Music business makes waves on the Internet

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More and more music marketers are tuning in to the Internet, finding that it's helping them reach audiences in both traditional and non-traditional ways.

While the Net gives the established music industry a channel to connect with non-mainstream buyers, it's also becoming a way to level the financial playing field for artists and independent record labels.

"The music industry has been fairly flat over the last couple of years," said J.J. Rosen, senior VP-general manager, N2K Entertainment, which runs online music store Music Boulevard. Still, the music business is a $50 million international market, and industry pundits predict that it will experience tremendous growth online.

Jupiter Communications reports that online music sales will grow from $71 million in 1997 to $2.8 billion in 2002.

N2K DEVELOPING ALLIANCES

Online music marketers are gaining ear time quickly. Garnering support for its Web presence, N2K's Music Boulevard has developed strategic alliances with America Online, Excite, Netscape, AT&T WorldNet and PointCast.

According to Media Metrix, N2K's Music Boulevard is the fastest growing music site on the Web, with 46.7% market reach in December.

And the music retailer is making a significant commitment to marketing. Last week, N2K hired Kirshenbaum Bond & Partners, New York, as its first agency of record. Billings are estimated at $5 million to $10 million. Kirshenbaum plans to launch a new campaign for N2K including TV, print and direct marketing, with TV breaking during Grammy Awards broadcast later this month.

HIGHER ROYALTIES

Also last week, N2K announced an agreement with MSI of Miami Corp. to create a European distribution hub for Music Boulevard, adding up to 150,000 international titles to Music Boulevard's existing catalog of more than 200,000 titles.

N2K's revenue for the fourth quarter is expected to reach $4.7 million, up from $679,000 for the same period in 1996. Total 1997 revenue is expected to be $11.2 million, compared with $1.7 million in 1996.

"The benefit to recording artists is that they can earn higher royalties by cutting out the middleman," said Mr. Rosen, noting that N2K will extend its model this year to find rock and other artists not currently under contract.

Also embracing the online model is JamTV Corp. and Wenner Media, which last week launched the Rolling Stone Network. The site features live streaming audio and video from concerts nationwide; daily video news Webcasts; special events such as awards presentations, and archives containing biographies and photos from more than 25,000 artists.

PUT ENTIRE CATALOG ONLINE

Another traditional marketer to expand distribution to cyberspace is Sony Music Entertainment (www.sonymusic.com) which recently announced it would implement a direct sales strategy on the Web.

The Sony site, home of Columbia, Epic and other labels, features daily news; updates on concert tours; live events such as Web broadcasts; and a searchable online catalog of all Sony Music CDs and tapes.

Yet selling music direct to the consumer is nothing new, as evidenced by Columbia House, which has been reaching mail order buyers for years through direct mail and print advertising in publications such as TV Guide.

Columbia House offers 11,000 music titles to customers, although until recently it had advertised only a small percentage of those through direct mail and print advertising due to cost considerations.

Now, on its Web site it can put its entire catalog online.

"The ability to have at your fingertips virtually every title that's in print allows consumers to do much greater catalog shopping than at a retail store," said Rick Hunt, VP-electronic media, Columbia House.

Columbia House capitalizes on the Internet's database and search technologies, giving customers more information that it hopes will help convert them into members.

The ability to download entire songs on a pay-for-play basis is another benefit for music sites.

Until recently, slow download times made music distribution on the Internet somewhat problematic. A few years ago, a single song took several hours to download. Now it takes minutes.

LICENSE MUSIC RIGHTS ON THE WEB

Still another advantage to online music sales is the ability for music professionals to license music rights over the Internet. In January, EMI Music Publishing, which owns more than 1 million music copyrights, launched an online lyric catalog for music researchers. By combining a 250,000-word thesaurus with an extensive catalog of song lyrics, the lyric search engine allows registered visitors to locate specific concepts or keywords.

Music marketers are also finding ways to drive traffic to their Web sites through traditional media buys. A Columbia House TV spot that ran last month resulted in a 50% increase in traffic to its site.

With advances in technology that will deliver faster-speed audio and video, the music industry is poised to become one of the commerce category killers on the Web.

Copyright February 1998, Crain Communications Inc.

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