Music industry invests in Internet

Discount Store News, April 1, 1997 by Robert Scaley

NATIONWIDE DSN REPORT -- Mass merchants are hoping that cyberspace can stimulate their music sales, while some on-line retailers are hoping to capture a bigger slice of music sales during the next few years.

Leading music distributor Handleman Co. has teamed up with Intouch to put its new Internet-based hiStation music demonstration system in Kmart during the next few months.

The hiStation system will use high-speed ISDN Internet modems to connect in-store kiosks to computer servers carrying samples of more than 300,000 songs from a database of more than 50,000 albums.

Music will also be sold from a Web site that consumers will be able to access through their home computers, said Dan Whitt, Handleman's vp of marketing.

Consumers will be able to order music from the in-store kiosks in Kmart and choose a variety of delivery methods, including having the CD sent to the nearest Kmart location for pickup later.

Target offers previews of albums on its Web site and last month was promoting its exclusive "John Tesh Anthology" album. Target's site does not allow consumers to purchase music through the Internet.

Navarre Corp., a Minneapolis-based distributor of music, computer software and interactive CD-ROM products, has announced that it is buying NetRadio Network, a popular World Wide Web music and entertainment site.

Navarre is in turn selling 15% of NetRadio to ValueVision International for $1 million in cash and $2 million in cable television advertising time in a move to boost NetRadio's profile with consumers.

"With the partnership of ValueVision, Navarre and NetRadio, we are positioning our resources for the inevitable digital convergence that will integrate digital television and the

Internet," said Eric Paulson, Navarre's ceo.

Navarre's Internet initiative also has a real world retail component.

"In addition to Internet direct selling, we expect to further expand and enhance the capability of the NetRadio Network to propel motivated customers into retail stores that carry Navarre's product lines of music, software and interactive CD-ROM products," Paulson said.

On the supplier side, Sony Corp. has announced that it will open an on-line store in the next few weeks to sell CDs and videos.

The site, Stationsony.com, will also allow computer users to listen to music, play game shows such a "Jeopardy!" and "Wheel of Fortune" and play video games.

Sony has also secured about $1 million in advertising for its site from Sears, General Motors and American Airlines.

Although the amount of overall record industry sales that is currently being conducted over the Internet is small, on-line sales of music and other entertainment products are expected to grow as the Internet reaches the status of a mass media,. said Robert Pittman, president of AOL Networks, the company that operates America Online.

Tunes.com has announced that its is establishing a music preview and sales site on the Web. By the middle of this year, the Tunes.com site will include 30- to 60-second snippets of 760,000 songs, and the site has formed alliances with several major record labels.

The National Association of Recording Merchandisers' SounData survey, conducted by SoundScan, found that just 16% of those surveyed said that they believe they will buy more music through computers in the future. Last year, 15% of respondents said they'd be making more music purchases by computer in the future.

Just 1% of those people surveyed said that they had purchased music on line according to the SounData survey. However 68% of consumers had logged onto the Internet recently, and 67% said they own a computer, indicating that a large untapped market may be waiting in cyberspace.

Music sales on the Internet totaled just $20 million in 1996, according to one published report. But market research company Jupiter Communications predicts that by the year 2000, music sales on the Internet will reach $1.3 billion and will represent 7.2% of the total music market.