Musicland ties music Web site to in-store sales - Musicland forms alliance with NetRadio, an over-the-Internet radio station, to boost its music sales

Discount Store News, Nov 4, 1996

MINNEAPOLIS -- The music industry is has hit another sour note. For the second consecutive year music sales are poor. Best Buy chairman Richard Schulze said that his chain's music sales are "flat compared to last year, and the industry as a whole is down about 8%. Even if we have a great Christmas, it won't bail out the rest of the year."

Over the past year, major hit acts have shown a lack of staying power. Green Day, which sold some 10 million copies of "Dookie" in 1994, got nowhere in late 1995 with its follow-up, which made the charts for only a couple of weeks.

Last year's sensation, Hootie and the Blowfish, similarly disappointed with its long-awaited second album, and even Pearl Jam, while turning in respectable sales for its latest recording, is selling only a fraction of the copies it sold of its earlier releases.

Most ominous is the continuing decline of Musicland, the most influential retailer in the industry over the past decade. Best Buy is poised to surpass the longtime leader in gross and unit sales this year, and discount chains, particularly Wal-Mart and Target, are also eating into the music specialist's market share.

Musicland is responding with a new on-line approach to building customer loyalty and stimulating sales of up-and-coming artists. Unlike most on-line strategies. Musicland's alliance with Minneapolis-based NetRadio is aimed not at selling music directly to consumers, but toward driving them into Musicland stores.

According to Robert Griggs, president of NetRadio, Musicland is taking advantage of NetRadio's in-depth knowledge of its listeners to create "a whole new form of marketing and advertising."

NetRadio, as its name suggests, is an over-the-Internet radio station that allows listeners to build their own individual listening environments, mixing and matching 10 individual channels of music (featuring, for instance, country, alternative, classical or worldbeat music), sports, weather, news and business news. By filling out an in-depth preference form, a listener can be presented with upbeat pop music in the morning, classical music during the afternoon and classic rock at night, with sports news on the half-hour and business news at the top of the hour.

NetRadio, meanwhile, knows each listener's preference, and can target advertising to each person's taste.

That's where Musicland comes in. The chain, along with Navarre, its primary distributor, has developed a new endcap featuring 13 new releases in several genres of music and from most leading mainstream and independent music labels. Starting Nov. 1, NetRadio listeners will be advised when playing a featured artist's CD that he or she can print out an instant digital coupon worth $2 or $3 toward the purchase of that artist's recording at Musicland. Listeners will also be offered an instant link to the artist and/or label home page for further information, contests and special promotions.

"This is just the beginning," said NetRadio's Griggs. "It's the birth of true one-to-one marketing. We're dealing with a physical endcap here, but there's no reason why we couldn't develop a limitless supply of virtual endcaps, one for every listener."

NetRadio is in discussions with other retailers to offer similar programs and is also talking with the video and other entertainment industries.

The Musicland program features 12 relatively new recording artists like DC Talk, The Wild Colonials, Republica and Eric Johnson, and one graybeard, Kenny Rogers. Labels represented include giants like EMI and RCA and upstarts like Thump and Drive Records.

Like most endcaps, this one is supported by manufacturer promotional dollars, and the record labels, along with Musicland, also pick up the advertising charges from NetRadio. Navarre, which owns just under one-half of NetRadio, manages the program and makes sure that each title is on-shelf when it's supposed to be.

The decision about which titles to feature is made jointly by Musicland, NetRadio, Navarre and participating record labels. Labels are restricted to no more than two slots on the endcap, and each title is featured for eight weeks, with Musicland and NetRadio having the power to substitute for slow movers after four weeks.

While Griggs believes that electronic commerce could in time supplant retailing as the primary means of distributing music, "that time isn't now. However, the Web is the first means of communicating directly one-to-one with customers. There are about 13 million Americans on line today, and for the first time, we can tell you what they like, what sports they enjoy, what they listen to and what their interests are." Many consumers have abandoned record stores altogether, and Griggs believes the Web offers the means of bringing them back to retail.

NetRadio can be reached at www.netradio.net.