HMV Group Plc, the U.K. operator of HMV music stores, said it is joining forces with Microsoft Corp. to open an online music store that will challenge Apple Computer Inc.’s iTunes downloading service and iPod music players. Maidenhead, England-based HMV will invest 10 million pounds ($19.2 million) in the digital downloading service, which will start in the second half of 2005, Paul Barker, head of corporate communications, said.
MacDailyNews Take: 19.2 million? Dollars?! That’s it? Apple’s annual toilet paper budget is higher.
“HMV is to develop a digital downloading service with software giant Microsoft, tapping into demand for online music. The applications, which the music store chain hopes to launch in the second half of next year, include a customised ‘jukebox’ where customers can find, download and buy music online at home and through terminals in HMV stores,” Reuters reports.
“Shares in HMV leapt 3.7 percent to 255 pence, valuing the company at around 1.3 billion pounds. HMV customers will be able to listen to the digital downloads on over 75 portable players currently in the market, like the Philip’s MP3 player, the firm said,” Reuters reports. “However, the software is not compatible with Apple’s iPod, and when the service is launched next year, HMV stores will stop selling iPods, a spokeswoman for HMV said.”
Full article here.
“‘IPods are not compatible with Windows Media at the moment,’ an HMV spokeswoman said. ‘However, while Apple has been incredibly successful, products based around Windows are going to push up their market share. It is going to be important that the service is compatible with Microsoft.’ The initiative will be developed by a joint team ‘combining the industry knowledge of HMV with the software development product expertise and consulting skills of Microsoft,’ Alistair Baker the managing director of Microsoft UK, said. Alan Giles, the HMV chief executive, said this morning that the company was ‘delighted’ to be working with Microsoft. ‘We have a unique opportunity to leverage the HMV brand…to establish a strong position in the newly emerging market for paid-for downloads,'” Mike Verdin reports for The Times Online.
MacDailyNews Take: The “consulting skills of Microsoft.” Oh, so that’s what MS does well, consulting. MS consulted HMV right into a format that won’t play on the player with over 90% of the market. The player that’s sold somewhere between 3-6 million unit, depending who you ask, in the past 90 days. Or 3-6 million more non-HMV customers. Sheesh, we almost feel badly for HMV. Almost.
Perhaps there is logic to this move: HMV must not want the hassles of selling music online and digital music players in their stores.
The main problem is that WMP based music stores have to compete in a very small and crowded market. How many services are available now? My guess is 5-10 – all vying for at best 50% of all music players (including flash based ones).
Apple will make ~15 million if they sell 400 million songs a year (assuming a net profit of 5 cents per song). Every other service will be the same deal. However the more songs sold the smaller the overhead per song will be.
I seriously doubt that any other service is breaking even yet. And since they are competing with many other services, the chance of selling enough songs to break even is very slim.
At some point Apple will licence iTunes and Fairplay, but not until they need to and not until they get an impact in Mac sales with the halo effect.
Fact is, with close to 50 bil in cash, Micro$in could, with the right offer, make any of us go public and say we have jumped on their bandwagon.
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But indoors, I wonder how many people drool, use, and worship Apple in secret. Don’t you know Longhorn Billybob has a secret Mac room?
The stupidity of these CEO’s amazes me. There is hardly any money to be made on the downloads at least as things currently stand. Apple makes a little, but the real money is on the best selling iPod. So what does the “brain trust” at HMV decide to do, I’m sure with MSFT whispering sweet-nothings into their ear? Ditch the best selling music player, by far, and become yet-another-windows-media music outlet, along with the myriad of others that are out there. Who’s going to make money off of Windows Media downloads? I’ll tell you who: MSFT. And they are the only one who will. No single seller will make that much in the long run.
Don’t even get me started on the whole clueless Napster and Real claims that people want to rent music rather than own it…
Why cant all these other companies come up with an original idea?!?!
But then it does not surprise me Microsoft is in on this, They have NEVER had an original idea, they have made their fortunes stealing and strong arming from other companies all along.
Hey 5, thanks for the Bleep.com tip…
All you need is $19.2 million. Just built it and they will come!
Then again, maybe it WILL take an act of God.
I agree with Jack A. HMV probably took this route with a heavy heart. But they have no choice – stores like this thrive on offering choice and it would be impossible for HMV to only offer 5 iPod models on the shelf and the iTMS pie which they have no fingers in.
