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Can a Retail/Online Entertainment Distribution Marriage Work?

27 Jan, 2003 By: Stephanie Prange

Back in 1999, when video-on-demand seemed more imminent, Mark Vrieling, who was then chairman of the VSDA board, told the Associated Press he didn't think Internet movies would happen anytime soon. But he said he could foresee a time when video stores could coexist peacefully with digital delivery, even embracing it. “Nothing stops us from having a bunch of DVDs in the back room and sending them to people's houses on a phone line,” he told the AP.

Almost four years later, with the new buyout of Echo Networks by six major music retailers, we may see if digital delivery and packaged entertainment can indeed form a happy marriage. Best Buy, Tower Records, Trans World Entertainment, Wherehouse Entertainment, Virgin Entertainment Group and Hastings Entertainment have acquired a controlling stake in the company to try legitimate digital distribution of music. Whether the planned service can compete with file-sharing systems that offer music for free remains to be seen. However, the retailer consortium has some advantages.

Echo's chief executive Dan Hart told The Los Angeles Times retailers may have a leg up on their pure-play competitors in gaining favorable license terms from the record labels because they — like the record labels — don't want to undermine packaged media sales; they have an interest in protecting the old-line business. In other words, the record labels may prefer to go with the devil they know.

If the music retailer online venture succeeds, it could provide a blueprint for the video retail future. So often the guinea pig in the packaged media business, the embattled music retailer may show its video brethren the Web way.

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