The music plays on(line)

Marketing research firm Jupiter Communications predicts that annual online music sales will reach $1.6 billion by 2002. So it’s no wonder that Amazon.com, the $121 billion online bookseller, is singing a different tune. On June 11, the Internet-only firm launched a music store offering 125,000 music titles for up to a 40% discount, including 30% off the top 100 bestselling CDs.

The music store was designed with the help of more than 20,000 customers who responded to Amazon.com’s call to “build the music storeof your dreams.” But it wasn’t until the company conducted numerous focus groups and surveys of its 2.2 million customers that it moved forward. “We had to make sure our customers were comfortable buying music from us as well as books,” says Jenifer Cast, general manager of Amazon’s Music Store.

In addition to music reviews and powerful search capabilities, such as choosing jazz by featured instrument, Amazon’s music store also features the MoodMatcher, which recommends music to match the listener’s mood, and more than 225,000 song clips from 30,000 CDs. And the site features reviews from customers and well-known music editors from Rolling Stone, People and Time magazines.

Amazon also cross-sells its books through the music store. Music customers searching for Miles Davis, for instance, also see a list of Miles Davis books, just a hotlink away. “Books and music are like peanut butter and jelly,” Cast says. “They just go together.”

But the online music competition is steep. Internet music retailer CDnow ($17.4 million) led the market in 1997 with 33% of online music sales, twice the share of Music Boulevard, the category’s second-highest revenue generator, according to Jupiter.

Other well-known rivals are entering the online fray as well. Music retailer Tower Records, mail-order clubs K-Tel and Columbia House, movie retailer Blockbuster, and bookseller Borders have opened up music cyberstores within the past year.

Beyond core products Many cybermarketers are expanding their offerings beyond their core products. CDnow offers movie titles. Barnesandnoble. com, the $25 million online division of book retailer Barnes & Noble, also sells software on its site.

“The new products are a natural fit for each marketplace,” says Marion V. Marchese, co-founder of VirTu Inc., an Internet business consultancy and management firm. By offering a new product category, “these online retailers are leveraging their customer base and selling more products,” says Lauren Freedman, president of the e-tailing group, an electronic research consultancy based in Chicago. “But there are inherent risks involved. Companies need to remember they can’t be experts in everything, even if the new product relates to the core merchandise.”

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