Karaoke Battles a Case of Laryngitis

Nothing quite captures the night life here more vividly than the sake-soaked image of drunken “salarymen” crooning “You’ve Lost That Loving Feeling” in a Roppongi karaoke bar for the fourth and still not final time.

But lately, between a nagging recession and emerging discount media technologies, Japan’s multibillion-dollar karaoke industry is singing a somber tune.

“Since last October, we’ve been suffering a lot,” says Katsuhiko Omaru, general manager of overseas audiovisual business for Pioneer Electronics, the company that invented the laser disc karaoke market and now dominates the karaoke equipment industry. “Because of the recession, expenditures for company entertainment have dropped significantly . . . so many managers do not go to karaoke bars as much.”

Even worse, says Omaru, is the concern that “the karaoke business has hit the saturation point domestically.”

Over the last decade, Japanese entrepreneurs have installed more than 96,000 “karaoke boxes”--small, rent-by-the-hour rooms in office complexes and malls that have been retrofitted with the latest in high-tech karaoke equipment--as low-cost alternatives to crowded karaoke bars. According to the National Police Agency, which, believe it or not, tracks trends in public entertainment, more than 25,400 such facilities were installed last year.

But the result hasn’t been a joyful noise of technology-mediated sing-alongs. It’s been a vicious karaoke shakeout that has seen the collapse of both businesses and profit margins in this $8.5-billion-a-year enterprise. The same economic and technological forces that have undermined Japan’s dominant computer, semiconductor and consumer electronics industries are now restructuring its biggest pop-culture industry.

In no small way, the manner in which Japan’s karaoke technologists respond to this current market challenge may reveal how the country’s other pop techno-culture industries respond to change.

In this case, companies that pioneered Japan’s obsession with high-tech karaoke are now being nibbled into red ink by newer, cheaper technologies that deliver more song for the yen.

Karaoke (which literally means “empty orchestra”) didn’t become a high-tech phenomenon until the 1980s. When Pioneer introduced laser-disc karaoke nearly a decade ago, Japanese salarymen were enthralled by the movie-quality production values of the music videos--the technology literally added another dimension to the karaoke experience.

Indeed, when Sony and Matsushita spent billions to buy CBS Records and MCA, the hot joke in Tokyo was that their real reason for the acquisitions was to enter the karaoke market.

What’s happened, however, is that the popularity of the laser videodisc has been challenged by the cheaper economics of compact disc technology. For roughly half the price of a full-blown laser-disc production, companies such as Japan Victor, Nikkodo and Sony have figured out ways to offer karaoke CDs that blend computer-generated graphics with the music.

While the picture quality isn’t nearly as sharp as Pioneer’s laser discs, CD karaoke crooners now have the opportunity to effectively remix and match the music with the computer images. In other words, they can interactively cut their own music karaoke videos. This appeals to the teen-age karaoke crowd weaned on a diet of MTV and Nintendo.

Indeed, there is no clearer sign that the cheaper CD technology is making substantial inroads into karaoke culture than the announcement in November that Japan’s McDonald’s would launch McKaraoke rooms supplied by Nikkodo.

“We are fully prepared to compete in every kind of karaoke media,” insists Pioneer’s Omaru, who points out that his company holds more than 40% of the CD graphics karaoke market. However, Omaru concedes that Pioneer’s margins on CD graphics are much thinner than for its laser discs: “We are concerned about future profitability.”

Consequently, Japan’s karaoke industry is struggling to figure out how to use technology to recapture profitability, not just buy market share. Companies such as Pioneer are being forced to ask anew fundamental design questions about how media technology can be used to create new kinds of karaoke experiences.

Similarly, there is semi-serious discussion within some parts of NTT--Japan’s domestic telecommunications giant--to allow karaoke bars and boxes to hook into a karaoke “network” so people in Tokyo can sing, drink and carouse with their buddies in Osaka. This would dramatically extend the notion of karaoke as a community activity.

There is even speculation surrounding virtual-reality karaoke, in which crooners could don virtual-reality goggles and microphones in order to “inhabit” a music video environment.

Will the karaoke innovations simply make things incrementally better and cheaper? Or will there be radical new ways for the media technology to hugely expand the customer experience? If it’s only the former, you can expect the blues to become popular in the karaoke bars.