May 24, 2004

Music Download

Canada: Future Shop set to launch music-download service

May 18, 2004. 01:00 AM

Future Shop set to launch music-download service
Retailer tackles free competition

Margins on sales `slim,' firm says

TYLER HAMILTON
TECHNOLOGY REPORTER

Electronics retailer Future Shop plans to announce today that it's getting into the music-download business to complement in-store CD sales.

Best Buy Canada Ltd., parent of Future Shop, will officially launch its online service, dubbed Bonfire, on June 12, making it the first and largest Canadian retailer and online retailer to sell digital tunes through the Web.

"Entertainment is very important for us as a category," Rick Lotman, senior vice-president of merchandising and marketing at Best Buy Canada, said. "We've been selling MP3 players and laptops for a while, and we're excited about being able to marry the hardware with the content."

Like similar sites from Bell Canada and Telus Corp., Future Shop's Bonfire site will be based on the same technology that runs Puretracks.com, the first licensed music-download site in Canada.

Bell opened its Sympatico Music Store last week, just nine days after Roxio Inc. of Santa Clara, Calif., announced its reborn Napster 2.0 service is coming to Canada this summer. More U.S. download services, such as MusicMatch Inc.'s MusicMatch Download and Apple Computer Inc.'s iTunes, are expected to follow.

Revenues from music downloads in Canada are tiny relative to traditional CD sales. But recording industry executives see online music sales as a way of providing an affordable and convenient alternative for consumers who otherwise would download free files from music-swapping sites, such as Kazaa and Morpheus.

"Trying to fight free is a challenge for anybody," said David Basskin, president of the Canadian Musical Reproduction Rights Agency Ltd., a licensing agency for publishers and songwriters. "We've believed since day one that the best answer to people who steal is having a commercial, legit, licensed alternative."

Basskin said Future Shop's entry into the music-download market is positive news because it creates more awareness of such services. Puretracks.com has the marketing muscle of Bell, Telus and now Future Shop to spread the word and educate customers.

"The bottom line," said Basskin, "is people need lots of choice."

As more choice comes to market, legislators are moving forward on efforts to crack down on music swapping, which a federal court ruled earlier this year is not piracy because it doesn't constitute distribution or authorization to copy under Canadian copyright rules.

Last week, a government committee report urged Ottawa to update federal copyright law to comply with its obligations under two World Intellectual Property Organization treaties. Those treaties make it illegal to make music digitally available for others to download freely.

Future Shop's Bonfire service, like others, will sell most songs for 99 cents or full albums for $9.99 and customers will have access to Puretracks.com's music archives. Analysts expect that increased competition will eventually lead to lower download prices.

Lotman said there are "slim" margins on music sales, meaning the service is unlikely to make money in the near term. "Over time that's going to change," he said. "It's very early. These are pioneering days in the download space."

TheStar.com - Future Shop set to launch music-download service

Posted by Craig at May 24, 2004 04:47 PM