MBW’s World Leaders is a regular series in which we turn the spotlight toward some of the most influential industry figures overseeing key international markets. In this feature, we speak to Alan Swarts, CEO of Orfium Japan. World Leaders is supported by PPL.
The continued dominance of physical CDs in Japan sets the world’s second-largest music market apart from other mature music markets globally.
Revenues generated by CDs in Japan reached 139 billion yen (USD $860m) in 2023, up 7% YoY according to RIAJ data.
Revenues generated by subscription streaming in Japan, meanwhile, reached 85 billion yen (USD $526m) in 2023, up 12% YoY.
The Japanese music industry’s reliance on physical CDs as its primary revenue driver has meant, however, that the UGC monetization market in Japan has lagged behind other mature music markets.
That’s according to Alan Swarts, CEO of Orfium Japan, which identified an opportunity to monetize user generated content in the market from platforms like YouTube.
“Every label or rights holder with a YouTube account generates revenue from their official content,” he explains. “However, there is also a separate revenue stream from UGC, where content creators upload videos that include the label’s music. Through Content ID, whenever someone uses your music, they must pay for its use, contributing to this UGC revenue.”
He adds that “many labels were wary of digital content, fearing it would cannibalize CD sales” and that as a result, because labels “held back content from DSPs, these platforms notoriously got a late start in Japan compared to the rest of the world.”
Orfium Japan was established in 2022 when Orfium, the Los Angeles-based rights management technology company led by CEO Rob Wells, acquired Tokyo-based promotional, marketing, and content company Breaker.
Swarts, who founded Breaker in 2013, was appointed CEO of Orfium Japan following the acquisition. Swarts explains that the digital tide began to turn in Japan’s music market when CD stores were forced to shut during the COVID pandemic, causing a spike in music streaming subscriptions in the market.
“This prompted a paradigm shift within the label community, leading them to embrace the digital use of their sound recordings,” he says. “This timing was crucial for our M&A with Orfium. Not only was Orfium ready to expand, but Japan was also ready for a company like Orfium.
“The increased use of UGC in Japanese master recordings created opportunities for us to partner with labels that had begun to use content ID more proactively.
“In short, Japan’s UGC monetization is starting late but growing rapidly, and Orfium is positioned right in the middle of this growth.”
“Not only was Orfium ready to expand, but Japan was also ready for a company like Orfium.”
Alan Swarts
Orfium has already struck several partnerships in Japan under Swarts’ leadership, including one with Warner Music Japan. Another one of those partnerships is a YouTube management deal with Tokyo-headquartered entertainment giant Avex.
The company also struck a deal to manage the YouTube catalog of Bandai Namco Music Live, a key player in Japanese Anime music, a sector that was worth USD $25 billion in 2023 and, according to Morgan Stanley Research, is set to grow to over USD $35 billion by 2027.
Orfium Japan was also recently picked by collective Management organization JASRAC to track, report, and monetize music on UGC platforms for the PRO’s catalog. JASRAC claims to represent an estimated 90% of Japanese publishers’ repertoire.
Plus, just last month, Orfium partnered with Japanese record label Pony Canyon to employ its AI-based matching technology to track the use of Pony Canyon‘s music catalog in user-generated content on YouTube.
“We’ve moved quickly and defied the typical pace of Japanese business,” says Swarts, commenting on the series of deals signed by Orfium in the Japanese market.
“Others have noted that having secured this many deals — seven labels and JASRAC — over such a short period is impressive for a company less than two years old. We’ve worked very fast. Our goal is to engage with every significant label in Japan and expand our partnership with JASRAC by the end of the year.”
While Orfium has established itself as a key player in the UGC monetization space in Japan, the company’s services extend beyond User Generated Content.
For example, it works with terrestrial TV networks like TBS, using its proprietary technology to generate broadcast music usage reports.
Additionally, Orfium Japan works closely with Orfium Korea “on business development, operational synergies, and administration,” according to Swarts.
“This rapid diversification has transformed Orfium Japan into a multi-product, multinational company, mirroring Orfium’s global strategy,” he adds.
Swarts’ own career in music and media started in TV Production, after attending university in New York. “I am part American, part Japanese,” he tells us. “I grew up in Middle America, where the only things I could do were watch American football and MTV.”
Swarts would go on to work for MTV for 17 years. “I had various roles, including being a TV personality, helping launch Nickelodeon and working in event production,” he adds.
Following a brief stint leading a digital mobile content service in Japan, Swarts became the Head of Content for MTV Japan. It was from there that he says he “took the leap” to start his media business, which became Breaker.
Here, Swarts explains why he decided to strike an M&A deal with Orfium, discusses the opportunities in the Japanese UGC market, and shares his broader predictions for Japan’s music business.
What were your ambitions for Breaker when you launched the company?
Drawing on my previous experience, I naively believed I had everything I needed to start a media entertainment company like Breaker to break down traditional barriers between the Japanese market and individual creators, artists, brands, and media companies. I had seen the industry from multiple angles: in front of and behind the camera, from headquarters to local affiliates, and across digital platforms and events.
