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Could the CD could be the future of the download market

Thursday June 9, 2011

Could bundling downloads with CDs help maintain music sales on the High Street?

We've heard lots about the impact of piracy on music sales the past few years. We've heard lots about the shift to digital.

Less has been said about the shrinkage of retail space devoted to music.

Yet it's no coincidence that the British buy more recorded music per head than music fans anywhere else when historically the UK has had the most diverse and numerous music retail market in the world.

Give people more places to buy music and because music is so often an impulse buy, they tend to buy more. A lot more.

That's why music sales fall when the retail space devoted to music shrinks.

In other words the shrinkage of retail space devoted to music is not only an effect of falling music sales, it's also a cause of it.

In the UK the rule of thumb is that when a store closes or pulls out of music half of the shop's sales shift to neighbouring stores. The other half simply disappears.

As CD sales continue their gentle decline and prices are lower than ever - an average £7.86 per CD this year - retailers are running out of reasons to maintain their commitment to the five-inch silver disc.

Space devoted to music is set to shrink further.

If that happens, the still significant percentage of buyers who are only interested in physical product will simply stop buying 

Suppliers may console themselves that some music fans will embrace digital, but the digital market has its own problems, not least the virtual monopoly of iTunes.

At this point physical retailers have no realistic prospect of competing with the iTunes leviathan.

Record labels find themselves increasingly exposed to a single customer now worth more than Microsoft and Intel combined.

And those customers still wedded to physical product have no easy bridge to the convenience and accessibility of the MP3.

No wonder there is increasing talk of creating a new hybrid format which combines the sound quality and physicality of the CD - and importantly can be racked on retail shelves - and the advantages of the download.

There is already  a precedent for it: many vinyl albums come with download codes. Why not a CD with a download code? And maybe some additional content - lyrics for instance?

The obvious counter to this is that CDs can already easily be ripped to a PC or Mac. But why not make the implicit benefit of being able to rip CD an explicit offer of a download.

Instead of just accepting that fans will take a copy, why not give it to them?

With the recent Hargreaves Review suggesting private copying be made legal, why not try and turn the inevitable into a positive?

The compact disc is the best part of 30 years old. Since its launch in the early Eighties there has been no meaningful innovation. And yet year after year sales figures from across the entertainment sector show that innovation sells. Downloads grow faster than CD sales. Blu ray's growth outstrips DVD. Newer console platforms like Xbox 360 and PS3 do better than the established Wii.

Could an innovative repackaging of the CD with download rights be the key to keeping physical music sales on the High Street, giving retailers the opportunity to compete with iTunes in the transition to digital and offering a convenient bridge for consumers to the benefits of the MP3 world?

It would be ironic if the future of the music retail business had been sitting right underneath our noses these past 10 years - the compact disc.

There will certainly be sceptics. Despite 10 years of decline, the temptation to do nothing seems remarkably strong. Yet do nothing and the status of music as a mass market retail product will continue to tail away.

Posted at 15:34
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