Chapter9(the last):The Introduction of Music Streaming Services and their Benefits

Once again, I would like to try to summarize the advantages of introducing streaming services.

1)    The Dominant Countermeasure against Illegal Distribution SitesAs explained with Spotify above, the most powerful countermeasure agains illegal distribution sites is to provide a convenient and superior service. It does not mean that every user wants to get free illegal music. Related to the Japanese copyright law, the sense of obedience towards the law is rather high compared to that of various foreign countries, thus setting a legal service with reasonable price options would make many music fans chose this service.

2)    Countermeasures against Video Sharing Sites

Currently, it has become a typical behavior to search video sharing sites such as YouTube when you one is interested in an artist or song. Youtube is not an illegal service, but the advertising revenue model does not provide a big share for the rights holder of the music. With popular streaming services, it is possible to offer the user an entrance to “listening stations” and recapture this position from video sharing sites. In that case, a bandwagon effect is expected leading to various businesses such as collecting marketing data or e-commerce of related products.

3)    The Sales and Promotion Effect on Conventional Download and Package Services

As described above, instead of offsetting the sales of downloads and packages, streaming services rather increase contact chances and thus lead to promotion and sales effects as has been proven in Europe and America. Due to wider penetration with broadband services, which caused a devastating damage on package businesses, a phenomenon could be observed in Korea where growing streaming services also increased the package sales.  As radio stations were promoting record companies, streaming services are considered to have a similar effect on the number of music fans on the internet, increasing them.

In addition, the spread of streaming services will produce possibilities for new services from IT companies and various industry branches freshly entering the market. In the United States a pseudo DJ performance service called[1] has been attracting attention. Moreover, with having more than 150 million users, the PANDORA[2] internet radio service that has a unique recommendation system accomplished IPO (initial public offer) at the New York Stock Exchange in June 2011. The creation of such new businesses is also expected to happen in Japan. Record companies should understand this situation as an opportunity to release a number of new businesses related to music and in order to expand their revenues.

4)    The Possibilities for Expanding Overseas Exports

The spread of cloud computing and streaming services will also expand the potential for overseas export.

Until now the worry about the negative influence of piracy could not be actively tackled. The copyright idea and the levy mechanisms in developing countries are underdeveloped, CD sales are, bootleg master circulation and such deeds, record companies work half hearted, not impossible. That the record companies were unwilling to sell CDs to countries where the concept of copyright or levy mechanisms were still at a developing stage was understandable, because selling CDs to those countries was almost an act of contributing to privacy. Regarding various Asian countries including China, if there was a cloud-based streaming service, the uneasiness existing until today would significantly decrease.

I would like to see this as an opportunity to actively expand overseas.


Cloud Computing as a Necessity for a Spread of Streaming Services

Because the expectations in streaming services are big, I would like to touch upon the challenges that are necessary for their distribution.

Compared with download types, streaming services require a stable infrastructure. In addition to a stable environment on the device, security and high quality distribution has to be implemented in the cloud technology.

Furthermore, for one piece of musical work various information have to tied to the song. This information becoming meta data is not only important for the handling of copyrights but also for marketing purposes.

All companies dealing especially with meta data construction, continuous sorting and the infrastructure maintenance are individually often working inefficient and wasteful. That’s why it would be necessary to create a public framework with common infrastructures. Another merit of the development of new infrastructure environments is that it could also lower the entry barriers for new businesses. Apple and Spotify which are vertically integrated companies are doing everything in-house, but wouldn’t it be a good idea “Daidodanketsu”[3] would be made into the industrial standard for Japan?

Sharing the basic fundament but competing in terms of user service would be of benefit for the user and the rights holder as well.

As described above, even though the environmental change happens in great speed it also has to be seen as a great opportunity. I want to summarize this paper with my hope that 2012 will be the turning point for structural changes in the music business and expect business to turn into a direction that promises rise.

[1] Social Media Website that allows users to share music. In so called “Rooms” users play music to other members of in a room.

[2] Also Pandora Radio, is an automated service that recommends music to its users.

[3] community based on common interests

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Chapter8:The Potential of Streaming Services and the Need for Cloud Infrastructure Maintenance

The Sweden based streaming service Spotify has been the focus of great attention. In addition to 12 countries in Europe, Spotify started a full-scale service in the United States in September 2011. It appears as if the number of members has steadily increased up to more than 4 million paying subscribers in August 2012. 

