There's a whole lotta shakin' online
In recent months, the field of companies chasing after the online music consumer has gotten more crowded than the ladies' dressing room at Lilith Fair. Beyond the battle for No. 1 between Amazon.com and CDnow, there's a Lollapalooza of other players rushing the stage with their sites set on the same target audience:
- There's Buymusic.com, the music arm of buy.com. The site's 10% Below Guarantee Program promises to beat the top three competitors' online prices by at least 10%. It's also selling every single-CD title on the Billboard 200 at $9.95-well below the wholesale price and in many instances $3 or more below its online rivals.
- Getmusic.com, the recently consummated online marriage of industry giants BMG Entertainment and Universal Music Group, quickly reversed its initial no-discount policy, slashing the prices of many of its hottest titles to compete with everybody else.
- Following in the footsteps of offline rivals Tower Records and Best Buy, Virgin Megastores, which operates some 200 stores worldwide, launched Virginmega.com in May. Soon after, Torrance, Calif.-based Wherehouse Music, the country's third-largest music retailer, unveiled wherehousemusic.com.
- Even Michael Ovitz is getting into the act. The former Creative Artists Agency chieftain, who has rattled Hollywood in recent months through talent raids by his new company, Artists Management Group, is launching CheckOut.com in partnership with Los Angeles-based Yucaipa Cos. The sites will sell music, videos, and games through three individual Web entities.
Like everyone else in every category imaginable, these companies are jockeying for position in the soon-to-explode e-commerce front. According to SoundScan, which measures music purchases electronically, year-to-date sales in nontraditional outlets-which include not only Internet sales, but sales through 800 numbers, shopping channels, and sales at selected concert venues-accounted for about 1.5% of all sales to date in 1999. But that doesn't even scratch the market's potential. Forrester Research projects that the online music market will explode to $4.5 billion by the year 2002.
In its quest to regain the top of the charts, CDnow (which has a customer base of 2 million following its recent merger with Music Boulevard) is forging alliances with production outfits so that it will be a key distribution partner when direct digital distribution starts to hit critical mass. The company is also devising a strategy to go global. And it's talking to customers about other music-related things they buy, from books to tickets to sheet music. "They'll look to us as a primary resource for those products," says Rod F. Parker, senior vice president of marketing and merchandising for New York-based CDnow.
Amazon, meanwhile, isn't about to surrender its self-proclaimed No. 1 status. The Web site is building customer traffic through its recommendation center, with reviews and contributions from 16 music editors on staff; exclusive CD titles from artists such as Cheap Trick and Cowboy Junkies; and free digital tunes by the likes of Public Enemy and most notably, Sarah McLachlan. Less than a day after Amazon began offering digital downloads from McLachlan's forthcoming live CD, Mirrorball, the disc hit No. 1 on Amazon's sales chart in record time. Soon after, five McLachlan CDs-including all three Lilith Fair compilations-were among Amazon's top 20 sellers in the same week. "The traffic was fantastic," says an Amazon spokesman.
For an overview of the online music battleground, check out the July/August issue of Internet Retailer.
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