A CD store offering ‘instore’ downloads sounds a bit nutty until you consider this: What if HMV offered a service to download FREE media-player versions of ANY CD you’ve just bought? That would spell trouble for Apple.
Twenty Benson,
You are delusional: “What if HMV offered a service to download FREE media-player versions of ANY CD you’ve just bought? That would spell trouble for Apple.”
So let’s get this straight. You’re saying that someone having to go into that store, buy a CD, then stand at some kiosk with some crappy little MP3 player to receive the electronic versions of the CDs is somehow going to spell trouble for Apple? Why bother downloading the “FREE media-player versions” at the store when you can just go home and rip the CD? What a frickin’ load.
That’s clearly a much less appealing offering than just buying the music from home off iTunes. And if you need a CD (but who does anymore) you can just burn it from your purchased iTunes tracks.
What planet are you from?
I’m thinking that they might not get any iPods to sell from hereon out.
Oh, gee, I’m sorry, HMV, but our supply of iPods goes to companies that have a clue. We can’t tarnish our brand, now, can we with a company that takes bribes from Microsoft to whore themselves?
Glad you understand.
Steve
Calm down BSOD. Record companies are quickly including copy protection onto CDs. And the CD market is still massively bigger than the Download market. If I went to buy a CD and the store offered me (as the legal owner of that music) the option to plug in and quickly download a free high quality compressed version of it onto my portable music player I would say YES PLEASE – wouldn’t you?
This would at once save time, make another strike against piracy and offer a VERY attractive alternative to iTunes (I get the download AND the CD). From the record companies’ point of view – they’ve got nothing to lose and everything to gain – they’ve made their sale AND they’ve ensured that the copy I would have made anyway has their copy protection code stamped into it.
I would say ‘Think different’ but for you BSOD, I’ll just say ‘Think’.
TB
Wow, is Apple’s toilet paper budget really in the $20 million ballpark? That’s a lot! The company could slash its personal hygiene budget considerably if it just eliminated (no pun intended) frozen burritos from its hardware-engineering feed trough. Then they could probably lower prices on the 30″ displays by a dollar or two. A few hundred years of cost savings like that and I could actually buy one.
first of all.. HMV really is floundering in North America at least.. how can any CD retailer claim to have ‘industry knowledge’??
These guys are getting sucker-punched by p2p networks DAILY.. you think their industry knowledge is something Microsoft is interested in hearing?
Industry Knowledge=Cute Rocker Chicks in Purple Tees?
Apple is definitely adding value over and over with more and more AAC features and with the iPod photo Apple is introducing a means to make those added features portable (album art not found on p2p…liner notes someday?)
This is really a bonehead move… think about it.. dwindling traffic in HMV stores, and now they’re gonna refuse to sell basically the hottest selling gadget in the free world … (DS/PSP are selling too)
This deal isn’t going to backfire the way some people think.. its only 20 mil.. but it’s gonna be a complete failure..
What? Another store? Why? MDN’s right.. slapping a logo on the MSN store.. what’s the point..Why not just integrate digital audio into their current online store and have two-tiered pricing??
I’m against compressed music. I don’t like my music altered. That said, you can’t hear subtle nuances whilst walking down the street or riding on a train, so for this, AAC/MP3 is fine.
But buying music online (compressed) sucks b/c whilst you’ve paid for it, you’re only getting “half” the song. What if you do want to listen to it properly on your hifi? Too bad it’s not as good as a CD.
Until they offer uncompressed music, you’re stuck buying CD’s.
Maybe you should be able to walk into a music store (or even an Apple store!!) with your iPod, jack into a base station, download some (lossless compressed) songs and pay for them then and there (eg. credit card swipe), and walk out.
No CDs, no “I work in a music store so I’m cool” front counter clerks; just some terminals for people to browse/listen to and finally buy music from. Yes, it’s a variation on the iTMS but with a few exceptions – you can download in bulk due to faster copies and you can buy lossless compressed versions if you want to.
In future you could do the same with movies (buy or rent), at least until the net becomes affordable and fast enough to handle multi-gig downloads in minutes.
HMV previously teamed up with OD 2 for Windows-only downloads and made no impact whatsoever.
Now they’re spending ten million pounds trying the same with Microsoft.
