Sales of music CDs in Japan have been declining steadily for a number of reasons. Most significant are widespread piracy, Japan’s aging population, and cooling consumer sentiment caused by the economic recession. Currently, annual physical music sales in Japan total about 310 billion yen, down by roughly half from 1988 when CD sales peaked. On the positive side, there has been enormous growth since 2005 in the volume of music sold over networks, chiefly to cell phone subscribers. This market segment had sales of 91 billion yen in 2009. But this growth has not offset the steep drop in sales of packaged recorded music. This is why the Avex Group is not optimistic about the future for music companies that rely on a conventional record-style business model.

To adapt to changes in market conditions, the Avex Group is moving away from a business model that is heavily dependent on CDs and other packaged products. We are instead increasing emphasis on live performances, merchandise, fan clubs, appearances by artists in movies and TV program, and other activities. Our objective is to assemble a production-based business model that incorporates a multitude of activities with a 360-degree perspective.

Going one more step, we are building platforms for each business. We want to generate a steady stream of revenue by functioning as a source of artists and content affiliated with our group as well as with other organizations. As one way to accomplish this goal, we launched in May 2009 the BeeTV service, which is a video content distribution platform operated in conjunction with NTT DOCOMO Inc.

We have a strong commitment to the spirit that has guided Avex since its inception: “No one does it. So Avex does it.” Our group will continue to create its own markets in order to become a 360-degree entertainment organization that can prosper and grow in the “post-package” era of entertainment.

Masato Matsuura
CEO
Avex Group Holdings Inc.