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Music Retailers Go Digital

Suffering industry to offer downloading alternative with Echo

January 27, 2003 12:00 AM ET

In response to a second consecutive year of sagging record sales, six major music retailers announced today that they're banding together in a venture that will meld the online market for digital music more closely with old-fashioned store-based sales. The group, which includes industry-giants Best Buy, Tower Records, Virgin Entertainment, Trans World Entertainment (which operates FYE stores), Wherehouse Music and Hastings Entertainment, bought a controlling interest in Echo Networks, a Los Angeles-based digital music vendor that will lend technology to and serve as an umbrella for the new initiative, called simply "Echo."

Echo is an effort to stem what traditional retailers see as the impingement of the impossible-to-regulate trade in pirated music on their profits. The six participants, once they secure licensing agreements from record labels, plan to take advantage of their status as familiar destinations for music buyers to carve out a piece of the digital music market by offering downloads to customers online and at retail locations. Echo will also differ from the major labels' pay-for-play forays into the digital marketplace -- which haven't been able to compete with the continuing (if illegal) operation of free file-sharing sites -- by featuring value-added products like players with songs pre-loaded and CDs that include free sample tracks with an option to buy the rest.

One of the earliest investors in Echo Networks, originally a Silicon Valley Internet radio startup, was Strauss Zelnick, former head of BMG Entertainment, parent company for record labels RCA and Arista and home to artists including Pink, TLC and Usher, as well as Elvis Presley's back catalog. Zelnick will now sit on Echo's board of directors, an important connection for the company's efforts to securing licensing agreements with labels, the first step in any legal digital distribution venture.

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