I suspect that Nipper the dog ( the one in their logo, listening to a horn ) could offer HMV better advice about where they should really be heading.
vapourware
$19.2 million,,, what a waste of perfectly good money. No wonder we still have economic recessions. People are so stupid sometimes when money is concerned. Got to jump on the bandwagon no matter how stupid it is. They do have other choices besides WMA, they could do what this website does with the buy your itunes button on the top of the page. It’s alot cheaper too.
Hywel: Give up on wippit. Now. It’s not worth the hassle. I had exactly the same experience. I thought the process was incredibly convoluted. I also didn’t receive any downloaded files even though my account stated that I had downloaded the files. Calls to customer services were ineffective – told to email tech support. I waited two weeks for an email telling me to follow steps I said I had followed in my email. Yes, I waited two weeks, even though there is supposed to be a 48hr turnaround. Two further emails later and after attempts to download using a Windows PC in case I was unsuccessful because it didn’t like my Mac and I just decided to write off the �50 annual fee and simply never use them again.
anon,
I agree. CD’s (or DVD’s) have the quality and they’re the only choice for the home-based music lover.
I don’t own an iPod, but if I did, it would be full of ‘Apple Lossless’ copies of my favourite CD’s – as is my computer.
But as you point out, in the not-so-distant (?) future it will all change.
When we get AIFF quality for our money, downloaded music will really take off, and Apple will be in an excellent position.
I wonder whether people will then be able to ‘update’ their expensive, but low-quality, collections – or have to pay the full price again?
The whole MP3 revolution was based on kids at home downloading their tracks to a computer- a major element therefore was the CONVENIENCE of doing so – you didnt have to go to the store. Why does HMV think folks are now going to want to give up that convenience and DL their tracks in a store?
Also, if HBV will let you load an MP3 player with songs in its store, can you then move them to your PC when you get home? I would think not due to licensing…
The format issues are in effect, irrelevant. HMV will just be competing with other WMA stores, and I suspect that as argued above – the online stores will be more successfull due to convenience.
The HMV move reminds me of the dot.com era – eveyone had to have a website and a digital this or a digital that, regardless of profitability, just to keep the stock market and the bankers happy. The same seems to be happening with music. It is the next big thing.
The one thing you will see soon is Apple allowing WMA DRM’d files to be played on an iPod/iTunes.
It opens up the flood gates of iPod sles. You will see 3X the number of iPods sold if they did this, almost overnight.
All of these joke music stores can no longer say “Not compatible with the most popular music player on the planet”. Everyone with a PC who doesn’t want iTunes on their machine, or buy from iTMS, can now use the that cool little iPod to buy music from any site.
But as the number of places to buy music goes from 1 to 100 instantly, I strongly believe more and more would be flocking to iTMS to buy music because they want to, not because they have to.
It also shuts up all those “Apple/iPod/iTMS is a closed system” arguments from the industry Anal-ists.
C’Mon Apple. You shouldn’t have anything to be afraid of. Just Do It!! Think Different!!
AppleMaster
Apple aren’t going to support WMA for years if they ever do. Every copy of iTunes that gets downloaded onto Windows comes with QuickTime, pretty much now the only competitor to WMP as far as digital content delivery is concerned. This makes the iPod Apple’s main weapon for Quicktime to even up the relationship between the two companies. If Apple control media delivery, MS’s control over document formats is balanced.
So I really can’t see Apple throwing the possibility of that away unless it becomes obvious that MS has already won the content delivery battle.
Ben – the ‘convenience’ of kids downloading MP3 is that they are FREE. The Kids would have jumped on a bus across town is someone there offered free music.
The Danger of the HMV strategy to Apple is that is could purposefully attempt to undermine the notion that ‘downloaded’ music has a monetary value and – in so doing – undermine Apple’s hard work in introducing the idea of placing VALUE on downloads.
HMV could approach this in two ways:
1. Buy a CD (from the store) – get the downloads FREE
2. Buy the downloads (from the online store) – get actual full CD thrown in for ONLY 3 dollars more.
Each strategy would pay the record labels what they are due, reinvigorate the CD market (the Record labels’ real wish), at the same time as undermining the concept that downloaded music has a value beyond being a (heavily policed) ‘CD-Lite’ version of your music collection.
Microsoft would be laughing all the way to the bank because they don’t care about the music – all they care about is getting their format used.
HMV looks alot like HIV..sorry, but when I first saw the article..this is what came to mind…then again, HIV does to humans what HMV will do to MicroSoft…kill it.
I liked your site.