AKB48 is currently celebrating its 10th anniversary. The group was the second best selling act of 2015, behind Arashi, but things aren’t as rosy as they appear. Rick Masuzawa of Nippon.com writes that AKB48 faces challenges due to industry changes as they enter their tenth year.

Masuzawa’s first point is that AKB48’s sales are in decline. In December, the single “Kuchibiru ni Be My Baby” was released. It failed to sell 1 million copies in its first week, breaking the streak that AKB48 started with the 2011 single “Everyday, Katyusha.”

Even if its opening week total of 905,000 copies sold would be phenomenal for any other act, it is considered a flop for AKB48. The inability of AKB48 to maintain its string of million-selling singles suggests that change is emerging.

Masuzawa’s second point is that AKB48’s events have lost their novelty. Many think that AKB48 sells so well not because of their music, but because of the handshake tickets attached to their releases. Each ticket gives fans 10 seconds with the member of their choice. To increase their time with said member, fans buy multiple copies of the same CD. This sort of “pay-to-greet” system has drawn comparison to the kyabakura bars, where people pay hefty fees for a chance to have a few drinks with a beautiful hostess.

AKB48 is not the only group to link CD sales to handshake events. Other idol groups hold similar events. There are some where fans can pose for a photo with a favorite member or even get a hug. Still, these groups are not selling anywhere near as much as AKB48.

Along with its handshake events, AKB48 has captured attention and won over fans in various other ways, including its general election where members are ranked by popularity and assigned positions within the group accordingly. There is also the group’s dating ban. These tactics have paid off with eager fans frequenting handshake events, which helps boost CD sales.

AKB48’s anniversary means that fans from the early days of the group are also 10 years older. Many expect these longtime fans to take an interest in sister groups, like NMB48 or HKT48, but others think their interest in idol groups will dwindle as they get older.

In addition, the approaches that garnered attention for AKB48, like the general election or ban on dating, have lost their appeal as they become routine. Even though the group’s recent single includes the theme song for one of the most popular NHK morning TV dramas in recent years, it was not able to sell a million copies in its first week. Several factors seem to account for this disappointing result.

One of those factors is the failed battle against music copying. In 2002, there was uproar over the copy control CD format introduced by the music industry. The CCCD technology prevents the “ripping” of audio data on a PC by intentionally embedding error codes that are read by a PC but not a CD player, ensuring that only audio players could be used to listen to CDs.

The introduction of the CCCD format was a response by executives at major record labels to the decline in CD sales, which they attributed to consumers pirating music to share with friends or distribute for free over the Internet.

Even though downloading pirated files is illegal, it proved nearly impossible to prevent. For record labels targeting a youth sector with little disposable income, however, figuring out how to prevent CD ripping and file sharing was a matter of life or death.

The CCCD format was ultimately unsuccessful and ended up creating more problems than it solved. As the discs were not standard CDs, they sometimes would not play properly on audio systems. In addition, people soon devised methods to circumvent the format’s barriers, and the CCCD format was eventually abandoned.

Another factor is new listening options. Around the same time the CCCD format, Apple launched iPod and iTunes, marking the beginning of full-fledged sales of downloadable content. In 2004, Sony introduced its Japanese online store, mora. The hope was that the new download sales would be significant enough to make up for the decline in sales of music CDs and DVDs.

As the figure above illustrates, sales of downloadable content was not enough to offset the falling sales of physical content.

On top of this, the new format of fixed-price streaming services like Spotify emerged to compete with the sale of downloaded files. For these services, users pay a monthly fee that provides the right to listen to as much music as they want. Similar services have become available in Japan, such as LINE Music and AWA. Since the copyright holders only receive a fraction of the monthly fees collected, the revenue earned from such services by record labels and artists can be even smaller than downloaded files.

The development of these technologies, which spans the 10-year history of AKB48, has brought significant changes to the music industry. The group has been keenly aware of the situation and managed to survive and thrive during this period by transitioning toward a business model centered on live events. This strategy has paid off, as seen in the group’s 5-year streak of explosive CD sales.

One weakness of such a business model, however, is that seating capacity at venues puts a cap on sales capacity. But AKB48 managed to raise the limit by increasing the amount each individual could pay for attending a handshake event. Another factor is the now common practice of using smartphones to purchase products, with live venues taking advantage of this method to enable attendees to buy merchandise even when inventories at events sell out.

The innovative new live viewing technology has also been used to expand the capacity of live events. Over the past few years the film industry has been working to improve and diffuse technology for transmitting digital video images. Many movie theaters are now equipped with digital film projectors that are capable of nearly real-time transmission of various video content from the Internet or communication satellites.

This technology has made live viewing feasible, with a greater number of transmissions each year, such as a concert at Saitama Super Arena near Tokyo being broadcast live in Fukuoka. This has allowed performers to bypass limitations in seating capacity at venues, with attendance now ultimately determined by the number of movie theater seats around Japan. A concert in a smaller part of Japan can be broadcast live in major urban areas, making it possible to attract more attendees, and in effect boosting revenue above what would normally be possible for an event in smaller city.

These technological developments are occurring at a moment when venue capacity has been falling drastically in Japan. This situation, dubbed the “2016 problem,” is occurring as a result of the run-up to the 2020 Tokyo Olympics, which has led to many venues to close for remodeling.

Given this situation, many expect live video transmission of events in regional cities to become a significant business. Even though AKB48 has focused its business model on live events, including live broadcast of concerts, the group will be unable to overcome the 2016 problem solely through broadcasts at movie theaters, as the format does not contribute to increased CD sales by giving audience members the option to interact with group members.

AKB48 faces a host of challenges, including the group’s aging fan base, the decreasing novelty of its mainstay events, and falling venue capacity. Followers of the group, however, look forward to seeing how the group will respond to these challenges as it sets course for the next 10 years.

Source