TheStreet.com has learned:
- With consumers downloading greater amounts of free, file-shared music from the Internet and buying fewer audio CDs, record companies and music retailers dependent on CD sales have struggled on two fronts: preventing people from getting unauthorized copies of music from the Internet, and encouraging them to listen through authorized services such as MusicNet, pressplay and Rhapsody.
The Best Buy experiment, which debuted in a handful of Midwest stores within the past week, represents a new approach to authorized downloads, and hints at how bricks-and-mortar retailers such as Best Buy — one of the nation’s largest retailers of music and consumer electronics — might participate in the business.
Unlike the authorized services already in operation, Best Buy’s new “Digital Hits” venture takes advantage of Best Buy’s real-world presence and sales force. And the experiment keeps the bricks-and-mortar retailer in the loop of online delivery of music — a transaction that might otherwise take place between record company and music consumer, bypassing the music retailer in the middle.
Though the new venture is far from perfect, it represents a step forward for the music industry, says Aram Sinnreich, a Los Angeles-based online music researcher studying at the USC Annenberg School for Communications.
“There’s no question that if brick-and-mortar retailers are going to retain their business, they’ve got to become involved as middlemen in the digital distribution of music,” Sinnreich says. One plus of physical stores, says Sinnreich, is that they perform educational and informational functions in ways a Web site can’t duplicate. Using in-store aids for online music such as informational kiosks, says Sinnreich, “is a forward-looking approach and has great potential for the consumer experience and for the health of the music industry overall.”
The Digital Hits experiment, available in Best Buy stores such as those in Bloomington and Peoria, Ill., isn’t quite yet as elaborate as it could be. For now, it is based around $10 Digital Hits music debit cards — the equivalent of prepaid phone cards, but for music — and a catalog of Windows Media Format songs sold online for $1 apiece.
After buying these $10 cards, available only in stores, users can use the money on the cards to download the songs in the Digital Hits catalog on their own computer. In theory, as the catalog expands, consumers could consult a touch-screen kiosk at each store to get a sense of the available music selections. But for now, the Digital Hits card appears to be promoted with endcap aisle displays, brochures and sales associates carrying computer printouts of the current catalog.
While the $1-per-song price might tempt users, limited selection and restrictions on file usage have in the past discouraged users from paid Internet music services. Though it’s believed Best Buy will have music from at least four of the five major record labels, as of Thursday its catalog includes music from only AOL Time Warner’s Warner Music Group and EMI Group.
On Thursday, the catalog comprised around 85 songs in categories such as country/folk, rap/hip-hop and rock/indie/pop. The selections, from artists including N*E*R*D, Linkin Park, Red Hot Chili Peppers, Faith Hill and Matchbox 20, appear for the most part to have been released within the past two years.
While users get unlimited playback of a song on their computer in return for their dollar, restrictions on songs’ additional use varies by record label, according to Best Buy’s Digital Hits site. EMI songs can be “burned” onto a recordable audio CD twice, can be installed on three different computers, and can be downloaded onto certain portable devices an unlimited number of times. Warner songs can’t be burned onto a CD, can be installed on only one computer, and apparently can’t be downloaded onto portable devices….
Intellectually I understand why downloading is cool, but limited availability, variable cost, rules, sound quality, and lack of documentation and art work are going to keep me snapping up CDs for some time to come. Right Ross?