Marketing Japan: World's Largest Record Store - Shibuya Tower Records - Goes Bankrupt!

By Mike in Tokyo Rogers


The headlines read: World's Largest Record Store Goes Bankrupt!

The largest record store in the world, a world-famous landmark building in Tokyo Japan; a store that has been visited by millions of Japanese and is a must-see for visitors to Tokyo from all over the world, Tower Records Shibuya, has gone bankrupt and will soon close shop doors.

Tower Records Japan Flagship store: Shibuya

No, it hasn't been officially announced. In fact, it hasn't been announced at all by anyone involved in the management of that company. But it is happening soon. All the signs are there plain as day.

I have worked in the music business in Japan for years. I watched that store - and even worked with Tower Records during its heyday. I even ran huge events at that store! In 1996, I was the first person in the world to organize an Andy Warhol event that placed all 13 of his Mick Jagger works in the same place, on display, for the first time in history. So, I know this business and I know what Tower Records used to be and what it is now.

Tower Records Shibuya is bankrupt. You can be sure that what I have written here is as true as the fact that the sun is sure to rise in the east tomorrow morning; Tower Records Shibuya is closing due to bankruptcy and it is going to happen sooner rather than later.

Using the same very slow listening booth equipment for over a decade

The shopping there isn't anything like it used to be. Ten years ago, Tower Records Shibuya was a fun shopping experience. Today it is a crap shopping experience and quite unsatisfying. They aren't going to make it to Christmas of 2011.

I'd like to tell you what I saw when I went to this store yesterday for the first time in a couple of years, ...

But first, let me tell you that I do not rejoice, I am saddened - but not surprised - to be breaking the news of the bankruptcy of this Tokyo landmark to you for the first time today. It has been rumored for a while now, and people like me, have been wondering how they were surviving in this world when sales of physical product (albums) have experienced a cataclysmic decline for brick and mortar retailers between the years 2000 and 2009. The New York Times reported:

Total album sales, including CDs and full-album downloads, were 428 million, a 14 percent drop from 2007, according to data from Nielsen SoundScan. Since the industry's peak in 2000, album sales have declined 45 percent 

The other day, HMV Shibuya, the flagship of the HMV stores in Japan, closed its doors forever last week. The Asahi newspaper reported:

Shibuya, a Tokyo district normally associated with the under-20 crowd, attracted hundreds of middle-aged people Sunday to witness the closing of HMV Shibuya, a CD store that became a cultural icon during the 1990s.

Now, it is just a matter of time before the largest record store in the world closes its doors forever. I'd also like to point out that the above article mentions that middle-aged people came to see the store closing... Tower Record's motto is, "No music, no life." I think, in this case, it should be, "No teenagers, no business."

You would have thought that HMV closing would have sent formerly loyal shoppers of HMV Shibuya to Tower Records Shibuya... Well, you would have thought that but when you realize that HMV Shibuya only had six or seven loyal shoppers to begin with (and they were all over 48 years old!) then you'd know that it wouldn't matter to the world's largest record store if they came to shop or not.

Only a few shoppers (although an exaggeration) wouldn't much help the local mom & pop shop stay solvent... They certainly wouldn't help the world's largest record shop stay afloat... Especially since any of the toilets in Tower Records Shibuya can hold more than six or seven people.

That is, excepting the men's toilet on the third floor of Shibuya Tower Records, which has a urinal in disrepair; it is a urinal that, I think, best represents what has happened to Tower Records Shibuya in the last few years; it is falling apart. This urinal is covered with tape and cardboard like something you'd see in a public railway toilet in a third-world country; not Japan. It is a urinal that also smells somewhat like a public railway toilet.

I expect to see urinals broken and left un-repaired in a government run malaise like a public train station. I do not expect to see this sort of thing in a privately-run retail store. The government is expected to take months to take action in repairing damaged items like this. The government is a boondoogle that has no customers. A private company is supposed to worry and be concerned about the "customer's  experience;" A private company has to make sure the shopper has an enjoyable time inside the store from even before the point of entry to after check-out. That is how retail gets return customers.

