March 24, 2004

Wal-Mart and Music

Wal-Mart bets discount digital downloads will draw online customers
At just 88 cents per song, Wal-Mart hopes its new online music store will compete on price against Apple's iTunes and Roxio's Napster services. But the real goal of the site is to drive consumers to Wal-Mart's Web site, analysts said, where the company has launched other online services including a DVD rental service and prescription contact lens fulfillment.

Wal-Mart Launches Online Music Store

Tue Mar 23, 4:26 PM ET

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CHICAGO (Reuters) - Wal-Mart Stores Inc. (NYSE:WMT - news) on Tuesday officially launched its online music store with an expanded roster of artists, and kept the price at the same 88 cents per song that it offered during a three-month test.

The store, which sells digital downloads for 11 percent less than major competitors, expanded its catalog of artists by 50 percent, including exclusive songs from Jessica Simpson, 3 Doors Down, Shania Twain and others, the Bentonville, Arkansas-based retailer said.

Wal-Mart began testing the site, which allows customers to download songs from the Internet, in December.

While the new store will have the brand name of the most powerful retailer behind it, it will face off against a number of companies that are better known in the online music space, such as Apple Computer Inc.'s (NasdaqNM:AAPL - news) iTunes music store and Roxio Inc.'s (NasdaqNM:ROXI - news) Napster (news - web sites).

Apple, which said last week it has sold more than 50 million songs through downloads on its nearly year-old service, declined to comment on the pricing but said it has confidence in its iTunes service.

"We think it's going to be increasingly difficult to imagine others catching up with iTunes," an Apple spokeswoman said.

Both iTunes, the most popular online music service, and Napster charge 99 cents per song, although Napster and several other services also offer subscription options that allow users to pay a monthly fee for downloads.

Wal-Mart is the dominant force in U.S. retailing, but it was relatively late to the dot-com world and has been adding online services in hopes of boosting its Web presence. It recently started offering contact lens prescription and DVD rental services.

Wal-Mart spokeswoman Cynthia Lin declined to comment on whether the service was profitable, or on how many songs had been downloaded, but said demand "far exceeded" company forecasts. She said the music download service means Wal-Mart can offer far more titles than it can in its stores, where shelf space is limited.

Analysts have said that the goal for Wal-Mart is to bring more people to its Web site. Even if the music service sold 100 million songs, that would add up to just $88 million -- a paltry sum for a company that recorded nearly $260 billion in revenue last year.

Wal-Mart said that for the next two months it would be the exclusive supplier of songs from artists carried by the Curb Records label, whose roster includes country music stars Tim McGraw and LeAnn Rimes.

Like most online services, the Wal-Mart service is aimed at users of Microsoft Windows operating system, which accounts for the vast majority of personal computers. Apple's iTunes, by comparison, is compatible with both Windows and its own operating system.

Shares of Wal-Mart closed up 11 cents, or 0.19 percent, at $58.21 on the New York Stock Exchange (news - web sites) on Tuesday. Apple shares closed off 2.20 percent at $25.59 and Roxio closed down 5.75 percent at $4.75, both on the Nasdaq.

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Posted by Craig at March 24, 2004 04:57 PM