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Last Updated: Friday, 21 May, 2004, 15:04 GMT 16:04 UK
Will Napster kill High Street record stores?
By Darren Waters
BBC News Online entertainment staff

Record stores
Record stores are offering more music than ever
Online music service Napster launched this week in the UK, predicting the demise of the High Street record shop within 10 years. Can the record shop survive in the digital age?

Record stores have been an integral part of popular culture since the days of the first rock and roll singles in the 1950s.

The hang-out of choice for teenagers over many decades, the contemporary record store has evolved over time.

From specialist independent shops offering rare vinyl to expansive megastores selling CDs, DVDs and iPods, the record store remains at the heart of the music buying experience.

But the with the launch of Napster in the UK this week, are record stores under threat?

'Experience music'

Chris Gorog, chairman of Napster parent company Roxio, predicted that the launch was so significant it would spell the end of High Street record stores within a decade.

High Fidelity
High Fidelity
There is a happy relationship between people experimenting with tracks online and then buying CDs
Mino Russo, Fopp
Napster offers 700,000 songs for download at a cost of 99p per track on top of a 9.95 a month subscription.

Brad Duea, president of Napster, said: "We feel that most people, when they experience music at Napster online, will enjoy it, but it doesn't mean the high street retailers will close their doors tomorrow."

But what about the day after tomorrow?

It has certainly been a difficult time for music retailers world-wide in recent years.

US retailer Tower Records filed for Chapter 11 bankruptcy protection earlier this year, and shut down all of its European operations last year.

In the UK, WH Smith announced it was to dump the CD single in February, while independent record chain Andy's shut down all of its stores nationwide at the end of 2003.

Global slump

A global slump in CD sales has hit record shops hard, with online piracy blamed by much of the industry.

Certainly, it would be ironic for Napster as a legal service to do as much damage to the retailers as Napster the illegal service did a few years ago.

Breakdown of UK album sales
HMV store
Music stores (HMV/Virgin etc) - 47%
Chains (WH Smiths/Woolworths etc) - 16%
Supermarkets - 21.6%
Mail order - 3.9%
Internet sales (Amazon/Play.com etc) - 7%
Other - 4.5%
Downloads - Not yet registered
Source: British Phonographic Industry
Dennis Henderson, chief operating officer at Virgin Retail, said online music would not shut down Virgin Megastores.

He told BBC News Online: "Online sales are another channel for people to buy music.

"People will always want to buy a physical product and to collect it themselves.

"There is a peculiar relationship people have with their record and DVD collections. Downloads do not have that."

Music retailers admit they are having to change the way they work.

"We are diversifying," said Mr Henderson.

"We have to offer a whole range of entertainment-related products. But we are still expanding our music offering."

'Work harder'

He said discounted singles on online music services and discounted chart albums at supermarkets were putting extra pressure on record stores.

"It raises the bar. We have to compete and work harder for our profit through selling other things."

According to latest figures from the UK Official Chart Company, legal downloads of singles currently account for about 5% of all single sales.

The company is still looking at the possibility of including those download sales figures into the official chart countdown.

While giants like HMV and Virgin will ride out the transition period, small independent stores may struggle, he said.

Napster screenshot
Napster is already up and running in the US
"If you are a smaller store, with a smaller selection, with smaller turnover you are always threatened by a migration to other channels.

"There has been a reduction in the number of independent record stores in the UK."

Mino Russo, head of marketing at independent record shop chain Fopp, said: "We are still selling a lot of CDs despite the declining market."

He said his own experience with digital music reinforced his belief that record stores could flourish in the digital age.

"I bought an iPod and thought my consumption of CDs would go down - but I'm buying more.

'Enormous value'

"At the moment there is a happy relationship between people experimenting with tracks online and then buying CDs as well."

Record stores were still offering customers enormous value for money, he said.

"Download tracks are 1 a time - but we sell a range of albums at 5," he said.

At a recent music industry conference, hosted by UK business network Music Tank, Kim Bayley, secretary general of the British Association of Record Dealers, said digital music accounted for 10% of sales in the short term and would account for 25% in the long term.

Speaking in a personal capacity, she told the conference: "Not everyone wants to download their music, and although it will become more important, it is just another format."

Music giant HMV hits a high note
15 Jan 04 |  Business

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