Music Retailers Team Up on Online Services

Determined not to cede their customers to the wave of new digital music companies, six major brick-and-mortar music retailers have formed a consortium aimed at negotiating competitive licenses with the record labels so they can launch their own online music offerings.

The Echo consortium, making its debut this week, consists of retail powerhouses Best Buy, Hastings Entertainment, Tower Records, Virgin Entertainment Group, Wherehouse Entertainment, and Trans World Entertainment.

Promotions Planned

"We are approaching the labels with the same goal of making digital music services work in the mass market," said Dan Hart, Echo chief executive officer.

Hart heralds from online music streaming firm Echo Networks, which the consortium purchased at its formation. The group adopted Echo's name, domain, and intellectual property so its members could use Echo's technology to create their own online music services.

The retailers hope to leverage their prowess in the offline world so as to offer new and unique music services to their customers, Hart said. Ideas include giving clients free music downloads when they purchase a CD, or having in-store kiosks that store customers' music preferences based on their online activity and offer recommendations and discounts.

"We are in the position to bundle values," Hart said.

Digital Music Evolves

While the group has yet to approach the labels on licensing agreements, Hart said he did not believe negotiations would be too difficult. The record companies and the retailers share the goals of offering customers online services that do not eat into their core offline distribution channels.

"This is the second wave of digital music," Hart said. "This group of people is not going in with starry eyes."

The retailers hope to launch music download, streaming, and radio services, among others, using the Echo technology. Retailers could choose to offer private label or cobranded services and each retailer would set their own prices.

All six retailers have an equal investment in the Los Angeles-based consortium. Together, they represent some of the largest music retailers, including Best Buy's Musicland and Sam Goody stores, and Tower Records' FYE and Strawberries stores.