TOKYO — Avex Group Holdings, often considered the fourth major record label in the Japanese music industry, is facing a severe economic crunch that will likely scale down its business for the foreseeable future, Billboard has learned.
The entertainment conglomerate has put its 18-story building in Tokyo’s trendy Minami Aoyama district up for sale three years after it completed a major rebuild of the structure, effectively doubling the number of floors. Three sources inside Avex say the company in recent days has discussed early retirement with about 440 employees — close to a third of the company’s total staff of about 1,500. The sources say Avex contacted anyone over the age of 40 as part of a serious downsizing effort, though they add it appears Avex only hopes to downsize by about 100 people.
Avex did not respond to requests for comment. The company directed Billboard to a Nov. 11 statement, which says in part, “It is true Avex is moving forward with structural reforms and is considering selling the head office building as part of these, but we have not made a decision at this time.”
The downsizing plans represent a spectacular fall for the record label that surprised the industry in 2014 when it beat out then habitual leader Sony Music for the largest mid-year share of the recorded music market in Japan at 16.1%, according to the Soundscan Japan. More recently, Avex held an 8.6% share of the Japanese market in 2019, placing them in third place behind Sony Music and Universal Japan.
Founded in 1988 by record producer Masato Matsuura, Avex rose into a major player in the market after producer Tetsuya Komuro’s pop band TRF released five million-selling singles in 1994 and 1995, according to the Record Industry Association of Japan. The company continued its rally by producing or distributing two of the biggest names in J-pop history — Ayumi Hamasaki and Namie Amuro. Avex recorded total music sales of $1.30 billion in fiscal year 2019.
But the 2018 retirement of Amuro and the recent sales decline of Hamasaki — the best-selling Japanese solo artist of all time — have hampered the label. An executive at a Japanese music consultancy says Avex’s biggest earners (which the company owns all rights to) are all artists whose careers peaked more than 10 years ago. They include Hamasaki, Kumi Koda, Ai Otsuka, and pop-rock duo Every Little Thing.
The pandemic has also hit the company hard. Avex reported earlier this month that net sales fell by 44% to $329 million in its fiscal second quarter of 2020, from the same period in 2019. Most of that dip was attributed to its music sector (54% of the company’s total net sales), which fell by 58% to $177 million in Q2 of 2020, according to company filings.
One ex-Avex executive tells Billboard that when the COVID-19 crisis struck the company was in the process of shifting its emphasis from recorded music to live concerts, making the subsequent lack of live shows particularly damaging. In recent years Avex has partnered with Ultra Music Festival and put more emphasis on its own flagship event, A-Nation, a summer concert tour around Japan. Avex has also branched out into anime and video games.
The ex-Avex leader says the label was slow to move into digital streaming, believing that strong CD sales would continue. Despite some recent gains in digital streaming sales, Japan remained the largest physical market in the world in 2019, with 68% of its total revenues of $2.9 billion coming from CD and vinyl sales, a drop of 4.8% from 2018, according to IFPI.
Avex has given preferential bargaining rights to Canadian real estate fund Bentall Green Oak for the sale of the Avex property, according to Yahoo Japan and other Japanese media reports. The 300,000 square-foot building, which Avex purchased for $195 million in 2002 when it was nine stories-tall, is situated on the popular Aoyama Street and commands its own plaza in front. Reports suggest that Avex will continue to occupy a substantial chunk of the structure’s office space as a tenant.