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Wal-Mart weighs e-music play

A published report said Wednesday that the world’s largest retailer, Wal-Mart, may soon launch an online music service on its Web site — By CNBC’s Garrett Glaser
/ Source: CNBC

It’s an idea that could represent billions of dollars a year in music sales. That’s what could happen if the world’s largest retailer, Wal-Mart, decides to sell downloadable music on its Web site, While the company had no comment, the New York Post said Wednesday the company is quietly talking to the big music labels about pricing and may announce the new service as early as this month.

After years of illegal downloading, Web sites that sell music are springing up everywhere — with more on the way. There’s talk that Viacom and Sony are about to join the fray. The best known sites right now are Apple’s iTunes and former bad boy Shawn Fanning’s, which now plays ball with the industry and charges for music.

When all music sites were free, some 15 million visitors a week were busy downloading, and the music industry reacted with panic and misery. Even as the game changes daily, though, it’s clear that not all of those music fans who go online will choose to pay instead of stealing music. But many will.

It’s also more complicated than just price. Nielsen Netratings senior analyst Greg Bloom told CNBC the whole experience has to be cool — and easy.

“The ultimate provider will provide a service that gives the most ease of use and enjoyment to the end user,” he said. “And if we’re talking about 10 or 15 cents per track difference, and if you love your iPod, maybe getting it for ten cents less from Wal-Mart won’t make a difference. And I think Wal-Mart realizes that.”

So if everyone else is selling songs online for 80 cents to $1 and Wal-Mart decides to sell them for 50 cents, they’d become the price leader, as they are in so many categories.

Gene Munster, senior software analyst at US Bancorp Piper Jaffray who watches online music closely, isn’t so sanguine about Wal-Mart’s reported plans.

“No person who’s hip enough to buy music online is going to go to Wal-Mart to buy music,” he said. “I think it’s a mistake for Wal-Mart then to be in that business. I think they’re going to invest some time and some money and find that this market is going to quickly embrace Napster and iTunes. It’s more difficult to start an online music site than just sign some deals with some record labels.”

Wal-Mart CEO John Fleming left a different impression about just who the Wal-Mart online shopper is when he talked to CNBC. “What we found is that the customer that we have online is the Wal-Mart customer,” he said. “In fact, 90 percent of the customers that buy online are in the store once a month and 36 of the customers that buy from us online are in the store six times a month.”

It’s not clear just how far away we are from an announcement by Wal-Mart. A company spokesperson said, “We look at opportunities to serve our customers every day. Do we have anything to announce? No.”

The Post reported that the company is finalizing deals with the five major music labels and could launch the service this later this month.