MMW-88 -- Two Year Reprieve For The iPod Tax?

J@pan Inc Magazine Presents:
Commentary on Japan's music technology news

Issue No. 88
Wednesday, November 9, 2005

++ FEATURE: Two Year Reprieve For The iPod Tax?
** NTT DoCoMo Takes Controlling Stake in Tower Records Japan
** Dwango Co. Ltd. Cuts Ties With US Partner Dwango Wireless
** Nifty Starts MOOCS Service With SD-Audio Support
** Rakuten Starts Online Music Service
** Square Enix Begins Distributing Chaku-uta Versions of Game Music

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++ FEATURE: Two Year Reprieve For The iPod Tax?

For the past several months, the possibility of a new Japanese
'iPod Tax' has attracted wide media coverage from both Japanese
and Western press. The issue came to light last April when several
Japanese music industry groups petitioned a copyright subcommittee
for the Agency of Cultural Affairs to impose a 2% to 5% surcharge
on digital music players such as the iPod. The surcharge would be
used to compensate copyright holders for money lost through illegal
copying of files.

Presently in Japan there is a 3% levy applied to recordable media
and players such as MD, CD-R and DVD-RW. This levy is paid
by the device and media manufacturers to a copyright collection
agency called SARAH, which then distributes the money (after
deducting 30% for various fees) to copyright holders, mostly music
publishers. The argument put forth earlier this year by representatives
from SARAH, the RIAJ and others was that the current levy should
also be applied to digital music players, since these devices are
also used for copying music.

The proposed measure sparked strong opposition from device
manufacturers and industry groups, who stressed that the players
are already equipped with various DRM (digital rights management)
mechanisms to protect against illegal copying. These opponents
also pointed out that the levy (which gets passed on to consumers
in the form of higher prices) effectively amounts to a blanket tax that
penalizes everyone, including those who do not illegally copy music.

Last month, the Japan Electronics and Information Technology
Association (JEITA) joined with the Consumer Electronics
Association (CEA) and European Information and Communications
Technology Association (EICTA) in issuing a joint statement of
principles calling for a reform of the entire copyright levy system.
In particular, the statement called for a freeze on any extension of
current levy systems, as well as a levy phase-out. The timing of
the statement came just as the Japanese copyright subcommittee
was calling for public comments on the levy issue.

The copyright subcommittee is scheduled to meet again on Nov. 11,
and is expected to make an announcement on the matter at that time.
On Nov. 5, reported that the subcommittee will announce
a postponement of any extension of the current levy system for
two years. The article went on to say, however, that the
government plans to continue discussion about possible changes
to the current system, including a future extension to include
devices such as digital music players.

If the report is indeed correct, it will mark a victory of
sorts for electronics manuafacturers and consumers. The music
industry here has enormous lobbying influence, and it is not
uncommon for levies such as the 'iPod Tax' to go into effect
with little or no public resistance. Several Japanese digital
music blogs this week expressed encouragement at the report and the difference made by the music
enthusiasts who have followed the committee meetings and
participated in the calls for public comments.

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** NTT DoCoMo Takes Controlling Stake in Tower Records Japan
In brief: NTT DoCoMo announced on Nov. 7 that it will purchase 42%
of the total shares in Tower Records Japan, making it the largest
shareholder of the record store chain. DoCoMo's total investment in
Tower Japan is expected to be around JPY 12.8 billion
(US$108.2 million). The move is intended to increase the spread of
DoCoMo's FeliCa wallet phones which will be used to make
purchases at the over 100 Tower Records stores throughout Japan.

** Dwango Co. Ltd. Cuts Ties With US Partner Dwango Wireless
In brief: On Oct. 28, Tokyo-based Dwango Co. Ltd. announced that
it had ended its exclusive licensing and technology contract with
Dwango North America, also known as Dwango Wireless. Citing
'differences in business strategy,' Dwango Co. Ltd. said that the US
company will no longer use the Dwango name, trademarks or wireless
software and technology in the US, Canada or Mexico. In its press
release, Dwango Co. Ltd. stated that with the end of this agreement,
it is now possible for them to expand their own business into
North America.

** Nifty Starts MOOCS Service With SD-Audio Support
In brief: On October 31, Nifty started a new music distribution
service called MOOCS. The new service offers a catalog very similar
to most of the other online music services, featuring artists from
Toshiba EMI and Avex Networks. The service is the first to support
the SD-Audio format used on SD cards for mobile phones.

** Rakuten Starts Online Music Service
In brief: Rakuten opened its online music store on Nov. 1, nearly
two and a half months later than the mid-August timeframe the
company gave when it announced the service earlier this year.
The new service is called 'Rakuten Music Download' and utilizes
Usen's music distribution server. The initial song catalog consists
of around 130,000 titles.

** Square Enix Begins Distributing Chaku-uta Versions of Game Music
In brief: Japanese Game Developer Square Enix recently began
distributing chaku-uta versions of songs from its popular games
on its i-mode ringtone site 'Square Enix Melody'. The company
started with 116 songs in chaku-uta version.

Subscribers: 4,675 as of November 9, 2005

Written by: Steve Myers