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Original URL: http://www.theregister.co.uk/2008/04/15/tesco_disco/

Tesco piles into MP3

By Andrew Orlowski (andrew.orlowski@theregister.co.uk)
Published Tuesday 15th April 2008 15:10 GMT

Does Tesco know something the rest of us don't? The supermarket has announced that it's opening an online store of MP3 music, with all 3.3 million tracks DRM-free by the end of the year. Movies and TV shows will follow, says Tesco. It seems odd for two reasons.

Firstly, buying digital music isn't a habit that has caught on. The global market is worth $3bn annually, but that's a drop in the ocean; Reg readers pour scorn on people who actually fork out real money for digital songs - on a song-by-song basis - calling them "paytards".

People love eMusic and Rhapsody because they offer something new. Music as a service doesn't penalise exploration. Download a couple of clunkers, and you've still got a fistful of choices in your subscription account. By contrast, song-by-song music services merely satisfy an impulse purchase. But then so does PirateBay, Mininova, and the (back again) Demonoid. From where, in only a few more seconds, you can typically get the artist's full LP in superior audio quality, with artwork.

Secondly, there's not much in it for the retailer. Even at the volumes Apple shifts - billions - selling digital music piece by piece simply doesn't make much money. So little in fact, that Apple is considering giving away access to iTunes for the price of a few dollars on an iPod - apparently to trump Nokia, which will heavily subsidise access to Universal's music on selected phones.

Some forecasts show iTunes music revenues levelling off within 18 months - which suggests Tesco has arrived at the market with too little, too late.

But not so fast - hasn't music has always been a driver for much more lucrative businesses, you're asking? Draw a crowd, and then sell them higher value, and higher margin goods. Well, yes. But first you need to draw that crowd. Not a few lost souls who haven't figured out how to set up BitTorrent.

With only two exceptions, I can't see Tesco's move as anything other than building out a back-end infrastructure, figuring out the complexities of music licensing, and putting down a marker for a rainy day. In the meantime, it can bundle the occasional MP3 as a bonus with online orders, perhaps.

One exception is the retail channel that never arrives: the wireless dispensing kiosk. Tesco snags one pound spent in eight in British retail, and it's almost all physical: that's a significant amount of footfall, and while you're waiting in the checkout queue, it's captive traffic. But there is little sign in the announcement that Tesco would "do a Starbucks". The other, perhaps, is more promising.

Our commercial broadcasters - and the BBC - are hoping that we'll get into the habit of paying for TV shows and movies. The Beeb already sells Dr Who through iTunes in the USA, and is awaiting the arrival of Kangaroo to sell us repeats here, too. But if current behaviour patterns persist, that's only going to increase the attractiveness of PirateBay.

So will you pay for repeats through Tesco? Let us know (mailto:andrew.orlowski@theregister.co.uk?Subject=tesco_mp3). ®

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