I think the owners of that building have a responsibility to fix things like broken toilets to their tenant... Unless, of course, tenant is late on rent payments...

Or, perhaps, I miss the bigger picture? Perhaps today's Shibuya Tower Records is a faithful representation the falling apart of the Japan economy as a whole?

But, I digress...

Though bankruptcy is not officially announced at Shibuya Tower Records, it is surely being discussed behind closed doors at the company that owns Tower Records Shibuya, Tower Records Japan (TRJ), as I write this blog. Further evidence of this lies in one of the reasons why anyone would ever visit a large record store in the first place; and that is the CD listening booths.

At Tower Records Shibuya, the CD listening booths are all in need of maintenance and headphone replacement.

Some of the headphones were disgusting. Of twenty listening booths I visited and tried, eighteen were quite a bad experience. Eighteen of twenty headphones I tried were bent and you had to hold them on your head with both hands or they didn't stay on your head at all; they were ratty and falling apart; and many times, even when pressing the tracks to "play" it took more than ten or fifteen seconds - sometimes never - for the tracks to play. Only two of the headphones sets were new and fit well.

Putting on those bent and ratty headphones was like wearing someone else's dirty socks or brushing with someone else's toothbrush. Ugh! No thank you. It's no wonder teenagers don't go there - like with a toothbrush - with their own iPods, all kids today have their very own headsets.

Most all of them were ripped up like this

Besides these problems; bad toilets, poor listening booths, there were very few customers and of the ones I did see, I didn't see anyone who looked to be teenagers. No teenagers in CD store!? I even went on a summer vacation Friday, two days after payday, and of the twenty or so customers that I did see, it looked like there was only one guy under 30. The rest looked in their 40's.

No teenagers? In a CD shop? No, I wasn't on the classical music floor; I was on the floor that sells Rock and Pop music. I'm sure that, if there were very few customers on the Rock and Pop floor, then the classical music floor must have seemed like a funeral.

To make things even more dismal, coincidentally, Tower Records Shibuya was celebrating their 15th anniversary that day. My, how far the mighty have fallen! I dare say that there won't be a 20th anniversary... There won't even be a 17th. Like, I said, I doubt that they can make it to Christmas of 2011.

If you come to Japan soon, visit Tower Records Shibuya to see an old friend before she dies and is gone forever... I'm not asking you to buy anything, just visit... Please just visit! That's all I ask. Visit and do what everyone else is doing; finding music that they like, writing it down, then ordering it online through iTunes or Amazon. But at least visit and see a relic of the past.

The queen is dead. Long live the queen!

They say at Tower Records in Japan, "No music, no life." There is music, on the racks, at Tower Shibuya, but there is no life or vibrancy at the store or amongst her staff. What a depressing and quite disenchanting experience.

Tower Records Shibuya is dead and bankrupt... It hasn't been announced and she hasn't laid down yet. But she is gone... See her while you can.


(Thanks to my good friend, Keith Cahoon, from me and millions of others, for many fun and great memories of good times in Tokyo).

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Keywords: Tower, Tower Records, Tower Records Shibuya, Shibuya, CD, CDs, record, record shop, Shibuya, Tokyo, HMV

Marketing Japan: A Primer on the Long Tail

By Mike in Tokyo Rogers

What is the Long Tail?

The Long Tail is transforming our lives and our businesses. If you are considering ways to improve your business and your life, then you do need to understand what the Long Tail is and its ramifications.

Anyone who wishes to do any business utilizing the Internet or any Social Media needs to fully understand the Long Tail in order to improve on whatever it is they are doing. That includes Facebook, U-Stream, blogs, Mixi, blogging, video-blogging, Myspace, vlogs, Pick, Linkedin or Twitter.

Average Japanese TV station upper management business model

In fact, if you are involved in any of the above, then you are a part of the Long Tail.

