Rap Coalition

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Thursday, April 17, 2008

Besieged by web, music stores go digital, sort of

By Bradley Bambarger, Star-Ledger Staff

Browsing in a record store has always held the promise of serendipity for the music hound -- stumbling on a gem next to the disc you were looking for, being reminded of an old favorite that a friend just has to have, grabbing something on impulse.

This has become an increasingly quaint experience, as brick-and-mortar retail space for CDs continues to evaporate. But music sellers have come up with an item that may provide some middle ground between consuming music via the internet and shopping for it in person: digital album cards.

These products -- marketed by top digital music seller iTunes and major record company Sony-BMG, with other major labels and perhaps Wal-Mart to follow -- manage to be both physical and digital. Selling for the price of a CD (usually $12.99), the glossy cards give purchasers a code that enables them to download the album's songs, a booklet and such extras as videos and bonus tracks not available on CD.

Offering 46 titles now and 30 more by June, Sony-BMG sells their Platinum MusicPass cards via the big chains Best Buy and Target, as well as at such mall-oriented media shops as FYE. With 30 titles so far, Apple's iTunes Digital Release Cards -- distinct from the iTunes gift cards sold by dollar amount -- are available at Apple stores, Best Buy and most Starbucks locations.

If old-school CD collectors find the digital album cards flimsy, the extras might be enticing. For music lovers new to downloading or wary of using their credit cards online, the album cards could provide a bridge to buying music on the web.

"People come into the store every day who haven't gotten into downloading yet, and the digital album cards can ease them into it," says Crystal Strope, a customer assistant at the Best Buy on Manhattan's Columbus Circle. "Of course, a lot of customers also like to browse to discover things as they've always done with CDs, and there's a touch and feel to the cards."

While the digital album cards may turn out to be neither-fish-nor-fowl ephemera, they don't take up as much costly inventory space as CDs, making them easy to merchandise in multiple spots. The Sony-BMG line debuted in January, with the iTunes cards appearing last fall. Neither company will reveal sales figures for their cards, but Sony-BMG reports an exponential spike around Valentine's Day and Easter, suggesting that the cards could be a hit as a gift item.

Unlike iTunes cards -- whose downloads only work with Apple's iPods -- Sony-BMG cards offer access to high-quality MP3 files that work on any digital music player. Sony-BMG's biggest MusicPass seller is R&B teen Chris Brown's "Exclusive," and its line also includes such newly compiled anthologies as "'80s Pop Hits." Among the iTunes cards -- which generally retail for $3 or $4 more than the site's $9.99 per-album price -- top sellers include Eddie Vedder's "Into the Wild" film soundtrack. A John Lennon video album is also available in the iTunes series, for $24.95.

The iTunes album cards are problematic for traditional music stores -- the site's virtual record shop is killer competition, after all. Trans World Entertainment -- which operates 30 music outlets in New Jersey (including 26 FYE shops) -- sells dollar-amount iTunes gift cards as a sort of necessary evil. But the firm draws the line at the Apple's album cards, says Ish Cuebas, Trans World's vice president of music and merchandising operations.

But Cuebas is bullish about these products from the major labels, saying, "The Sony-BMG album cards haven't been a runaway success, and the profit margins are lower than with CDs, but we've definitely seen some incremental sales. They're not going to replace CDs for us, but they fill a need -- we'll try anything."

Advertising for the digital album cards has been surprisingly low-key. Their existence is still below the radar for most consumers, with young shoppers approached in the Best Buy in Union this week having never heard of the cards.

Although changes in the business keep coming, CDs haven't gone away, with four times more albums sold on disc than via download during this year's first quarter -- 88.4 million versus 15.7 million, according to sales-charting firm Nielsen SoundScan. But digital sales are making gains, with a 36 percent increase in album downloads so far this year. Amazon has begun successfully offering MP3 downloads, and a January-February study by market research firm NPD Group listed iTunes as the top music seller for the first time, surpassing Wal-Mart.

Album sales of any kind are down 11 percent in the first quarter, after a 15 percent drop last year. With illegal downloads and a surfeit of other free music on the Internet, record companies have to deal with more holes in the dike than they have fingers. But they finally seem to be working together: The major labels just arranged to sell music via MySpace, and more deals are being made for websites to pay labels indirectly for music, via ad revenue.

Digital album cards are another example of necessity breeding invention, says Ed Christman, retail editor of Billboard magazine.

"Are these cards the next big thing that will save the record business? No, but every little bit helps," he says. "There's so much experimenting going on. Everyone's guessing about how people are going to buy music in the future, but nobody knows."


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