Chat app firm aims for Japanese music revolution

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In Japan, a homegrown music streaming service is set to outdo international rivals and breathe new life into an industry still dominated by CDs and vinyl records.

LINE Music, the streaming arm of popular messaging app LINE, launched in Japan last week, ahead of industry giants Apple Music and Spotify. At present, Spotify isn't yet available in the country and it's unconfirmed whether Japan will be included in Apple Music's global release at the end of June.

"LINE will definitely have the first mover advantage with its music service. It has a large user base, and this could a nice value-add to its users," said Clement Teo, senior analyst at Forrester.

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LINE is one of Japan's biggest social media firms, with its chat app boasting 205 million monthly active users as of March. A key feature of LINE Music is the ability for users to send music or playlists on the chat app, the company said in a statement.

The streaming business is the latest in LINE's ecosystem, joining stickers, games and a mobile payment service called Line Pay.

"LINE customers show no problem paying for stickers and other micro transactions, so that gives LINE Music a huge advantage over rivals," noted Ajay Sunder, vice president of information and communication technologies at Frost & Sullivan Asia Pacific. "Considering LINE's scale, it can make a big splash."

The music services will offer 1.5 million songs from both Japanese and Western artists as well as pre-made playlists and official artist pages. Users can pay a monthly fee of 500 yen ($4) for 20 hours of usage, or double for unlimited access. Its price plan is slightly cheaper than Apple Music's $9.95 monthly fee, but its catalog size pales with Apple's 30 million songs.

Forrester's Teo questioned the sustainability of LINE's aggressive pricing model, especially as its music catalog expands in the future, which could see prices rise.

Transforming Japan's market

Japan is the world's second-largest music market after the U.S. but streaming still remains a novelty as fans opt to purchase physical formats like CDs instead. Last year, physical media commanded 78 percent of Japan's overall sales, according to an April report from recording industry watcher IFPI.

But that dominance may soon change as LINE Music boots physical media out of the market, said Teo.

"LINE complements, not replaces, the Japanese consumer habit of buying CD, and even vinyl, for now. As younger users start to embrace the convenience of streamed music, over time this could become the dominant way of consuming music."

As the new service grows, so will Japan's nascent streaming market, warned Sunder.

"LINE has several potential deals it can launch once they finish explore streaming on their own. They could eventually bring in bigger audio houses to partner with."

-CNBC.com is awaiting a comment from LINE.