Digital discord

Release Date: 2008/04/24

Benedict Kelly

THE MUSIC INDUSTRY has been repeatedly slammed for being slow to adapt to the digital era. While independent labels moved swiftly to make music available for consumers to download with few (if any) restrictions, the world's four large music labels - EMI, Universal, Sony BMG and Warner - have fought tooth and nail to protect their hold on the market.

In some markets that has included aggressively targeting people accused of illegally sharing music on the Internet - with limited success. However, that's simply fighting a rearguard action against the inevitable wave of digital music sweeping the world.

Musica is one retailer that stands on the frontline of that battle. With its more than 150 stores across South Africa, it's this country's largest specialist retailer of music. Three years ago Musica dipped its toes into the digital waters by signing a deal with British company On Digital Distribution - then backed by musician Peter Gabriel but now owned by mobile giant Nokia - for an online digital download store. Musica is currently winding down that store and setting up a new service in conjunction with British service provider Vidzone.

Musica technology executive Paul Watson, while unwilling to reveal the performance of the stores over the past three years, says the rationale behind changing service providers was the need to keep track of the progress of technology.

Arthur Goldstuck, MD of SA research house World Wide Worx, says the commitment that Musica showed by sticking to its digital strategy in the face of an SA market that hasn't embraced the digital music revolution is impressive. In fact, Goldstuck says SA is one of the few markets worldwide where CD sales are still on the increase and where sales of cassette tapes continue to thrive.

Watson backs that up, saying Musica hasn't seen the kind of decline in CD sales that's occurred in the US, where digital sales have taken the market by storm. In January this year Apple's iTunes Stores surpassed retail giant Wal-Mart as the largest retailer of music in the US, according to information from US research house NPD Group. Statistics show Apple now controls 19% of the music market in the US, as opposed to Wal-Mart's 15%. The same research indicated that 48% of American teenagers didn't buy a CD last year, up from 38% in 2006.

Watson says the low penetration of both Internet access and broadband access in SA is one of the reasons for the low adoption of digital downloads. The one market that Musica will be able to better tap into with its new partnership is mobile - one area in which Vidzone is particularly strong, being capable of delivering both mobile and web-based stores.

But Musica is hamstrung by the world's major labels' insistence that all music is protected by digital rights management (DRM) software, which dictates when and where a piece of bought music can be played. The only DRM system available to Musica is Microsoft's PlaysforSure technology - which isn't compatible with Apple's iPod music player and most cellphones. The only way around that is to sell the music without any protection. And although the big four record labels have started doing that in the US, it's yet to hit SA's shores.

With turnover of R873m last year (up from R778m in 2006) Musica isn't feeling the pinch hurting its peers in North America and Europe. With low broadband penetration in SA preventing the widespread adoption of digital downloads - and, more importantly, online piracy - Musica had the freedom to concentrate on broadening its offerings. That has included strengthening its offerings in DVDs and gaming, which now make up 41% of its total turnover.

Its continued presence in the digital download space in the face of little real competition indicates that Musica recognises the need to provide an offering should the market take off - although that's unlikely to happen in the next year.