iTunes retail test in the cards for Apple
By Ed Christman
NEW YORK (Billboard) - In a move to enhance its already prodigious stature as a music merchandiser, Apple will lead a test this fall that places artist- and album-specific iTunes gift cards in brick-and-mortar retail stores.
The iTunes gift cards, according to label and retail sources, will each feature specific album covers against a standard DVD-size cardboard backing. Albums by Maroon 5, Norah Jones and Eddie Vedder are under consideration for inclusion in the tests, which will run at Safeway, Starbucks and Best Buy. Wal-Mart and Target have been approached, but there is no word on whether those merchants will participate.
The test creates a dilemma for the major labels. On one hand, executives like the possibility that the gift cards could get music into stores that don't carry it now. They also like the increased exposure for their artists. And they foresee a role for the gift cards in stores that already carry music but where music selection and CD sales are being reduced by store closures, inventory realignments and the CD format's oncoming obsolescence.
iTunes is pitching its album-specific gift cards, which will feature the Apple and iTunes logos, as a way to get more music in existing shelf space at stores that already carry music.
One major-label distribution executive noted that when CD sales ultimately get weaker, anything that encourages music buying is to be welcomed.
But other executives worry that the gambit might in fact accelerate the demise of the CD. The strategy also will enhance the prominence of Apple, which already is perceived to be heavy-handed in wielding its clout with labels.
"It sounds like a way to help Apple get 50 percent market share," one senior label executive said. A senior distribution executive added, "It's ridiculous for Apple to negotiate with retailers on our behalf."
Another distribution executive wondered why music retailers carrying CDs would go along with the idea, since it could drive more traffic to iTunes at the expense of brick-and-mortar merchants.
iTunes didn't respond to requests for comment.
Meanwhile, sources suggest that single-album gift-card titles would be priced between $11.99 and $14.99 -- above iTunes' main album price point of $9.99 -- but each could come with music videos and ringtones. It's unclear if the labels would get their traditional wholesale cost of $7 per album.
For all his uneasiness over the idea, one executive conceded, "You have to give it to iTunes for trying to press their dominance in interesting ways."
Reuters/Billboard