One of Spotify’s greatest features is its perfect legality. Based on a Peer-to-Peer[1] management technique, the service has also received funding from major record companies. Following the policy of “providing a high level distribution service that is more convenient than illegal sites” and because of the so called “Freemium”[2], free of charge advertisement service, and a 2-step charging system the number of users is increasing.

File sharing software which certainly can be called the arch-enemy of the music industry, lead to the development of this technology and is of great interest.

Another feature is its affinity to other social media. It is collaborating with the worlds biggest social media platform Facebook. From the beginning of the service, the relationship has been very close, which was also uttered by the Facebook Management with phrases such as “Facebook–Music is already there. It’s called Spotify”. The system of getting to know music recommended by a friend seems to be exceptional.

In England, France and the United States streaming services are not understood as merging and each other offsetting download and package businesses, but rather has data shown that there is a synergy effect, and thus global record companies show a positive attitude and engagement towards music streaming services.

The environmental changes including the development of internet technology, the possibility of always being connected to communication environments, and the wide spread of smartphones have an influence on an entire lifestyle and are thus expected to change the way of listening to music as well. It is forecasted that the fundamental change of recent years which can be called “From Ownership to Usership” will most likely also lead to a change in ways of listening to music away from downloading forward to streaming.

Nevertheless, since Apple, which owns a great share of the western market, has started its iCloud[3] personal cloud computing service, it seems as if the transition from download to streaming will be postponed.

In Japan, one of the iCloud functions, namely iTunes Match[4], can not be used, because negotiations with record companies have been on hold. It seems there have been critical comments from some users, but nevertheless there is a compelling number of CD rental stores which is an unavoidable feature of Japan. In the first place, Apple did not assume the presence of rental shops when designing its service, because rental businesses like the Japanese do not exist anywhere else outside Japan. The ripping from rental CDs as well as downloads from illegal sites would be converted into high-quality sounds once iTunes Match could be used. It can be called “file laundering”, comparable to money laundering. The iTunes Store which owns a majority in the global market share has less than 10% share in Japan. Outside of Japan record companies have a contract which makes them pay royalties to iTunes , but taking the characteristics of the Japanese market into account it is believed to be difficult to introduce such a system in Japan.

Here, I would like to touch upon an amendment to the Copyright law which was passed in June 2012. In relation with the music industry the so called “Illegal Download Regulation” is now in focus.

Users who knowingly download from illegal sites and did not have to fear any penalties until then, are now subjects to penal action. It is an offense subject to prosecution only on complaint[5]. A simple “punishing a crime to make an example for others” is not going to happen. Thus, more important is that the record industry has a social responsibility providing a legal, convenient and inexpensive service on the internet. Until the law is being enforced in October 2012, a legal and convenient music-listening environment for net-users should be provided.

〜from “WHITE PAPER of DIGITAL CONTENTS in JAPAN” (supervised by METI) (translation:Benjamin Tag) 


[1] Computer network, where each participating computer can act as client or server for the other computers.

[2] Mostly online business model where basic or goods are provided for free. Advanced features, functions and services require a fee.

[3] Cloud computing and cloud storage service from Apple Inc.

[4] Part of iCloud that requires an annual subscription fee. It offers non-protected music files. It enables the user to store songs that are available on iTunes in the iCloud. Unavailable songs will be added to iTunes by Apple.

[5] Type of crime which requires a formal complaint from the victim in order to prosecute. In English often “Antragsdelikt” (from German). 

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Chapter7:The Prosperity of Nico Nico Video and the Significance of Yonezu Genshi appearing from Dojin Music

The Dojin Music[1] scene shows increasing prosperity and has its home ground in the activities of Nico Nico Video.

The concert event “Nico Nico Large Conference” that has taken place nationwide since 2009, has grown and on the 28th and 29th of April 2012 the so called “Nico Nico Super Conference” was set on stage in Makuhari Messe/Chiba. The number of attendants reached approximately 100,000 over two days, and it is said that about 3.5 million people were following the live net broadcast.

The realm called Doujin Music is a music movement that neither quite fits into the scheme of professional or amateur nor major or indies.

It is the music version of the “comic market” that has existed for comic enthusiasts from the 1980s, and it has grown big through the market penetration of Miku Hatsune[2] and Nico Nico Video[3].