Recently, my partner and I went to a satellite TV station here in Tokyo, Japan that is not doing too well... In fact, they are all worried about their future and the future of their station. (Incredibly, there are old media people who seem not to be worried about their station's - and their future - but this blog is for people who are not brain-dead.) Over these last 5 - 10 years, advertisers have been abandoning satellite TV (as they have been abandoning all other Mass Media formats) and spending their marketing and advertising yen in different areas.

Not only have advertisers been abandoning them, but, even more alarming for them is that the viewers have been getting off the sofa and doing other things too. Subscription Music TV is no longer cool like it used to be. And why should it be? Why do I have to sit through ten crappy videos to maybe see one I like when I can go on YouTube or Myspace and see what I like immediately? (Both YouTube and Myspace are excellent examples of the Long Tail in practice).

Don't be confused, just because this particular station is a digital satellite station, don't think they are not in trouble; they are... Admittedly, though, they are in much better shape than a dinosaur such as TV Tokyo or TBS is, but that is only because they do not have over a thousand employees like those terrestrial stations do. Most of these satellite stations in Japan have anywhere between 40 - 80 employees so their books - and their chances of survival - are much better than the major terrestrial TV stations.

Nevertheless, even though they are a satellite TV station, their business philosophy is still strongly rooted in analogue type of thought; and this will be their downfall if they don't act soon.

The station in question has been struggling through a few years of trying to figure out how to utilize the Internet to help survive as a broadcasting station but they have come up short consistently every time... I think the problem lies in that they can't get their heads around the fact that they will have to stop thinking like a TV station and start thinking like an Internet business in order to survive.

After having several meetings with them, I think I've figured out what their basic fundamental problems are: they do not understand the Internet (they think it is a crutch to support their TV broadcasting and they haven't a clue as to what the Long Tail is and what it means to them.

Up until now, and for the foreseeable future, broadcasters in Japan are, and will be, stuck in old-fashioned thinking. They still use their web pages as a place for one-way communication to their viewers. Simply put, their web pages are boring and, frankly speaking, only serve as an online TV Guide listing for the program schedules.

Not exactly the kind of content that is going to start a buzz or an overnight Internet sensation.

They also do not understand how the web can be an avenue for creating new business and money streams... It is my guess that this particular station probably loses about ¥200,000 ~ ¥500,000 yen (about $2,000 ~ $5,000 (USD) per month on their web page when they could be - should be - making money from their web site, like so many others do.

Of course, we had been trying to explain to them about the concept of Web 2.0 and creating "community" by giving away free, interesting content online, but for some reason, they never seemed to quite "get it." Oh, they seemed to understand that something has to be done, but couldn't put their finger on what exactly that it is that has to be done.

I gather that after our meetings they would go back to their company meetings and say things to their compatriots like "Yeah! Mike says we have to do Social Media and Social Marketing! He says we have to be more intelligent about our online business and in creating community! He says we have to put content online and giveaway content free..."

Then the boss would retort, "Why?" and then that's where the confusion came in... I'm sure the room would grow quiet.

But finally, at this last meeting, I think I have gotten through to them as to why they need to act. Finally, I believe that I explained it in a way that makes sense to them. And that explanation was the Long Tail. (Please understand that I am a professional speaker so if I had trouble explaining this to these good folks, I can imagine how hard it must be for most!)

So, now let me give you an EXTREMELY short explanation of what the Long Tail is. I also have a link below to Chris Anderson's bible on the subject, "The Long Tail" that I strongly recommend!

Highly recommended: Chris Anderson, The Long Tail 

The Long Tail explains is how things have changed in these last 10 years or so.

At the head of the tail (the top), there are your standard Brick and Mortar shops and businesses; shops that have limited retail space. In my example, I'd like to use Tower Records.

Tower Records is probably the most famous of the old style record stores. Everyone knows them... I used to go there  lot. Unfortunately, I figure they have a very bad future and won't be around in 10 years. In spite of having a huge amount of floor space, Tower cannot possibly carry everything.

Tower takes a risk on ordering product and having to distribute that product to their various stores. They have to guess how many of each product each store can profitably sell. It is inevitable that they will guess wrong.

