Minding The Store

Published in Billboard Magazine

 

Major labels are looking to take advantage of the digital boom Down Under with their own download services.The local affiliates of Universal Music Group, Sony Music Entertainment and EMI Music all operate digital music stores—although executives say competing with local market leader iTunes isn’t their primary objective.

“Consumers need choice and the market was open for another high-quality, authentic digital music platform,” Sony Music Entertainment Australia chairman/CEO Denis Handlin says. “Not enough was being done to provide alternatives into the market.”

Sony’s Bandit.fm site, which launched in November 2008, is the only major-label-owned service to host content licensed from all three rival majors and independent music aggregator the Independent Online Distribution Alliance. Official market-share figures aren’t available, but industry estimates give Bandit about 4% of the digital market, behind iTunes’ dominant 70%-plus share and telecom Telstra’s BigPond Music’s 10% share, edging the low-single-digit percentage share each held by Universal’s GetMusic and EMI’s TheInSong. (A Warner Music Group spokesman says the major doesn’t plan to open a digital download store in Australia.)

Licensing from the other majors was “not as hard as you’d expect,” Sony Music Entertainment Australia GM of digital Gavin Parry says. “There was a lot of support from other companies to find an alternative in the market.”

GetMusic, which Universal launched in November 2007, features video streaming and sells digital downloads, CDs, DVDs and other merchandise; it also sells digital downloads by Sony artists. Universal Music Australia managing director George Ash says the ultimate aim “is to have everyone on there.”

EMI Music Australia launched its Musichead MP3 download store in September 2008 and then rechristened it TheInSong last October, integrating it into its A&R/blog site TheInSoundFromWayOut. It carries 500,000 tracks from EMI’s catalog and will expand in 2010 through licensing deals with other labels, according to EMI Australia director of new business development Roddy Campbell.

While executives stress current sales levels reflect the relative infancy of the sites, Campbell says TheInSong “surpassed expectations in the first couple of months,” while Bandit claims 100,000-120,000 unique monthly users.

Executives note the importance of brand partnerships in driving traffic. Bandit has teamed with Commonwealth Bank, Clinique and Qantas Airways for download giveaways, while EMI’s service has forged promotions with MasterCard, Garnier and fast-food chain Oporto.

Pricing is competitive, with no one store consistently beating the others. The major-owned sites are also vying for customers by offering exclusives. In the run-up to Christmas, Bandit was selling recent albums by Sony “Australian Idol” alumni Guy Sebastian, Adam Harvey and Damien Leith with exclusive bonus tracks.

The majors are also planning to start subscription services, with Bandit’s due to launch in late January or early February and EMI and Universal set to follow suit later in 2010. A survey that media group Immedia published in August found that while only 10% of respondents had used a music subscription service in the past year, 68% were keen to sign up.

Recorded-music sales in Australia grew 0.4% during the first half of 2009 to $178.6 million Australian ($156.9 million) from the same period in 2008, with a 43.3% rise in digital sales more than compensating for a 6.9% slump in physical sales, according to the Australian Recording Industry Assn. (Billboard, Oct. 17, 2009). Label sources say the digital market kept growing at a similar rate in the second half of the year.

Increasing competition in Australia’s digital market could prove challenging for all players as the market matures. But industry observers expect the majors’ presence to drive overall demand.

“Competition is a very positive step, whether it comes from labels or not,” says Karen Farrugia, Nokia music manager for Australia. “It reinforces to consumers that legal digital music is easily accessible.”