Music Download Store to Open on eBay

Sep 23, 2004
George Anderson

By George Anderson

PassAlong Networks, a music download service that includes the complete catalogs of Warner Music, BMG
and Universal Music Group, plans to set up a storefront on eBay to gain exposure to the auction site’s 114 million members worldwide. PassAlong will also operate its own site.

Initially, PassAlong will offer consumers a collection of 200,000 downloads with the number expected to grow to 500,000. The company said it would be the first major digital download service to accept payment using eBay’s PayPal service.

PassAlong will sell individual cuts for 99 cents as does the digital music download leader, Apple Computer, plus it will offer an incentive to shoppers who recommend music to others. Consumers can earns points to redeem music at any of PassAlong’s stores.

Josh Bernoff, an analyst with Forrester Research told Forbes he sees pluses and minuses for PassAlong Networks going forward.

“I think eBay is good place to hook up with right kind of community where this kind of model can be successful,” he said.

Mr. Bernoff did voice concerns about PassAlong’s ability to make a profit. “It’s hard enough to make a profit selling songs at 99 cents each,” he said. “But when you cut into that margin it becomes even harder. Now it might be the case where if it’s really successful you can make it on volume, but as we all know that often doesn’t work very well.”

There is one other element PassAlong will have to deal with, said Forrester’s Bernoff. “This market became crowded about seven players ago,” he said.

Moderator’s Comment: Is the music download market large enough to support all the businesses selling digital downloads?
What are the keys to successfully competing in this category?

Michael Gartenberg, an analyst at Jupiter Research, told Forbes music download sales will reach $800 million by 2009. Current annual sales of CDs are in
the range of $10 billion.

George Anderson – Moderator

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