In the following I am going to check on the background of the rise of Dojin Music. In the first place it is due to the advancement of digital technology. Computers and music production software became cheaper, easier to use, and the barrier to making music was significantly lowered, thus it became very easy to produce music when you have a computer. For the production of so-called Desktop Music (DTM) it is not necessary to be able to play an instrument. However, since the complete work is done alone at home, it was difficult to share the music with others.

Then the Vocaloid[4] came up, represented by Miku Hatsune. The Vocaloid developed by Yamaha is a human voice synthesizer, and was used by Crypton Future Media Co., Ltd. to personify a character (give it a voice), and thereby a lingua franca for amateur creators was born. Amateur musicians that used the computer for music production, got connected by making use of the same “singer”. Miku Hatsune was used in a U.S. American TV commercial for Toyota and has not only attracted support from overseas fans of Japanese culture, but rather became a symbol for Japanese subculture.

Nico Nico Video became the publishing home ground for the so called “Vocalo P”[5] music creators that use Miku Hatsune. There is a feature in this specific Japanese movie sharing service, where comments called “Danmaku” (Eng: barrage) written by users are recorded and shown, often overlapping, in the video. By reading and writing these comments, sympathy is visualized and spread over and beyond time. The so-called Otaku (Eng. often: geek) who have the existing anime and comic culture and aesthetics in common, were the center of the support. The Miku Hatsune music by amateur musicians has started a great movement. A vast number of songs has been released including hits with more than several million views. The popular songs were released by other musicians with different arrangements, spread by users (calling themselves “Utaite” (“singer”)) singing them without using Vocaloid, and several other ways. Illustrators called “Eshi”[6] were uploading videos matching the music, and thus formed a great culture based on Miku Hatsune together with the musicians.

From one original piece of work (video), countless numbers of derivates were created, which themselves became the groundwork for further secondary creations. This amoeba-like infinite chain of creative activity is called “N Creation”[7] (N = 1, …, n), and is the distinctive feature of Doujin Music.

“Vocalo P” present their pieces of work by making Miku Hatsune sing their songs. The “Eshi” who like the music make movies for the song, and the “singers” who watch the video and like the song sing it and upload it to Nico Nico Video. The whole process is visualized and the number of plays counts as hits. Movies going up in the ranking spread and become more popular. This proves the functioning of the UGM[8] (User Generated Media) system with its growing number of users.

The total amount of sales at Doujin Events cannot be exactly identified and it is very difficult to estimate the market size, but Doujin Music is starting to have a big impact especially on the younger generation, e.g. Miku Hatsune is becoming popular amongst teenage girls, and the average view time of Nico Nico Video of people in their early 20s is about 45 minutes a day.

In 2012 a milestone making artist has appeared, Yonezu Genshi.

He has become a popular “Vocalo P” under the name “Hachi”, and showed an overwhelming number of plays on Nico Nico Video, including “Matryoshka” with more than 5 million hits. “Hachi” began to use his real name Yonezu Kenshi, and started his singer-songwriter career with an album release in June 2012.

There has been cases where popular creators and singers on Nico Nico Video published their work from major labels, but this still has only been a matter of advertisement towards Nico Nico Video users. However, Yonezu Genshi became the first who has been evaluated as an artist by the mainstream music scene, while maintaining his Dojin Music activities.

He was featured on covers of free papers of CD shops, rock magazines, in long interviews and he was treated as a promising new-coming rock artist. The first album “Diorama” placed 6th in the Oricon weekly ranking and became a sales’ success. The appearance of Yonezu Genshi can be an opportunity to unite the Dojin Music scene with the music market of major record companies, that has been separated until then. It also presents a new pathway for amateur musicians to making a major debut and becoming professionals.

The influence of Dojin Music which is based on the Japan specific culture UGM, on the music business deserves ongoing attention.

〜from “WHITE PAPER of DIGITAL CONTENTS in JAPAN” (supervised by METI) (translation:Benjamin Tag)


[1] Also called otokei dōjin in Japan, is a sub-category of dōjin activity. Dōjin are basically non-official self-published Japanese works which can be based on official products or completely original creations. (Wikipedia)

[2] A virtual character that was designed in order to create a mascot for an artificial singing voice.  The voice is based on the software synthesizer Vocaloid 2.

