Japanese consumers ignore Spotify's 40 million tunes

Tokyo

ON a recent muggy afternoon in Tokyo, 21-year-old Shintaro Naganuma joined several hundred customers browsing CDs at the eight-storey downtown outpost of music retail chain Tsutaya.

Having discovered a couple of new rock artists on YouTube, the third-year university student hit Tsutaya Co's flagship store in trendy Shibuya to look up their albums. That process encapsulates the dilemma now facing Spotify Ltd's head Daniel Ek, who on Thursday presided over the music streaming service's long-awaited entry into the world's second largest music market.

On the one hand, the nation's consumers have grown accustomed to finding music or listening casually through smartphones, which should help the Swedish company attract users for its free ad-supported version. But when it comes time to hand over the cash, most people in…