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TK's MORNING BUZZ: Video Retailers Should Follow Their Music Brethren -- and Prepare for the Digital New Order

15 Nov, 2000 By: Thomas K. Arnold

Word of yesterday's settlement between MP3 and the Universal Music Group on the digital downloading of music reached me while I was in my car for a late lunch.

The radio announcer made a big deal of the settlement, in which MP3 has to pay Universal $53.4 million in damages but gets access to Universal's entire music catalog.

The focus, as one might suspect, was on the imminent "death" of the brick-and-mortar record store. Of course, there were no interviews and little in the way of statistics except for one finding, not attributed to any source, that held record sales in music stores located near college campuses was going down.

Fast forward three or four years into the future and we can expect to hear the same death knell sounding for video retailers, renters and sellers alike.

Just as the announcer asked, "Who's going to buy a CD when they can download one?", we're going to hear things like, "Who's going to buy a DVD when they can download a movie?"

The answer, in both cases, is, "a lot of people." If record sales have gone down in music stores near college campuses, that's perfectly understandable.

Until the recent involvement of the courts, digital downloading of music was free and unregulated. Of course a college dude's going to download the latest Smashing Pumpkins album if he can get it for free.

But under the soon-to-be-ironed-out New Order of digital downloading, which some labels are already implementing, downloading music will carry a price tag. It probably won't be as much as buying a pre-recorded CD in the store, but then you don't get the neat artwork on the disc or the packaging, either.

I firmly believe digital downloading and packaged music will co-exist peacefully, and the next few months should prove me right.

If there is a slight dip in pre-recorded CD sales at retail, dealers can make up for it by latching onto the digital bandwagon and offering digital downloads either on their Web sites or in their stores, at Web-linked kiosks. Trans World and Tower already offer digital downloads, but in the wake of yesterday's ruling are expected to beef up their selections and their overall commitments, in the belief that consumers are far more likely to go to one site for all their music needs than skip around from record company site to record company site to amass their collection.

The same will hold true in the future, in regard to digital downloading of movies. The key thing for video retailers to remember is to do what the music chains did--prepare and learn as much about the technology as you can, so when it comes around you won't get caught off guard and, instead, will be in a position to embrace it and capitalize on its potential.

Before long, even that know-nothing radio announcer will realize reports of the death of brick-and-mortar music stores are greatly exaggerated.

Of course, that won't prevent him from making a similar pronouncement in the future, when it's the video industry's turn.

We'll just have to show him again.

Comments? Contact TK directly at:TKArnold@aol.com

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