The New Distribution Model

72 RaR March 17, 2000 DIfernatiUe (iardryRadio The new Distribution Model Continued from Page 71 A Forrester study projects that from basically zero 11The complement between an online revenue in online digital music sales we will move to almost a billion dollars over the next three years. There presence and the ability to direct people is going to be a lot of market growth there. It is an opportunity for organizations like ours that provide a su- to the store works in reverse as well." perior customer experience to really develop relationships with music enthusiasts. It is a long -term process. R &R: Who is in charge of convincing artists like Dave Matthews to put tracks online? other forms of media. PW: Were leveraging our relationship with Virgin, about Virgin JamCast is that it is the first consumer gument with tapes and we will be able to do even more. which has very deep relationships with all the labels. implementation of IP Multicast technology, which takes In the future technology out there to do water- Sometimes people get confused: Richard Branson sold the broadcast model and puts it on top of the Internet. There is already The watermark will say, -Here is who pur- Virgin Records to EMI about five years ago. Our rela- This makes it very efficient to send the same piece of marking. chased this file, and here is who has access CO it." That tionship is with the Virgin Entertainment Group, which media to literally millions and millions of users. will live with the file forever, and there is no way runs all the Virgin Megastores and a variety of other Virgin JamCast is the first to deploy IP Multicast in mark off. Those standards are taking some time to businesses. They sell somewhere around a billion dol- a consumer application. What it does is that while you to strip it and these huge libraries need to be lars of merchandise through the Megastores each year. are surfing the web or checking your e-mail or while be implemented, looking at a year -plus process. They have relationships with all the labels. We work your kids are playing games, Virgin JamCast is in the coded. We're where the industry is headed, and very closely with them. We just put up some music background, automatically putting music that you sub- Everyone knows providing the best user experience from Rounder Records last week that was also co- scribe to on your hard drive. When you come in at we are focused on want to make it easier to ac- promoted,throughout all the stores. Labels are looking night and want to check out music, the music is wait- with digital content. We a friendly brand. It is going to promote their artists through novel avenues, and Vir- ing there for you to listen to with CD- quality sound and cess and use underneath time. Not all the answers are going to be found gin Jamcast is a great way for them to get their future no downtime. Its a very pleasing and convenient pro- to take but there is no doubt where we are headed. artists and music directly into the home. cess. overnight, R&R: What kind of pricing structure are we talking R &R: Are these promotional music items or pur- about here? chased items? ,pcb The,t, PW: The average single is 99 cents, and they range PW: A combination of both. There are promotional G from 79 cents to $1.29. Most are available for 99 cents tracks as well as music you can pay 99 cents for and though. Right now we only sell tracks on a single ba- keep the single. It works like this: We send you a digi- N O. sis, but full albums will be available at the end of March. tal file, and that digital file is typically protected with R &R: It is interesting to me that you are paired with a time bomb. So the new Smashing Pumpkins single a brick -and -mortar retailer, which some say will be the is actually valid for the rest of this month, and after losers in a new online music distribution model. How that you have to pay to have the encryption removed KPfT /St. Louis has do you see this affecting their business? so you can play it permanently. The Alternative format always found success when it The thing that Virgin has done is to create en- R &R: What a great promotional vehicle for a record PW: is rock -based. The recent tertainment destinations with their Megastores that company to be able to send out with the knowledge onslaught of artists like Kid have proven that they can drive a lot of traffic to their that if the consumer really likes it, the purchase will Rock, Rage, Limp Bizkit and others has replaced the brick -and -mortars. There is a brand and a user experi- be in there in the back end. grunge of 10 years ago. The buy it. It is about conve- ence associated with Virgin that is unique. Online prop- PW: Exactly: They can hip -hop additions to the erties cannot do that. So from a music enthusiast stand- nience. Think about Blockbuster Video. They were so format have helped liven up, but that is more point and from an entertainment standpoint, Virgin has successful because they made it very convenient for things flavor for the format. When alternative leans away from its rock roots, that is when violate copyright we run into trouble. Ska, "The fact is that people will swing and electronica have been good flavor in the past, laws. There is no way for the industry but again, it's the rock -based music that keeps the format to prevent that." on track. is logi- a unique opportunity to drive that traffic from the stores consumers to watch movies. Virgin JamCast the Eric Baker to the website. That's an element that a traditional cal and final conclusion to delivering media directly into 1 oodrunoet Recul rl\ company doesn't have access to. The comple- the house so it is there waiting for you, and you do online The future of Alternative else to get it. ment between an online presence and the ability to not have to go anywhere radio has a lot going on. First, direct people to the store works in reverse as well. R&R: So you could wake up and have the top 20 the dot -corns will be more active in the pursuit of R&R: So its more of a complementary relationship songs of the week waiting on your hard drive. You buying radio stations, which them, and if you liked something, you than a combative one? could go through means more consolidation PW: Absolutely. You will see. Virgin Jamcást pro- would keep it in. At the end of 30 days you would oh, great'. Second, satellite moted heavily at all the Virgin Megastores. Also, the make up your mind whether you wanted to pay to radio. In the next three years some major automotive CD sales is Virgin, have it permanently. entity that does all of our fulfillment companies will offer satellite so we promote and help each other. Virgin's whole PW: Yes. I could very easily see that happening. radio in cars. This will affect strategy is to give the customer what they want R &R: Let's talk about piracy. Are these tracks the amount of people who listen to local radio. Local are walking into the store, ordering a CD retransmittable? whether they radio will have to be more But the fact is that online or downloading a track directly. PW: At the moment they are. aggressive in marketing their R&R: Tell me about the digital push technology, people will violate copyright laws. There is no way for music and stations. Third, Alternative radio will have to since download times continue to be an issue. the industry to prevent that. And even with a modest continue to deal with the downloads on the Internet, PW: Estimates are that 60% of web surfers will con- amount of legally available hard artists and the softer tinue to access the web through a 56K modem for the there is á lot of illegally available music on the web. modern rock artists. Can the knows? next three years, so bandwidth continues to be an is- However; there are encryption schemes, and we are format split? Who sue. Every day consumers waste about 610,000 hours working with the SDMI, which will lessen the likelihood downloading digital music. The thing that is unique of piracy. Look at it this way: There was the same ar- .

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