Net Profit
Music retailers find money on line.
There's a lot of talk these days
about how no one is making money on the Internet. But tell that to the online music retailers have already
opened up their electronic shops, hocking everything from Hootie and the Blowfish CDs to Skinny Puppy
T-shirts. While most Web sites are hanging on for that proverbial "day" when money will finally start flowing
down from the mountain top of revenue streams like subscriptions and advertising, on line music retailers are
already chalking up profits.
Music clearly accounts for a large chunk of the content on the Net, so it's not surprising that it is also one of the
more successful products sold over the Web. But the traditional retail powerhouses like Sam Goody, Tower and
HMV are not leading the charge in the new medium. Instead, young upstarts like CDNow, Music Boulevard,
Soundwire and CD Connection have taken the reins.
CDNow reported sales in excess of $6 million in 1996, and with a growth rate of 15 to 20% a month, they project
to triple that amount in 1997. Soundwire, the Web's premiere indie music retailer, declined to reveal exact sales
figures, but did say that are already in the black and are, quote, "doing quite well."
The companies report that their consumer demographics are pretty evenly split in terms of age and gender. And
contrary to the hype about consumers being afraid to pass their credit card info over the Net, both CDNow and
Soundwire report that the overwhelming majority of their customers have no worries about whipping out the Visa.
Net retail may be viewed as cutting edge, but technological developments are already threatening to curb the
rise of on line music sales. As things like digitial delivery, audio streaming and micro-transaction systems
are fine-tuned, consumers get closer and closer to the day when they will be able to download and record their
own CDs at home, or listen to archives of CD quality music through their stereos with a click of the mouse.
What will be the role of retail then? Will there be a role at all? According to Marlo Zoda of CDNow, as physical
sales and distribution decreases in significance, the retailer's role moves towards content production. The goal?
To create the perfect environment for music shopping. By using intelligent agents, sophisticated searchable
databases and extensive product information, retailers will focus less on selling and more on personal service.
Zoda says, "Retail stores have to come up with creative measures to provide information and content so that the
customer is doing more than just buying things."
by Nat Soti
soti@i-cities.com
