Posted 11/14/2003 7:09 PM
MUSIC AND TECHNOLOGY

Wal-Mart to launch online music service
LITTLE ROCK — Wal-Mart Stores is looking to its core customer base with its new online music service, offering a library of largely country music songs for less than the 99-cent per download industry standard.

The world's largest retailer, based in Bentonville, Ark., sells 20% of the nation's recorded music, and plans to launch its own online music downloading service. The company already rents DVDs online, and analysts say offering music opens the market to a new demographic.

"It really represents the mass market stepping up to digital music services and saying, 'We're almost ready to adapt this on a big scale,'" said Jacob Kaldenbaugh, an analyst with Harvest Equity Research in San Francisco. "This is downloading music going mainstream."

Brisbane, Calif.-based Walmart.com's spokeswoman Cynthia Lin was traveling on Friday and not available for comment.

Wal-Mart's service may be online as soon as next week and carry about 200,000 titles — half the library of other downloading sites like Apple's iTunes.

"If you look at the headline numbers everybody else has close to 400,000," Kaldenbaugh said. "Right now the issue is, do you have the songs that your consumers want? The question is, are there enough country music consumers who feel comfortable using downloadable music?"

Kaldenbaugh says that Wal-Mart's customer base may be less opposed to paying for online music. That and targeting the country music market, could prove a boon for the store, said Marcus Thomas, a music management professor at Georgia State University in Atlanta.

"Wal-Mart stores in general are located in rural areas and the larger part of the music they sell thru their racks are country," Thomas said. "Very possibly, it could boost the sales by exposing the music to more people."

But other analysts say that Wal-Mart is eager to jump into an already-crowded online music market.

"There's really a land grab going on to get online with music stores," said Charles Wolf, an analyst with Needham and Company, Inc. in New York. "Everybody and everyone is trying to get into this business as quickly as they can."

Wolf said Wal-Mart may bring new downloaders to the Internet, but depending on what platform the company chooses, it could pull customers from other sites.

"Some people might download music who have never done it before," Wolf said. "The sites that are likely to lose are those who are compatible with the format Wal-Mart uses."

The other factor is how many people visit the site, Wolf said, noting that people know the Wal-Mart name.

"One of the determinates of success will be the traffic," he said. "And Wal-Mart obviously generates a lot of traffic into their stores."

E. Michael Harrington, a music business professor at Nashville's Belmont University, said that he thinks the company is making a mistake if it places too much emphasis on country songs.

"I would think they should expand it to more," Harrington said. "So many rock 'n' roll kids go to Wal-Mart anyway, why wouldn't they go to Walmart.com?"

During the summer, Wal-Mart completed a seven-month trial and began full-scale operations in its online DVD rental business, a challenge to market leader Netflix.


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