All Things Digital

It’s likely an anomaly inspired by iTunes gift cards doled out over the holidays, but according to a Jan. 8, 2008 NPD Group Music Survey leaked to Ars Technica, Apple (AAPL) surpassed Wal-Mart to become the number one retailer of music in the the US. Quite an achievement. A short-lived one, though. Let’s not forget that Apple was the number 2 music retailer in the US as of Feb. 26, 2008.

UPDATE: Well, what do you know. Apple was the number one music retailer in the US in January. And it was the number one music retailer in February as well, despite its “we’re #2 proclamations. This according to a press release issued by the company this afteroon, in which Apple said it has bested Wal-Mart for the top music retailer spot, based on the latest data from the NPD Group.

Apple offered the news with a bit of a reality-distorted caveat, though. The latest NPD Group data to which it refers was culled from the research outfit’s MusicWatch survey which “captures consumer reported past week unit purchases and counts one CD representing 12 tracks, excluding wireless transactions.”

As of this writing 8 of Wal-Mart’s 10 top-selling CDs contain more than 12 tracks, including one that boasts 22.

If the recording industry thinks Steve Jobs has been a bear to negotiate with in the past, wait until it gets a load of him now.

Apple’s (AAPL) iTunes Store has become the No. 2 music retailer in the states, according to a new study by the NPD Group. It’s second only to Wal-Mart and, if things keep going the way they are, Apple will soon surpass it. “Digital sales were up close to 50% and CD sales were down 20% last year,” said Russ Crupnick, the NPD Group’s president of music. “Even at half that growth rate in digital sales, Apple will in all likelihood catch Wal-Mart this year.”

One last point worth noting here: While 1 million consumers dropped out of the CD-buyer market in 2007, 29 million acquired digital music legally. That’s an increase of 5 million over the previous year. Growth here was largely driven by the 36-to-50 age group. “The continued growth in legal download sites is encouraging, yet the industry struggles to improve the value of each digital customer,” said Crupnick. “With so many baby boomers and Gen Xers entering the market, there are certainly opportunities to sell more digital albums, promote older catalog titles, or create bundles that will raise revenues. In the near term that’s going to be the best means available to narrow the gap on dwindling CD revenues.”

In the grand tradition of Gateway and Palm, Dell is shuttering its 140 kiosks in the U.S. as part of a new retail strategy that will expand sales of its products in outlets like Wal-Mart, Best Buy and Staples.

“We recognized early on that customers really wanted to touch and see the products before they purchased them,” said Dell spokesman Bob Kaufman. “That led us to the kiosk model. Now, customers can touch and feel our products before buying them at one of our retail partners.”

And better still, they can walk out of one of those partner stores with more than a receipt. You see, Dell’s kiosks (shown above just buzzing with activity) carried no inventory. An odd choice, since consumers typically like to take their purchases home after they’ve made them. Just ask Apple, which has carved out a nice little brick-and-mortar retail business for itself by stocking the products it sells.

As George Whalin, president of Retail Management Consultants, noted back in 2006 when Dell first debuted its kiosks, stores that carry no inventory risk frustrating shoppers. Said Whalin: “I don’t think that works as well, particularly for consumers. Walk into a major consumer electronics store, and they have a selection of TVs you can choose from, compare, load up in the back of your pickup and take home.”

It’s not often that one emerges from a Steve Jobs negotiation with anything more than a warm glow–especially members of the entertainment industry.

So it’s surprising to hear that Apple may have agreed to raise the average price of the movies at its iTunes Store. According to a report by Pali Research analyst Richard Greenfield (viewing requires registration), the company is courting 20th Century Fox (a division of News Corp., which is buying Dow Jones, owner of this site) with a plan to boost the average wholesale price of a movie to $15–just $3 below the average selling price of a DVD. Also under discussion: a new Apple-friendly “premium” DVD that would offer a version of the included film optimized for iTunes. Price: $3 or $4 more than the average DVD.

“While we suspect Fox will be the first studio other than Disney to fully embrace iTunes, we believe others will quickly follow suit,” Greenfield wrote, noting that studios are eager to prove to big-box retailers like Wal-Mart that iTunes significantly undercut their business. “The last thing the movie industry needs is pressure on new-release DVD wholesale pricing, although the studios probably make more money on an iTunes wholesale of $15-plus than most DVDs at $18, due to returns.”

Rupert Murdoch is in an unusually generous mood these days, isn’t he? This morning Fox Broadcasting said it would make season-premiere episodes of seven of its TV shows available for free through Apple’s iTunes store. Beginning this week and continuing through the two that follow, the network will offer free downloads of such series as “Prison Break,” “Bones,” “American Dad” and “K-Ville.” Said Fox’s William Bradford, senior vice president of content strategy, “We wanted to give our viewers and consumers a new way to discover our content.”

