June 10, 1999

Sony Music Plans to Test Use of In-Store Digital Kiosks

By LISA NAPOLI

ony Music Entertainment said Thursday that it had struck a deal that would let consumers buy music through digital vending machines in music stores.

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The announcement follows a flurry of deals and partnerships in recent months that hope to capitalize on public interest in the digital delivery of music over the Internet. The Sony deal is unusual, however, because it shifts digital delivery out of the home and into retail outlets.

In an agreement with Digital On-Demand, a company that has developed the in-store digital kiosks, consumers will be able to choose from 4,000 albums, about half of Sony's music catalogue.

The digital files will then be sent over a proprietary computer system and pressed to the customer's choice of format, including CD, DVD, or minidisk.

The transaction, which would include the printing of art and liner notes to match that of a prepackaged CD, should take 10 to 15 minutes, according to Scott T. Smith, president of Digital On-Demand, which is based in Carlsbad, Calif. An initial test of the kiosks is to take place in 50 stores in the New York and Los Angeles metropolitan areas beginning this fall, he said.

The kiosks will also be able to download music to digital music players, once such a standard is created, Smith said.

A music industry coalition, including Sony and the other four major music producers, have said they will reach a digital delivery standard by June 30.

Last month, even in advance of an agreement on a standard, Sony said it planned to begin selling singles by its musicians this summer directly through the Internet -- a move that could bring it into conflict with traditional retailers.

Danny Yarbrough, chairman of Sony Music Distribution, said yesterday that the kiosks would not eclipse efforts at online sales, but make music more widely available in more formats.

Indeed, several attempts this decade to sell music through kiosks have failed.

"We see this as an expansion of the business," he said. "It offers the retailer the ability to offer titles they wouldn't be able to physically carry to that consumer in that environment."

Analysts were skeptical of the plan, citing problems with the operation and maintenance of kiosk devices in highly trafficked retail outlets, as well as the unwillingness of consumers to wait for their purchases to be prepared.

Mark Hardie, senior analyst with Forrester Research of Cambridge, Mass., noted a proliferation of "smoke and mirrors" announcements stemming from the eagerness of various industries to ride the mania surrounding digital-based production.

"There's so much noise being made about technology that glosses over the realities of poor products, bad interfaces, the true market," he said. "At the end of the day, I don't think this is going to succeed. It's neat technology at a time when the world is ga-ga over neat technology."

Mike Dreese, founder of Newbury Comics, a New England music chain, said that his experience with earlier versions of kiosks in his stores had been troublesome.

"There's an enormous disconnect going on between technologists, the music industry, and the people who have tested these devices," he said. "There are very few in-store devices that work."

Indeed, several attempts this decade to sell music through kiosks have failed. Digital On-Demand is a successor to another kiosk business, Newleaf Entertainment, which was a joint venture by I.B.M. and Viacom Inc.'s Blockbuster Entertainment unit. That venture, whose patents Digital On-Demand has licensed, was shelved because the companies could not create enthusiasm for the idea within the industry.

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Related Sites
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• Sony Music Entertainment

• Digital On-Demand

• Newbury Comics

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Lisa Napoli at [email protected] welcomes your comments and suggestions.

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