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| From | GaryPig@aol.com |
| Subject | This Just In....... |
| Date | Mon, 31 May 2004 14:57:40 EDT |
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.....from BigO Update No. 321:
WHY BUY CDs AT A STORE?
Here's an article from Computer World which reflects a turning point
in music retailing. Take note that HMV have just changed chairman and
will close all their US stores by end 2004.
If you are one of the few left running a music store, selling
CD's and DVD's... I would quickly think of another line of business
to get into. Call it the neutron-bomb effect: In less than a decade,
the aisles of music retailers will be empty. I predict that online
music sites such as Apple's iTunes, Napster and Sony's Connect will
have drained Virgin Megastores, HMVs and Tower Records of their
customers. (Not to say nothing of the smaller independents). The big
brick-and-mortar music retailers won't just be empty; they'll be gone
-- along with their shelves, bins and dimwitted sales assistants who
can't direct you to anything other than the latest Britney Spears CD.
The success of Apple's iPod, which plays Internet-downloaded music,
demonstrates how the world of traditional retailing is colliding with
digital technology. With recommendation engines, shared playlists and
downloadable samples all at a consumer's fingertips, why buy at a
store?
Even big music companies such as Warner, BMG and EMI are
getting into the act, teaming with RealNetworks to start a service
dubbed MusicNet. But this effort comes with restrictions on what you
can do with the music. You might want to burn a CD so you can listen
in the car, but the service's protected Real Audio and Windows Media
files chain you to your desktop. Virtual music should let you take
music anywhere. And as soon as you go virtual, the economics of
shrink-wrapped CDs begins to look dicey. A consumer who pays 99 cents
per song at iTunes (soon to be $1.25; the music companies are being
true to form, biting the hand that feeds them) is putting about 65
cents into the pockets of the record companies. For Apple, the real
money is in selling the iPod.
But for the music industry, the important lesson has been
Apple's demonstration that it doesn't take a music company or a
traditional retailer to rearrange the business model of selling
music. With the record companies taking two-thirds of the money,
margins for stores are going to get squeezed. They are already razor
thin, and promotional deals, chargebacks for unsold inventory and
co-op advertising seem ridiculous when a consumer can point, click,
sample and buy.
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