Music Stores Rethink Download Strategy

[Kent Pribbernow]

<div class='os_post_top_link'><a href='http://news.com.com/Big+music+stores+squelch+download+plan/2100-1027_3-5231175.html?tag=cd.top' target='_blank'>http://news.com.com/Big+music+stores+squelch+download+plan/2100-1027_3-5231175.html?tag=cd.top</a><br /><br /></div>"Echo, a joint effort launched with a splash of publicity in early 2003, was supposed to give the big brick-and-mortar retailers such as Best Buy and Virgin Megastores an online foothold that would help them beat back file-swapping services and digital stores.<br /><br />But mounting development costs, a glut of rivals offering bargain-rate services, and smaller-than-hoped-for sales across the online-music spectrum, even at Apple's successful store, have led the big retailers to pull funding for the project, its founders say."<br /><br />Perhaps the online music download market isn't as lucrative as it appears. What could this mean for Apple...or Microsoft for that matter?

[Felix Torres]

Context is everything, isn't it?

Four significant numbers, three from the article:

1- $11,200 million worth of CDs sold in 2003
2- $ 245 million worth of digital d/ls in 2003
3- $ 120 million worth of cassettes sold in 2003
4- $ 70 million worth of iTunes AAC sales

Three simple calculations:
1- iTunes and AAC adds up to 28.6% share of the global d/l business, which is impressive for a one-year old player.
2- Since Real AAC and SONY ATRAC are both newcomers to the business, this means the bulk of the non-iTunes market (71%) belongs to WMA. Is 50% a safely conservative estimate for this?
(The reason this is relevant is that Steve Jobs said that if WMA ever got to 50% market share, he'd be willing to consider WMA support on the pod. Anybody willing to bet on the odds he makes good on that?)

3- iTunes, reportedly the most successful online d/l business adds up 0.6% of the music retail market. That is one hell of a lot of publicity Mr Jobs has generated with that 0.6%, isn't it? Kudos to the reality-distortion zone; it still works! 8O

Now, back to the real world.
Once the context has been filled in, it is easy to see:

1- Why the one-time panicked brick-n-mortar retailers are rethinking Echo; the digital music sky isn't falling just yet, no matter what the pundits and tech media might be saying. Suddenly, they realize they may be looking at another dot-com speculative bubble and they've learned their lesson: "invest in haste, repent at leisure".

2- Why Amazon.com is still on the sidelines; they don't seem too inclined to cannibalize their profitable CD sales just to get a bit of free publicity.

Now that we have a proper reading on the current size of the music d/l business, and its relevance to the studios, we must wait a year for the other shoe to fall; a second reliable number with which to gauge the growth rate of the business and the players and formats.

Until then, any predictions are pure speculation and hype.

And until then, Echo is likely out of business.

There really is no pressing need for the big retailers to panic until they get a hint whether they're looking at a business that will grow to billions a year in sales, stay in the hundreds of millions, or possibly *decrease*.
Considering how immature and tiny the business is, it can go any of the three ways.

Now excuse me while I go dive into the bunker...

[The Yaz]

What has hurt D/L sales is a factor of the DRM restrictions and that the online stores all carry limited titles.

After downloading a couple of times I found that it was easier to buy individual songs if I did not know the artist, but I would still order the whole album from the artists I like to collect. For me, D/Ls have replaced buying the singles from a record store, not the album purchase.

Another factor for me is the album artwork. If the download and album are evenly priced, I'll buy the album everytime. That way I know I have the original content to copy to my PocketPC at my convienience.

Steve 8)

[Felix Torres]

What has hurt D/L sales is a factor of the DRM restrictions and that the online stores all carry limited titles.

Steve 8)

Like it or not, DRM is tied at the hip with legal d/ls.
Not going to change.
What absolutely *has* to change is, as you pointed out, the limited selection that the stores offer.

The one lesson being ignored from the launch of CDs is that when it comes to new music formats, is the the *old* songs that sell the format.

The bulk of the sales that made CDs the dominant format of its day and wiped out LPS overnight was the ready availability of the labels' back catalogs.

Never mind this week's top 40; give me the top 40 for the past 40 years and then we're talking.

And while you're at it, how about providing access to non-NorthAm music?
There's lots of interesting music coming out of europe and latin america that is not easily available on CD on these shores.

D/Ls are perfect (best, actually) for sampling new acts and genres but that only works if they actually offer the stuff.