[3] Japanese Video Host service, provided by Niwango. One special feature is that comments by viewers are shown in the video and not beneath.

[4] Yamaha software synthesizer that creates an artificial singing voice. For this it requires the input of melody, text and pronunciation specifications.

[5] People creating their music with the help of Vocaloid are called Vocaloid Producers, short: Vocalo P.

[6] An old expressions for singer and painter. They perform on NicoNicoVideo.

[7] One piece is used to create various derivates.

[8] Places on the Internet where the traditional producer-publisher separation and classification is not clear anymore.

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Chapter6:Issues and the Status Quo of J-Pop Gathering Worldwide Support

Overseas, the term “Cool Japan”, even though somewhat perceived as a little worn out, is popular and deeply rooted in Japanese music and thus still spreading today. However, many Japanese pop culture festivals associated with anime and comics are being carried out worldwide. (table-8)

Its main representative is the JAPAN EXPO in Paris that started in 2000 and has reached a record high in 2011 with 190,000 visitors (announcement by organizer).

The common characteristics of these J-festivals are that they have occurred and grown among users without being recognized by Japanese industry and government officials.

NHK’s subsidiary Japan International Broadcasting Inc. airs the music program [J-Melo][1] in 130 countries and regions worldwide and after each broadcast a lot of fan mail reaches the official program-site from all over the world. It is becoming evident that there are “J-Fans” all over the world; of course in Europe, the United States and Asia, but also in the Middle East, Central and South America. In 2010 the three big music publishers and production groups (Japan Association of Music Enterprises JAME, The Federation of Music Producers Japan FMPJ, Music Publishers Association of Japan MPA) established SYNC MUSIC JAPAN which creates a strong presence with a site that manages official artist profiles in English and Chinese and publishes press releases and so forth. The current situation is defined by many inquiries from organizers of Japan Culture Festivals in overseas,  and by foreign J-Culture Fans longing for official information. Moreover, the number of tours by Japanese artists outside Japan has been steadily increasing. (table-9)

In 2011 there were two big topics, which I would like to introduce in particular.

The rock band L’Arc-en-Ciel carried out a world wide concert tour in the context of their 20th anniversary celebration. The tour entitled L’Arc-en-Ciel WORLD TOUR 2012 surpassed every other Japanese artist’s tour in size and became a great success.

It was carried out worldwide in the following 14 cities: Hong Kong, Bangkok, Shanghai, Taipei, New York, London, Paris, Singapore, Jakarta, Seoul, Yokohama, Osaka, Tokyo, and Honolulu, and mobilized a total of 450 000 people.

It was the first time for a Japanese artist to carry out an arena-class world tour and became a huge success for the entertainment industry. It should be stressed that the tour was promoted by an agent in the UK, and organized similar to the ones of big European and American artists. In contrast to most Japanese artists until now that where rather “working away from home” or “traveling”,  L’Arc-en-Ciel was treated as the main artist of a tour based on a local entertainment system. Moreover, it was the first time ever a Japanese artist performed as the main act in the so called world’s most famous arena, the Madison Square Garden in New York/USA. Therefore,  L’Arc-en-Ciel have set various milestones with their tour, and from now on can serve as a guide for Japanese artists.  

I would like to pick up on one more case, namely the album of Yuki Saori. She is a famous singer who sing old fashioned music.

Yuki Saori & Pink Martini’s album 1969 was responsible for surprising news when it was ranked 1st place in the iTunes Jazz Charts in the U.S. November 2nd, 2011. Pink Martini is an American 13-piece jazz orchestra, that has covered full-length Japanese pop songs on this compilation. The album title refers to the year Yuki Saori had her debut, and has released “Yoake No Scat” (Dawn Scat) that became a smash hit and was ranked # 1 in the Oricon Charts that year. All chosen tracks for the compilation have a connection to the year 1969.

Following the # 1 rank in the United States, it also appeared as # 1 in the Canadian “World Music” iTunes charts and achieved more top ranks in various other categories. The CD album which was released in October ranked # 6 in sales in the Greek “IFPI Album Charts”, # 18 in the “HMV International Charts” in Singapore and could enter different charts in many other countries as well.

