Tesco Squeezes into Crowded Online Music Market

Tesco, the UK retail giant that sells everything from groceries to insurance, has opened its own online music market.

The download site contains about half a million song files in the Windows Media Audio (WMA) format.

IPods, which have captured more than 50 percent of the UK market, do not play WMA files. There are about 70 other players on the market that are compatible with the format, although their market share is tiny.

Key Problems

“The first problem is: How do you differentiate yourself in the marketplace against competitors? Everything is about the same. There’s no way to distinguish yourself amongst all the players,” Michael Gartenberg, research director at Jupiter Research, told TechNewsWorld.

“The second problem is that they’re going with WMA format, which is understandable because Apple won’t license its format. But music stores are not driven by PCs, they’re driven by portable devices and the No. 1 portable device is the iPod.”

The music download market is already crowded with services from giants such as Virgin, Coca-Cola, Microsoft and Sony, in addition to iTunes.

Gartenberg said that a new store launched into this market would have to distinguish itself through aggressive pricing, depth of selection or more liberal rights management policy. Tesco, however, seems to be simply matching its competitors on all three fronts.

No Distinguishing Features

Single songs cost about US$1.50 (79 pence) and an album download costs about $15 (8 pounds). Songs will be protected so that consumers can burn them to CD or transfer them to a portable music player a total of only three times. Microsoft and Apple both offer at least twice Tesco’s 500,000 song selection as well.

Tesco estimated the British download market at $46.6 million (25 million pounds). Analyst firm Generator predicted in October that the European download market will grow to $5.7 billion (4.5 billion euros) and account for 40 percent of music sales by 2009.

A month earlier, Jupiter Research made a much more conservative prediction, estimating that digital music revenue will reach a bit over $1 billion (836 million euros), or 8 percent of the market in that timeframe.

But Tesco said music is just the entry point for the download store, housed at tescodownloads.com. The company plans to branch out into music videos and eventually into movies.

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