For example, the new NOFX record comes out and a kid wants to buy it in the Tower Records Shinjuku store, but the Shinjuku store is just sold out - while the Tower Records Shibuya store still has 5 copies. What happens to the kid at the Shinjuku Tower Records store? He goes to another record shop nearby, in Shinjuku, and buys what he wants... Tower Records loses a sale.

For companies like iTunes, or Amazon, who work on the Long Tail, this is a huge advantage for them over the traditional retailers; they have no shelf space (well Amazon does too - to a degree - but they started MP3 and download business too).

A key component to understanding the Long Tail is shelf space. Businesses and organizations that cannot capitalize on the Long Tail have space restrictions. For each centimeter of shelf space, Tower Records must make a certain amount of money in return. In this case, Tower Records cannot possibly have enough shelf space to have everything, floor space costs money. So, Tower Records can only sell the hits or any CD that they might reasonably expect to sell more than ten or twenty (or, preferably, several hundred).

Philosophically, it is obvious that when one tries to be friends with everyone, they are friends with no one. This is why I predict that, say, InterFM will go bankrupt by end of 2012, maybe sooner. I also predict TV Tokyo insolvency by end of 2014.

But back to the Long Tail.

Tower Records, TV and radio stations have only so much "shelf space" they are confined to a physical world. But, take iTunes for example; iTunes has no space restrictions. iTunes carries millions of titles and their catalogue grows daily. How many titles does the biggest record store in the world carry? 30,000? 100,000? And each of those titles cost money to carry; they must pay the rent. Shelf space costs money!

How much does it cost iTunes to carry some bits on a server that has 3 million titles on it? Almost nothing and it's getting cheaper by the day.

Look at the chart below. At the left are my examples above: Tower Records and the TV and radio stations. They only have so much space, space costs money; they have to cut off somewhere what product they are going to carry or broadcast. THAT is the point where the Long Tail begins.

I have marked the cutoff line in Red. To the right of that red line (and, by the way, including everything to the left of that cutoff line) are the products that a company like iTunes carries.

You'd think that, to the right, this line eventually goes to zero. It doesn't. It never goes to zero. The market is growing exponentially (in spite of what the major labels are saying) and because people are being offered more and more choice, they are taking it. Today we are witnessing a cultural explosion of DIY people and new artist's, authors, publishers, musicians, comedians, producers, writers and more. The end is not anywhere in sight.

The Long Tail is providing us with much more freedom of choice.

And here is the kicker, because storage of data on bits costs nothing, then places like iTunes, Amazon (MP3, E-Books), etc. can store hundred's of thousands, no millions of titles... More, if they wish... And it costs them almost nothing. It will be Game Over once the rights issues are resolved.

Now, look at the chart above again.

To the left are the old stores and old media. At the bottom is the Long Tail of the new media. It is a fact now, since people are being offered so much more choice, that "Apple said that every one of the then one million tracks in iTunes had sold at least once (now the inventory is twice that)." This means that, cumulatively, that the products in the Long Tail add up to a significant portion of iTunes business... As the tail gets longer, it is merely a question of time (probably a relatively short period of time) when the Long Tail's total sales will surpass those at the head of a traditional retailer.

What will that mean for our culture, entertainment and economy?

Even with this explanation, I knew, from experience, that I still had to educate my friend's at the satellite TV station to be able to go to their boss and explain to him why we had to reform their Internet business....

I did that. Now, if you need any more convincing, take my chart and turn it vertical. Now the end of the Long Tail is at top and it is still extending.

Where does your business want to be in the next few years? 

At the right or on the bottom?

And the bottom, well, the popularity segment is shrinking as can be witnessed by dropping sales of major artists and Rock radio...

Now, where do you and your business want to be in the next few years? At the top right or at the bottom?

Utilize the benefits of the Internet to, not only benefit your current business, but to reform and revitalize it. Understanding the Long Tail is key. Now that's not just smart, it's good business and intelligent marketing.

Note: For a more detailed explanation of the Long Tail, I highly recommend reading Chris Anderson's "Why The Future of Business is Selling Less of More - The Long Tail"

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Keywords:
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