Digital Music Pacts Bring Retailers Into Network Age
By Scott Hillis
dailynews.yahoo.com
LOS ANGELES (Reuters) - Have you ever walked out of your local music store empty-handed because you couldn't find that rare gem of an album amid racks of Top 40 hits?
A series of announcements over the past few days mark the first steps to bring brick-and-mortar music stores into the digital age, letting customers use in-store computers to download hard-to-find records and record them on the spot to a compact disc.
Sony Music Entertainment Wednesday said it had signed a deal with private company Digital on-Demand to pipe more than 4,000 albums, or half its catalog, directly to stores.
Although it was unclear exactly which artists would be offered, it could bring lesser-known albums from musicians like Bob Dylan and Miles Davis back into stores.
And Thursday, two major music retailers, Trans World Entertainment Corp. (Nasdaq:TWMC - news), which runs several music chains such as Camelot, and British-based Virgin Entertainment Group, said they would roll out the service over the next few months.
Through its RedDot Network, Digital will deliver those albums over superfast lines to special terminals it says hopes will become fixtures in music stores across America.
Customers will be able to browse catalogs of music, decide whether to make a CD, DVD or minidisc, and then wait 5 to 15 minutes while the album is recorded and the cover art and liner notes churned out on a high quality laser printer.
Eventually, the system will allow music to be e-mailed to home computers or loaded directly into portable playback devices that store the songs on a memory card rather than a disc or cassette.
The deals are the boldest move yet by traditional retailers to reassert their relevance amid the attention showered on Web sites such as CDnow and Amazon.com, which offer rare albums real-world stores can't stock on limited shelf space.
While store sales still account for 85 percent of all CD sales, compared to just 1 percent for Internet sales (14 percent is through mail-order music clubs), the deals are aimed at tapping the convenience of the digital age.
''One of the very clear things that's developing in the marketplace is that information takes the path of least resistance, and that path is digital,'' said Anthony Deen, vice president of retail design for Virgin Entertainment.
Deen said the new technology would not steal the thunder of Virgin's new music Web site, (www.virginmega.com).
''The record store offers a cultural value very different from the Web site. It offers a community experience rather than the individual experience of the Web site,'' Deen said.
To build its network, Digital bought patents from a defunct company called New Leaf, which tried a similar project in 1993 that failed after record labels shunned the effort.
Analysts said while like any new product, it would take some time to win acceptance, Sony's backing would give the technology a strong boost.
''Now with Sony, it seems like it's started to cross one barrier in that labels see it's something they have to do in terms of augmenting sales channels,'' said Geoffrey Sands, vice president of management consulting firm Booz-Allen & Hamilton.
''The retailers are the ones who have the most at risk and to the extent that digital delivery helps improve costs, that's obviously positive,'' Sands said.
Digital was expected to announce similar arrangements to license music distribution rights from other major record labels over the next few weeks, company President Scott Smith said in an interview. Digital also hoped to eventually offer hit albums and singles, Smith said.
''Sony doesn't want to give us too much from their products because it cannibalizes their other distribution channels,'' Smith said. ''Right now it's stuff that should be in the stores but isn't. Where we think we will go in the future is frontline product.''
Smith and Deen also brushed off concerns that the quality of the packaging, created on printers rather than printing presses, would turn off customers.
''The quality is incredibly high. One of the things we pushed (Digital) on was that the quality was up to a standard that artists would be happy with as well as customers,'' Deen said.
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