It is said that prior to the production of this album, Pink Martini’s leader Thomas Lauderdale found an original album of Yuki Saori in a used-record store and bought it because he was attracted to its jacket. It is possible to say that this episode tells the story of Japanese traditional popular music (kayokyoku) as being not at all inferior to western music. Kayokyoku is one root of J-pop. The producer of the album 1969 is Gou Satou who has experience with the production of the big overseas hit “Shima Uta” (Island Song) by The Boom. This occasion promised great export potential for J-Pop.

The catchphrase “Cool Japan” evokes interest in overseas exports of Japanese music, but the time of general statements is over; it is already the phase of detailed discourse. It is necessary to establish monetizing schemes that are steadily profitable.  The export of entertainment content has a broad influence on many levels, it is an important measure to elevate national power, it unites the public and private sectors of foreign countries, and it is promoting exports in general.

Even though the Ministry of Economy, Trade and Industry (METI) has promoted the “Tokyo International Music Market (TIMM)” as part of the “Japan International Contents Festival (CoFesta)” for 8 years now as a showcase for Japanese music, the results can not be seen yet. METI’s portalsite Cool Japan Daily as well offers a refined cultural discourse, but lacks an insight into business schemes or the support for them. Not to mention the example of South Korea where the government plays a very important role in the establishment of profitable business models.

I am hoping for a as quick as possible strengthening of the content export policy.

【table-8:J-culture festival】


【table-9:Overseas tours by Japanese artists】


【table-10:L’Arc-en-Ciel 20th L’Anniversary WORLD TOUR 2012】


[1] Entirely English, weekly Japanese music television program by NHKIt is recorded entirely in the English language.

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Chapter5:The long-term decline of the Karaoke market and its Potential

The role Karaoke business plays on the Japanese music market is big. Although it fell, with 451,1 billion Yen in 2011, it was still bigger than the CD market.

Even though karaoke services are widely penetrating the mainstream and the decline in recent years has just been small, the long-term fall doesn’t take a halt. (table-7)

Under such circumstances, new business models that make use of karaoke boxes are sought after.

Managed by XING, the branch’s number 2; JOYSOUND has more than 6 million subscribers to their Karaoke-SNS service “UtaSuki Douga” and is gaining great popularity. It enables “UtaSuki” members to upload their video part of a duet sung by themselves and use social media functions without knowing the duet partner.

Besides restaurants and so forth, there are 30,000 karaoke boxes existing nationwide at present. Most of these are equipped with Internet connections and Set Top Boxes (STB)[1] and are thus “places” that provide the user with a variety of experiences. Regarding a big group of karaoke users, namely people who like music but are not extreme fans, the emergence of a new business model that utilizes karaoke boxes and telecommunication systems is expected.



〜from “WHITE PAPER of DIGITAL CONTENTS in JAPAN” (supervised by METI)
 (translation:Benjamin Tag)

[1] Device that contains a tuner and connects a Television set with an external source of information.

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Chapter4: Solid Live Entertainment Business and Royalties

Regarding Live entertainment, the number of spectators stayed solid, and increased by 3% compared to the prior year. A bad influence because of the Great Eastern Japan Earthquake and the accident at the Fukushima nuclear power plant have been a concern, but regarding the crisis there is also the side that the value of emotional support through music has been re-evaluated.

The phenomenon that foreign artists worry about performances in Japan applied only to some, and did thus not cause big damage.

In addition, apart from the numbers in table5, live concerts by so called amateur and Indies bands in small venues are progressing.  These small scale live houses are spreading across the country in the heart of big cities and create networks. With a scale of several hundred people and more than 3-5 bands performing every day, these stages are sustaining the base of Japan’s live entertainment.

Hereafter, in order to see the changing tastes and likes (different from mainstream), a rather broad range of generations including elder and younger has to continuously go to concerts for which a great effort is necessary. 

The number of concerts that take advantage of digital cinema distribution systems (ODS)[1] has increased. The company Live Viewing Japan specializing in ODS has been founded and creates solid results. As a service live viewing has a new revenue system and at the same time is a promising form of music export, since it also responds to the needs of overseas fans that want to see a concert of Japanese artists.

I also would like to touch upon “Club Regulation Issues”.

