snapshot 8/27/07

Digital music services try to nibble away at Apple
Several digital music service providers -- including MTV's Urge, Rhapsody, Verizon Wireless, Wal-Mart and Yahoo Music -- have unveiled new forays designed to shine light on their struggling services in the shadow of Apple's still-dominant iTunes.

While no individual effort is likely to dislodge Apple from its No. 1 position, all are clearly efforts to chip away at its commanding lead. According to data from NPD Group, Apple controls 73.7 percent of the retail digital-music market, with more than 3 billion tracks sold since it went live. iTunes is also the third-largest music retailer of any kind, surpassed only by Best Buy and Wal-Mart.


SanDisk Announces Super-Small MP3 Player
In a direct move to challenge Apple's dominance of the itty-bitty MP3 player market, SanDisk today announced its super-tiny Sansa Clip. This extremely small and wearable music device is barely bigger than a pack of matches and comes in memory capacities of 1 and 2GB for $39.99 and $59.99, respectively. Though the 1GB version only comes in black, the more expensive 2GB model will be available in multiple hues of red, pink, and blue.

Of course, the Clip is named after its clip-on fastener which lets you attach it conveniently to clothes, the same way the Apple Shuffle does. The big difference here is, unlike the Shuffle, the Clip sports a slick OLED screen for navigating tracks and controlling the player's other functions. Besides playback of MP3, WAV, WMA (both protected and not), and Audible audio formats, the Clip features an FM tuner/recorder, plus an internal microphone. The Clip is expected to support various music services including Rhapsody to Go, Napster, and eMusic.


Pass the Popcorn. But Where’s the Movie?
According to Craig Moffett, vice president and senior analyst at Sanford C. Bernstein & Company, cable’s video-on-demand is well positioned, technically speaking, to be the preferred way that movies reach the home, but the Cable Guys cannot get access to Hollywood’s products: “They built a Ferrari of a delivery engine, but the content owners didn’t show up.”

The movie studios are preternaturally suspicious of the new and unfamiliar. Their fear has nothing to do with crunching the numbers, but rather with large organizations’ tendency to lose sight of their interests — not to mention their customers’. Thanks to the efficiencies of digital delivery, the studios actually earn three times the margin on each video-on-demand viewed that they earn on a store rental, while charging the same $4.


As Download Services Go DRM Free Where Are The Indies?
As the major download services add DRM-free tracks from EMI and Universal, where is music fromDrm_anti_wall the indies? Indie music after all makes up 70-80% of all new releases by volume and 30% of sales. And it's not that indie labels don't want to sell DRM-free to iTunes, Walmart.com, Rhapsody and others. Most indies already sell DRM-free at bargain prices via eMusic. And even a Walmart_2 usually selective Wal-Mart has virtually unlimited shelf space in their digital storefront.


Diversification Pushes CD Prospects Southward, Analyst
CDs are now sliding precipitously, especially in the United States, and that has intensified media diversification efforts at major retailers. Store-specific numbers vary, though broader figures have been soggy. At the halfway point, year-over-year disc sales in the United States dropped 15.1 percent, according to Nielsen Soundscan. That gap has since broadened to 18.4 percent, according to more updated, year-to-date information released last week.

For retailers like Trans World, Hastings, and Virgin Megastores, diversification has now become an accelerated survival tactic. During the recent quarter, music-specific sales at Trans World dropped 19 percent on a comparable store basis. That is more severe than dips of 16 percent recorded during the same quarter last year, and represents a worsening trend. "Trans World has 950 stores and we would expect them to continue to deemphasize music over the next 12-24 months," said Richard Greenfield of Pali Research during a recent investor note. Greenfield noted that Trans World has already lowered its music-specific selection to 43 percent of total inventory, down from 47 percent last year.

The decreased selection means less consumer matches, and lowered sales volumes. "As floor space continues to contract at physical retail, we are increasingly concerned that the rate of decline in CD sales will materially accelerate in 2008," Greenfield asserted.


Music online is different. It’s not just ‘new format’ different — it’s ‘new ballgame’ different. But some rules still apply.
1) More distribution is better than less distributionDoesn’t matter whether you’re selling shellac 78rpm records or house tracks as 320kbps mp3s. The more places your music is available, the more chances people are going to have to stumble over it. That’s not job done, of course — making something available is not the same as marketing it — but it’s the other half of the equation.


iPod and iPhone Media Download Kiosks Coming January 2008
Although the "upcoming" Zune music kiosk download feature seems obvious thanks to the player's Wi-Fi capabilities, being able to download music onto your iPod or iPhone on the go seems less obvious. However, 22Moo has just announced a date for their iPod- and iPhone-compatible internet kiosk station that lets you download movies, videos, games and music onto your player when you're on the go. The launch is planned for January '08 at CES and MacWorld.