Best Buy Launching Apple iTunes Competitor

[Jason Dunn]

<div class='os_post_top_link'><a href='http://www.pcworld.com/article/id,127403-c,onlineentertainment/article.html' target='_blank'>http://www.pcworld.com/article/id,127403-c,onlineentertainment/article.html</a><br /><br /></div><i>"Best Buy, in cooperation with RealNetworks and SanDisk, is the latest company to join the growing list of competitors challenging Apple Computer's iTunes music service. Best Buy today unveiled an online music service called Best Buy Digital Music Store that allows customers to find, manage, and purchase music online. It is powered by RealNetworks' Rhapsody 4.0 music service and lets users purchase and permanently download songs and albums, as well as subscribe monthly to listen to an unlimited number of songs, the company says. As part of the offering, Best Buy will carry and promote SanDisk Sansa e200R Rhapsody MP3 players, which have been optimized to work with the new music service. Both the players and the service will be available starting October 15, the company says."</i><br /><br />There doesn't seem to be anything special here: songs will be 99 USD cents each, or $15 USD a month for a subscription plan. The 2 GB Sansa device will sell for $140 USD with the 8 GB Sansa costing $250 USD. You'd think with a tie-in like there, there'd be some sort of rebate or Best Buy in-store coupon...SOMETHING to make this stand out from every other service out there. Unless they change something, or get creative, I predict it will be dead in 24 months. Best Buy has some serious marketing clout, but not unless they add some innovation on top of it all.

[Felix Torres]

Normally, I avoid posts on iPod/iTunes-competitor announcements since we all know they are all "hopelessly doomed" (as the pod-people keep insisting every single time such a product pops up) but this one got me thinking:

Of late, not many people seem afraid of Apple...
Could it be that since MS is going after the pod, others are thinking that maybe Apple is not invulnerable after all? That they *can* be had?
Or could it be that Apple's business practices have started to annoy their partner/competitors (and Best Buy may sell a lot of pods, but they also sell a lot of CDs and DVDs and Apple's direct sales may be cutting into their already thin margins) enough that they want to see Apple brought down a peg?

What got me thinking along those lines is that today, MLB.COM announced they were pulling product out of iTunes and making *their* site the exclusive source for the freebies. And other non-ABC networks (NBC, CBS, FOX) are providing their video content for free directly off *their* web sites and through alternate channels, as if the non-Disney studios were purposefully avoiding iTunes for video; as if the music industry's experience negotiating with Apple has them leery...
(I recently saw published reports that said all the studios that *aren't* on iTunes already have deals with MS for Zune, starting next year.)

Could Apple have gotten too big for their britches and become a target for their one-time partners?

As for BB doing special promos for their new service, shouldn't those come *after* launch? Maybe as part of the weekly ads...
For a discount/rebate to have value, the product has to have the higher price established first, no?

[sojourner753]

Could Apple have gotten too big for their britches and become a target for their one-time partners?


I'm of the opinion that every empire has its day then eventually collapses under its own weight. Not saying that its Apples time, but the symptoms seem to be there. Apple has too much control, so partners start looking for alternatives. Whether its to really leave, or as leverage to re-negotiate. Either way Apple will find itself in a position to have to play nicely with others.

Also... am I the only one that should really be a re-release of their existing music service. I'm pretty sure they've been pitiffully pettling Rhapsody for at least a couple of years.

[Jason Eaton]

I guess I see it a little differently. What I see is analogous to other markets such as TVs or computers. In the beginning there is usually one or two companies that are dominate and lay out the ground work with consumers. Those companies learn from their mistakes and feel out the price points the consumer is willing to pay. Over time these actions get mapped out and become visible enough to observers who can piece the information together and work backwards to make some fairly educated guesses on how to do things.

Once the ‘play book’ is established and companies have some numbers to wrap tactics around, the market usually sees an influx of third tier players who believe they can make money while understanding what risks are involved.

In this instance I am sure Best Buy is leveraging its distribution muscle to get a lower price in bulk on the players. They add a little profit on for themselves and the target price for players returns to where it was before.

Real makes an offer to Best Buy to use the rhapsody service and offers up some incentive capitol to Best Buy and presto.

Best Buy can make money or break even with little to no financial risk. If the service goes belly up they make some profit on just selling the players. If the service gets going they make a little more on the music sale.

…

Now on to the other part, will it work? I am doubtful. They may make enough to keep the project a float but I doubt they will take a large percent of market share. Apple could probably tell you that even 3 percent of a market is good enough if your overall costs are low and you make nice profit on the things you sell.

[Macguy59]

Interesting. Unless I missed it you don't predict such doom and gloom for either the Zune store or URGE. What sets either of those apart?

[Jason Dunn]

Interesting. Unless I missed it you don't predict such doom and gloom for either the Zune store or URGE. What sets either of those apart?

Best Buy is just one store - sure, they're big, but they're just one company. Zune is going to be USA-wide in 20+ major retail chains, hundreds of stores, and will have Microsoft/Xbox marketing muscle behind it. URGE is a virtual service available to anyone in the US, and has a good amount of marketing behind it.

[Macguy59]

Interesting. Unless I missed it you don't predict such doom and gloom for either the Zune store or URGE. What sets either of those apart?

Best Buy is just one store - sure, they're big, but they're just one company. Zune is going to be USA-wide in 20+ major retail chains, hundreds of stores, and will have Microsoft/Xbox marketing muscle behind it. URGE is a virtual service available to anyone in the US, and has a good amount of marketing behind it.

So in other words there really isn't anything to set them apart from Best Buys model aside from marketing $$