Wal-Mart to Join the Digital Music Party

Wal-Mart doesn’t want to lose its clout in the “music software” arena. It seems to me they have the kind of leverage that could really drive the price of a digital song down, or maybe they don’t really care:

Wal-Mart Stores Inc., the world’s largest retailer and the top seller of compact discs, plans to add a pay-per-song download service by yearend, people familiar with the matter said.

The Internet store will be modeled after Apple Computer Inc.’s iTunes Music Store, which allows customers to download songs for 99 cents each. Wal-Mart has been in talks with record companies to license music for its own download service, four people who asked not to be named said.

The Bentonville, Arkansas-based retailer, which currently controls 14 percent of worldwide music sales, is seeking a foothold in online music as downloading, legal or otherwise, cuts CD sales. Global music sales fell 11 percent to $12.7 billion in the first half of this year after declining 7 percent last year and 6 percent in 2001, according to the International Federation of the Phonographic Industry.

….Wal-Mart sells most CDs for $10 or less, compared with more than $15 at specialty music stores. It has a smaller presence in online sales of CDs, with Walmart.com accounting for less than 1 percent of music sales, NPD said.

More than 12.7 million customers on average visited Wal- Mart’s Internet site each month in the third quarter, according to ComScore. That made Walmart.com the sixth-busiest U.S. Web shopping site, behind companies including EBay Inc. and Amazon.com Inc.

“They’ve got the infrastructure there, so if that’s a direction they wanted to go to, they could,” NPD’s Crupnick said. “They have the buying power and the market strength.”

Wal-Mart will enter a crowded field of online music providers. Roxio Inc.’s Napster, RealNetwork Inc.’s Rhapsody and Musicmatch Inc. are among the legal download services that have proliferated as the major record labels try to counter piracy and free file-swapping sites such as Kazaa and Grokster. [Bloomberg]