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Digital music threat forces Virgin to moot store closures

Just an empty threat from a protectionist

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Virgin Megastores today threatened to pull out of music retailing if the major recording labels fail to stress their support for traditional record stores over the emerging digital music market. The rather lame threat came from Virgin Megastores' COO, Simon Wright, cited in today's Financial Times. Wright fears that the majors will soon embrace the Internet and begin selling music direct, to no one's cost but companies like Virgin Megastores. He has a point. While the major labels have be approached the Internet very tentatively to date, it's clear that they do appreciate the value to themselves of embracing it as a music delivery medium. The question, though, is one of timing. This week's merger announcement between EMI and Time Warner, itself soon to become part of AOL, has clearly got the traditional music retailers rattled. But it's by no means certain that the AOL connection will translate into a major shift towards the Net for EMI Warner Music, as the merged company will be known, shareholder and regulator support for the deal permitting. As Wright himself says in the FT, the volume of sales on the Net is "still less than one per cent in the US". If that doesn't suggest the majors aren't going to abandon more traditional record stores just yet, nothing does. The FT cites research which claims that ten per cent of all music will be bought and delivered via the Net by 2005. That still leaves 90 per cent of it being sold through traditional channels. Sony, which is probably the company that's most embracing the direct delivery of digital content isn't planning to launch such a service until 2001, on the back of its PlayStation 2. Universal, which was to have launched a digital music service late 1999 has conspicuously failed to do so. EMI is tentatively working with digital music specialists to see how the market develops before taking the plunge itself. Hardly the "shotgun" approach Wright claims they're all taking. But no matter how quickly -- or slowly -- the majors embrace the Net, Wright's whinings really amount to little more than the pleading of a protectionist. The record stores themselves, with the constant pursuit of the 'yoof' market have done more to drive customers away from traditional retail outlets than anyone. ®

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