… And get hooked on it, and then watch it throughout the fall season–either on ad-supported network TV or as a paid download from the iTunes store. Which doesn’t sound like such a bad strategy when you think about it. Certainly, it’s far more appealing than NBC Universal’s hilariously ill-conceived download service and an interesting alternative to ABC’s, which will put full-length prime-time shows on AOL one day after they air on broadcast television.

That said, all three networks’ strategies are problematic in that they require the audience to access programming in disparate ways. Even traditional broadcast TV, as antiquated as it is, doesn’t force viewers to watch different networks on different systems. “The consumer is probably becoming confused,” notes 24/7 Wall St.’s Douglas A. McIntyre. “He will need to go to AOL to watch ABC. CBS programming is on the iPod. NBC will be doing direct downloads from its own Web site. NBC and News Corp. are starting a joint online venture called Hulu. TV and film will also be available on the Amazon Unbox. Wal-Mart has started a video download service. The large retailer will charge for its content. NetFlix is also planning an online movie service. Viewers will be better off getting their TV and movies from illegal file-sharing sites. At least all of the content is available from one source.”

Note: John Paczkowski is on vacation and won’t be writing or posting videos until he returns Monday.

To keep you abreast of tech news while he’s away, we’re compiling a daily digest of 10 must-read tech stories. We’re calling it the Tech 10 and it appears below.

1. Retailing behemoth Wal-Mart will sell digital-music downloads on its Web site without copy protection, Reuters reports. The so-called digital-rights management software insisted on by some record labels can stymie where the average user plays the songs.
2. Taking on the juggernaut of iTunes, MTV and RealNetworks are forming an online digital music venture called Rhapsody America. According to The Wall Street Journal, Verizon Wireless has signed on as mobile distributor of the joint content.
3. Adobe Systems’ warhorse Flash Player is getting a makeover named “Moviestar.” The update, says InfoWorld’s Paul Krill, will bring high-definition video technology to downloads, affording clearer and smoother playback of images.
4. Increasingly popular online video site Metacafe got a shot in the arm in the form of $30 million in financing. VentureBeat reports that the latest cash infusion was led by new investors Highland Capital Partners and DAG Ventures.
5. Acknowledging it did bad (though not evil), Google announced last night that it would make credit-card refunds, rather than Google Checkout credits, to those owed after the company terminated its download-to-own/rent service of Google Videos. PC Magazine disclosed that the search giant will also allow users an additional six months to watch the videos they have already downloaded.
6. Fretting over security and productivity concerns, half of all companies in a recent survey are blocking employees’ access to Facebook. The poll of 600 workers by online security firm Sophos also found that two-thirds of all employees believe their colleagues are revealing too much information on the social-networking site, exposing them to cybercriminals bent on data theft and their companies to network hackers.
7. Bebo, the U.K.-centric social-networking site, has announced a partnership with Microsoft on a new instant-messaging service. According to Webware, the Windows Live Messenger hookup is only that–and not a signal of any impending acquisition.
8. Joining the social-networking parade, online business network CollectiveX has launched Groupsites. According to Michael Arrington of TechCrunch, the new product opens up the buttoned-down service to allow users to create social profiles as well.
9. Upping the ante in the competition for giving laptop users more memory, Toshiba announced today that it will release a 320-gigabyte hard drive for its laptops by the end of the year. According to IDG News Service, for users of multimedia laptops–where storing video is paramount–the extra space will come as a welcome feature.



10. In a bow to color choice and the sexes, researchers have found that there’s truth in the the time-honored (if sexist) adage that girls like pink, boys like blue. Reporting on a study from two scientists at Newcastle University, the Independent did not confirm whether the findings were borne out in colors chosen by men and women for iPod skins.

–posted by Associate Editor John Sullivan

If you’re among the 100 million Americans who shop at Wal-Mart weekly, chances are you’re not familiar with Voice over Internet Protocol (VoIP), or Internet telephony, but you may be soon. The colossus of American retailing put its considerable weight behind the Internet telephony market yesterday by adding a special section that sells Skype calling cards and “Skype certified” Webcams, handsets and headsets to more than 1,800 of its stores. “This brings Internet communications to the masses,” Don Albert, vice president of Skype’s North American operations, told USA Today.

The deal places Skype and other hosted VoIP services into the mainstream spotlight and may even bring them a huge crop of new users. I say “may” for two reasons. First, bargain-hunting small-town America, where Wal-Mart does a great deal of its business, isn’t exactly technologically adventurous. Will it embrace Skype? Will it even notice it? Second, Wal-Mart’s been reporting lousy financials for a while now. America may still shop at Wal-mart, but from the looks of the company’s earnings reports, it isn’t buying much–even at price points that make it feel like it’s getting the deal of the century.