Observing Changes in the Music Industry: Structural Shifts and Emerging Demands Brought by Digitalization (Part 1)

The advancement of digitalization is bringing structural changes to every industry. Transformation SHOWCASE reports on what changes are occurring across various industries and what "next opportunities" are beginning to emerge within those changes.

The entertainment industry is one such sector. Digitalization is altering business structures and sparking new movements. This article focuses specifically on the music industry, featuring interviews with Mr. Hide Hosaka, Ms. Yoko Tonomura, and Mr. Yusuke Togashi of Dentsu Music and Entertainment Inc. (DME). We heard about the real-world challenges the music industry faces as it confronts transformation amid advancing digitalization. This coverage will be presented in two parts.

Changes in the Music Business within the "Advertising Marketing" Domain

Q. First, a basic question: What kind of business does DME operate? While it's a company in the music industry, it seems different from what are typically called "record companies" or "labels" – companies that sign artists directly or release music themselves.

Togashi: DME engages in various music-related businesses. One of our largest segments is the "advertising business," which matches artists and songs with corporate advertising, primarily commercials. Another core business is the "rights business," where we act as copyright holders ourselves, managing song copyrights, handling contracts, investing in new content, and supporting artist activities. These two areas form the twin pillars of DME's business. A defining characteristic of DME might be that while it possesses the function of protecting music rights, it also makes the "advertising business" – which connects music with companies to create new value – a central pillar of its operations.

Regarding the "Advertising Business," we essentially provide all solutions related to advertising music needed when companies launch advertising campaigns like TV commercials. Among these, tie-ups with artists are a key element. We match artists with companies based on the company's needs, considering the artist's image and fan base. For companies, partnering with artists provides significant marketing power. Conversely, for artists, increased media exposure through commercials offers substantial benefits. Creating these win-win relationships is our job.

Q. Artist tie-ups have long been a common practice in advertising marketing. What are the recent trends or tendencies in this area?

Togashi: Traditionally, "CM tie-ups" primarily targeted well-known major artists, with campaigns centered around mass media like TV and radio. Recently, however, corporate advertising campaigns have shifted beyond TV commercials to online platforms. This has broadened the range of artists we can propose to companies. Now, not only major artists but also indie artists popular with specific target demographics are being considered as tie-up candidates. Metrics like social media follower counts and YouTube video views have become indicators of "reach potential." From a target efficiency perspective, artists who can effectively reach specific generations or categories—such as those "trending within a particular generation or genre" or "popular on TikTok"—are increasingly valued.

Meanwhile, artists themselves are changing. In the past, tie-ups often failed to materialize unless mass media exposure—like "how many times a TV commercial airs"—was guaranteed, as the benefits of providing music or appearing in the campaign were seen as minimal. Recently, however, there's a growing recognition that even campaigns focused solely on web presence are crucial for an artist's own promotion. This shift is likely making tie-ups easier to secure. Indeed, especially among younger audiences, online and social media music culture has permeated, and web media and social platforms have become central for gathering music information. Consequently, leveraging these channels for promotional campaigns is increasingly vital for artists too.

Hosaka: In terms of adapting to digital, the music industry has been remarkably quick to respond. The rise of music streaming services has obviously digitized how music is consumed, but it has also drastically changed how artists emerge and develop. We've seen cases where people who released original songs on video-sharing sites or composed Vocaloid tracks went on to debut and become major artists. They're now often called "DIY artists" – creating their own songs, uploading them online, and even handling online sales themselves. Some artists leverage social media promotions to gather large fanbases. This shift might even dilute the very meaning of "major label debut." More and more artists are emerging with substantial followings even before their official debut. Previously, the standard path was to debut on a major label, boost CD/DVD sales, and grow into a popular artist. Now, however, the sheer number of fans you have upfront is paramount. This trend became quite pronounced around three to four years ago.

Matching visuals and music. What is "synchronization business"?

Q. I see. I had sensed that digitalization was changing how music is "listened to" and "sold," but it seems the very "way artists are born" is changing too. Consequently, the characteristics companies seek in artists for marketing are also shifting. Mr. Tonemura, you mentioned being involved in the business of matching advertising with music. Could you tell us specifically what kind of work you do?

Tonomura: In our industry, there's an area we call "synchronization business." This involves synchronizing, or matching, "music" with "visuals." For example, synchronizing music with films or synchronizing music with games. Situations where there is some kind of "visual" material that requires "music" exist everywhere, right? Within that, I specialize in the business of synchronizing music with "advertising" visual materials.

In terms of "adding music that matches the visuals," whether it's film, games, or advertising, the principle is the same. However, I personally feel that "advertising synchronization" is a bit unique. This is because advertising involves the "advertiser," meaning the client company. They have specific target audiences they want to reach as a business, and they have a corporate image or brand image they want to convey to consumers. You need to fully understand all these aspects and then synchronize the music that best matches them. In a film, for example, you can directly convey the vision of the creators—the director or music supervisor—through the music. But with advertising, you must also consider the advertiser's vision and how it relates to the entire campaign.

On the other hand, the same piece of music can appear to change its character when paired with specific visuals. Music has its own personality, and the artist who created it has their own intentions. It's not simply a matter of paying a fee and using anything. Understanding these nuances is crucial when syncing music, so it's not as simple as just choosing a track that fits the visuals. We properly negotiate with the artists, convey our intended use, and only proceed to contract once they are satisfied. This includes handling the contractual rights arrangements; I professionally serve in an interpretive position between the artists and us.

Q. When you, Mr. Tonomura, proceed with "synchronization," are there any points you particularly emphasize?

Tonomura: Our fundamental stance is to avoid imposing our preferences. While we work within the music industry, we operate as professionals dedicated to fulfilling our client companies' requests. Advertising, in particular, almost always embodies the diverse aspirations of many people. Not only the client company as the advertiser, but also the people who developed the targeted product or service, the creative team behind the ad production, and many others are involved. It's created through twists and turns. Considering this, while we certainly make recommendations, we believe it's crucial not to push "this is the best" but to flexibly respond to the thoughts of various people and consider what truly is best.

The music industry is in a transitional phase due to rapid digitalization. When considering the future of the music business, it seems necessary to recognize the current reality: not only how music is listened to, but also how artists are born and nurtured is changing. Furthermore, new movements are emerging regarding the role of music in advertising and marketing. In the upcoming second part, we will delve deeper into the changes in the music industry driven by digitalization and the current state of "synchronization business."

• Observing Changes in the Music Industry: Structural Shifts and Emerging Needs Brought by Digitalization (Part 2)