer number of potential customers is often enough
to make the venture worth the heavy royalties and setup costs.

And speaking of setup costs, the obstacles to setting up an overseas
service can be huge. Not only are copyright laws different in each
country, but there are also major technical and production challenges
to be faced. Establishing a service with Verizon in the US, for
example, requires each provider to develop its own Brew software
application that effectively acts as the browser software for the
ringtone service. Japanese providers must also learn to deal with new
formats such as SP-MIDI and need staff who are in touch with the local
market. Finally, handset differences have so far tended to be more
severe in the overseas markets, requiring a much greater degree of
on-site testing.

Despite these challenges, though, more and more ringtone companies
here are moving toward establishing overseas services, and those who
are already well-entrenched in foreign markets are looking to expand
even further into newer, emerging platforms. The pattern that seems to
be unfolding here is that these companies are adding less in the way
of new software on their domestic services, focusing instead on
adapting their existing software such as trial-listening and karaoke
apps for new models (no small task in itself). At the same time, they
are committing significant resources to researching overseas markets
and technical requirements, as well as actively negotiating with
foreign carriers.

-- Steve Myers

Link:
"Ready to Rock" from February 2003 explains KDDI's chaku-uta system.
http://www.japaninc.net/article.php?articleID=1014

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++ NOTEWORTHY NEWS

** iTunes for Windows Tops Million Downloads in First Few Days

In brief: Apple Computer announced last Monday that more than a
million copies of its iTunes software for Windows had been downloaded
since its release the previous Thursday. In addition, Apple said it
has sold more than a million songs using the software in the same
period. The Windows version of iTunes is expected to further increase
sales of Apple's iPod digital music player.

Source:
http://news.com.com/2100-1046-5093702.html

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** Webcasting Stations Must Pay Royalties

In brief: A US appeals court on Monday upheld a previous ruling made
by a lower court that radio stations must pay royalties to the artists
and record labels whose songs they play on the Internet. Last year,
the Copyright Office set the royalty rate at around one cent per hour
for each listener, but this was reduced by the US Librarian of
Congress for the smaller, Internet-only broadcasters.

Source:
http://news.com.com/2100-1027-5094122.html

Link:
"A Web of Rules" from November 2002 looks at Internet law in Japan
http://www.japaninc.net/article.php?articleID=945

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================================================

** More than 200 Music Swappers Receive Warnings

In brief: The Recording Industry Association of America (RIAA) began
sending out warnings to 204 suspected users of online music-sharing
software last week, saying that lawsuits were being prepared against
them. The recipients were given 10 days to contact the RIAA to discuss
a settlement. The association says that of the 261 lawsuits filed last
month, it has so far settled 64 of them, receiving an average of
$3,000 per suit.

Source:
http://story.news.yahoo.com/news?tmpl=story&ncid=&e=9&u=/ap/20031019/
ap_on_hi_te/downloading_music_warnings_6

Link:
"File Swappers Download 75 Million Music Files" from August 2002
http://www.japaninc.net/article.php?articleID=859

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Subscribers: 2,020 as of October 22, 2003

STAFF
Written by: Steve Myers (steve@thetamusic.com)
Steve Myers is president and chief enthusiast of Theta Music
Technologies, which specializes in the development of music-related
software applications.

Edited by J@pan Inc editors: (editors@japaninc.com)

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