The regulations affecting clubs that focus on DJ events, are unmasking social problems. Because these clubs are often late-night businesses they are subject to the“Fueiho”[2]  and thus the cases of police arrests for illegal business have increased. The correspondence on police’s side has changed, because the decision that clubs are becoming breeding grounds for drug dealing and underage drinking seems to be working. Unfortunately, in the past this was the case in some venues, though most clubs are managed soundly and do not allow minors to enter late at night. Not to forget, clubs are transmitting music information, and play a cultural role as centers for communication. The so called dance-music[3] genre is a DJ driven global music scene. Over the years, it has greatly contributed to the development of J-Pop music. And if clubs would disappear from Japan, because of tighter police regulations, we have to be aware that this would cause irreparable damage on the Japanese music scene and music business. Thus, the reevaluation of the merits of clubs in Japan and the formation of a social consent including the operating existent laws is desired. To do this, it goes without saying that on club management side a wholesome management and the legal disclosure of information is necessary.

Copyright revenues have also continued leveling off.  Table -6 shows, the collection of transition charges by copyright control and management organizations other than JASRAC (Japanese Society for Rights of Authors, Composers and Publishers), for example JRC (Japan Rights Clearance) which is similar to JASRAC has been increasing in recent years. This is probably an evidence for the penetration of the music business.

I think it is an important task to well balance the right protection and promotion of distribution of new services in the IT business together with more transparency in distribution and collection.

〜from “WHITE PAPER of DIGITAL CONTENTS in JAPAN” (supervised by METI)
 (translation:Benjamin Tag)

【table-5:Number of shows and audiences】



[1] Other Digital Stuff 

[2] Businesses Affecting Public Morals Regulation Law

[3] a genre of pop music 

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Chapter3:The End of the Chaku-Uta and the Limits of Internet Downloads

As expected in the White Paper 2011, the decline of the mobile distribution market for the so called “Chaku-Uta”[1], a ringtone exclusively used on feature phones, is rapidly progressing. (table-4)

In 2011 the showed a decline of more than 20% down to 78% market size compared to the year before; and in 2012 as well, every months’ sales seem to be lower than those of the prior year and each month of the former year.

Starting with ringtones as “Chaku-Melo”[2] (ring-melody) made from famous tunes, the mobile market in Japan experienced a continuous upward trend peaking in between 2008 and 2009 from where it changed into a declining direction.

The cause is obvious. Regarding traditional feature-phones (so called Galakei, Galapagos Keitai)[3], content providers offered tunes and compositions within the framework provided by the telecommunication companies, which was a “Closed World”.

On the other hand, when smartphones, mobile phones with computer functions such as being able to freely access the Internet, connect with illegal distribution sites it is still difficult and will be so for a while to realize disconnection of these phones. Until then, it is necessary to re-define the mobile business with a different idea.

In addition, the sales prices also have a great impact.

Hitherto, the price for a “Full Chaku-Uta” was well balanced with the price of a CD at 300 to 400 Yen (3.8〜5 USD) for one song, but regarding smartphone sales, Apple already set the standard pricing for 1 song at its iTunes Store at 150 to 200 Yen (1.9〜3USD), so there is no choice but to meet this price range. Even if the number of downloads with smartphones was the same as those of the “Full Chaku-Uta”, the sales would only be about half.

In 2011 Internet download distribution grew by 115% compared to the prior year. Since the fiscal year 2010 the market scale has been less than 20% of the mobile market and could thus not cover the decline of the “Chaku-Uta” market with a whole distribution at 84% compared to the prior year.

The future of Internet downloading is supposed to take the form of an individual user deploying several devices such as computers, tablets, smartphones, and the differentiation with mobile distribution will naturally disappear.

In addition, streaming services will spread, download service models, music and song flat-rates (unlimited listening), subscriptions services (monthly billing) will require a variety of billing plans to enable a proper use.

In the following I would like to focus on the content distribution business services and the user trends.

〜from “WHITE PAPER of DIGITAL CONTENTS in JAPAN” (supervised by METI)
 (translation:Benjamin Tag)

[1] Also “truetone” or “realtone”; a song from a record (mostly CD) that has been encoded into a simple audio format such as MP3, AAC, or WMA in order to make it useable as a mobile phone ringtone.

[2] Ringtone, sound made by a telephone to indicate incoming calls or messages.

[3] Japanese Mobile Phones are designed for Japanese users and are highly evolved, but never developed like this abroad, and could thus not exist outside of Japan. 

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