US music retailers in Net joint venture

  • Business
  • Wednesday, 29 Jan 2003

NEW YORK: Major US music retailers have launched a service to deliver music via the Internet, a step they hope will save them from piracy that has raged on even after the demise of the Napster online song-swapping service.  

The partnership, which comes as the music industry also battles growing pressure from discounters like Wal-Mart Stores Inc, consists of Best Buy Co, Hastings Entertainment Inc, Tower Records, Trans World Entertainment Corp, Virgin Entertainment Group and Wherehouse Entertainment Inc.  

The six retailers said in a statement that their venture, called Echo, would enable them to “effectively compete in the digital music market place.”  

But Bernstein analyst Colin McGranahan said he sees Los Angeles-based Echo as merely a step by the stores to band together as the direct music distribution model continues to evolve and music labels gain the upper hand.  

In the past year, a number of major music labels have been seeking ways to distribute their content directly to consumers in an attempt to steer clear of the retail downturn.  

“This does not seem intuitively a slam dunk,” said McGranahan. “Clearly there may be another story behind (this move). It could happen that the music labels are working on something that’s leading music retailers to feel they need to get together to have some kind of a united voice.”  

Just last Tuesday, Wherehouse Entertainment filed for bankruptcy protection for a second time in less than 10 years. The Torrance, California-based company, which along with its peers has been struggling to gain a foothold with consumers, said it will close 120 more stores.  

The music industry’s troubles also forced Best Buy, the top US consumer electronics chain, to shut 107 of its Musicland stores earlier this month.  

The retailers said they will each back Echo with in-store marketing. Each participant will independently market and price its digital entertainment offering.  

Echo officials were not immediately available to provide details about whether the new venture would be subscription-based or how it would compare with services like Pressplay, an online music subscription joint venture backed by Vivendi Universal and Sony Corp. 

Pressplay, for example, agreed in November to provide content from Warner Music, expanding its online subscription library to include music from all five major labels.  

Users of Pressplay can download songs to their computer and then copy them to portable devices or burn them onto CDs.  

The company competes with MusicNet, which is owned by record labels Bertelsmann AG, BMG, EMI Group Plc, AOL Time Warner Inc and RealNetworks. – Reuters  

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