“I had seen the industry from multiple angles: in front of and behind the camera, from headquarters to local affiliates, and across digital platforms and events.”
In 2013, there was significant buzz around media distribution and the potential of building a media company on YouTube. It was the perfect time to apply my knowledge and create a globally connected, data-driven media company. My vision was to manage talent, create original content and work with various brands.
I launched Breaker with the tagline ‘borderless content for the connected generation’. Unlike traditional broadcast, which is limited by geography, a UGC platform offers global reach. It also allows for a two-way conversation with the audience and enables data-driven content and investment decisions.
Breaker was acquired by Orfium in 2022. What made Orfium an attractive company to do a deal with?
We knew YouTube inside and out, having worked with YouTube Japan to launch the YouTube Fanfest and produce a YouTube Originals series. Our work also involved collaborating with companies in the music industry, including those Orfium aimed to engage with in Japan.
Orfium seemed like the perfect partner at the right time. They had already established partnerships with most labels, publishers and societies globally, and were eager to enter the Japanese market quickly. We provided a clear shortcut for this expansion and I was excited to join Rob Wells and his team, as I was impressed with his work.
Can you tell us about the highlights of Orfium’s expansion in Japan so far?
Our recent partnerships with JASRAC, Bandai Namco, Avex and Warner Music Japan are the highlights of our expansion in the Japanese market to date.
A few weeks ago, I attended a high profile Japanese music conference and had the opportunity to share the stage with a representative from YouTube Japan and the head of digital for Avex.
It was an excellent experience for the three of us. We discussed how platforms, content providers and tech partners work together to benefit the rights holders in the music industry. It was a significant highlight for me to showcase to our peers in the music industry that Orfium, in its brief history, is already being recognized by labels and platforms.
What are the biggest challenges for UGC monetisation/revenue growth in Japan right now?
Historically, labels were cautious about allowing YouTube users to upload their sound recordings. Most recordings would simply get blocked if you tried to use them. Therefore, the average YouTube user assumed they couldn’t use sound recordings without facing a block.
“Historically, labels were cautious about allowing YouTube users to upload their sound recordings.”
The main challenge now is on the user side: changing this perception. Many people still think that any music in their video will result in it being taken down. This has become somewhat of an unwritten understanding within the YouTube community. Addressing this misconception requires education.
You were responsible for spearheading Orfium’s YouTube management deal with Avex. What exactly does this deal entail?
This is a comprehensive management deal encompassing several different services. We offer claiming services, which involve discovering videos that include music. Another crucial aspect is assisting labels in managing their music assets and metadata, a complex and time-consuming process.
“Our advantage lies in our proprietary in-house technology and staff with technical expertise — the two Ts. This winning combination helps us help labels navigate and manage YouTube’s complicated CMS.”
YouTube’s interactive platform allows anyone to claim music, leading to numerous disputes. Accurate metadata is essential to identify the correct rights holder and ensure they receive the appropriate payments. Beyond claiming, we handle much of the “air traffic control” or metadata fixing that most music companies lack the resources to manage effectively.
Our advantage lies in our proprietary in-house technology and staff with technical expertise — the two Ts. This winning combination helps us help labels navigate and manage YouTube’s complicated CMS.
You struck a deal with Bandai Namco last year. Could you give us some insight into the size of the Anime market and the opportunity for the music business in Anime?
According to Morgan Stanley’s research, the global anime market is projected to generate $35 billion by 2027.
Bandai represents more than 3,000 anime creators and it earns significant revenues as a result of creators commenting or reenacting anime scenes that use Bandai’s music in YouTube videos.
Orfium has the opportunity to make a real impact here in ensuring that those revenues are captured; we’re excited about the potential of working with Bandai and other companies in the anime space.
Orfium Japan recently started working with JASRAC to track, report, and monetise music on UGC platforms for its catalog. Could you give us some insight into this partnership and what you’ve achieved so far?
In Japan, JASRAC dominates the collection society landscape, controlling circa 90% of the market. This means that, with this partnership, we are effectively working with every publisher in Japan.
We see our current deal as the beginning of a deeper and multifaceted YouTube partnership. We’ve gotten our foot firmly in the door and we look forward to taking advantage of the opportunities ahead.
Can you tell us about any other deals you have in the pipeline?
We expect to announce our partnership with another major Japanese record label soon, with four to five more deals in the pipeline, both big and small. Our hope is for Japan to become the hub for other Asian territories across the region.
We’re in discussions with a label in Thailand, K-pop companies and partners in India, among others. We hope our expansion in Asia won’t stop in Japan and that we’ll have traction beyond Japan by the end of the year.
If there was one thing you could change about the music business what would it be and why?
I would like to see more integration of data and advanced technology in the industry to drive revenue from new platforms and ensure proper compensation for creators.
As a tech company that tracks and monetizes music usage across various platforms, our mission at Orfium is to ensure that creators and rights holders are fairly compensated, and there are still many untapped platforms where we can generate additional revenue for music creators and rights holders.
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