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Why did Wal-Mart fail at the MP3 biz?

Industry observers and music fans say mistakes overwhelmed low prices.

By doubleace Aug 10, 2011 1:03PM

This post comes from Lynn Mucken at MSN Money.

For years, the world's largest retailer's simple business model -- be everywhere and sell cheap -- has allowed it to plow under other businesses, in the process becoming one of the most loved -- and detested -- corporate giants.

But Wal-Mart's seven-year misadventure in the music download trade will end Aug. 28, when it closes the Wal-Mart Music Downloads Store, the company announced this week. Apple, ironically another company that inspires both total devotion and a surprising amount of enmity, won the MP3 smackdown, with its iTunes offerings capturing 66% of the MP3 market to Wal-Mart's less than 1%, which is worse than Amazon, Zune, Rhapsody and Napster.

Wal-Mart doesn't lose many fights. So why did it lose this one, especially when it was undercutting its competition's prices pretty much across the spectrum? 

Here's what Alexandria Osorio of Digital Music News, which broke the story, believes:

And today's lesson? It looks like price isn't the most important thing when it comes to music downloads. Once upon a time, Wal-Mart was an "iTunes-killer" with deeply discounted 88-cent MP3s. But discounts meant little compared to integrated iPod and iPhone integration (and) a superior iTunes user interface. … And just like that, Wal-Mart is now closing its MP3 download store, thanks partly to weak consumer demand and price insensitivity.

Post continues after recent video about another Wal-Mart service.

While drivers will travel miles to save 11 cents on a gallon of gas, music fans apparently don't seem attracted by saving the same amount on a Wal-Mart download over the same song offered by iTunes.

Explained Jacqui Cheng at Ars Technica:

Both Amazon and iTunes offer a better user experience too, with software for multiple platforms and a large built-in user base. Let's face it: for mainstream music, why would anyone choose Wal-Mart over the competition when it comes to music downloads?

Peter Kafka at All Things Digital was less harsh:

It would be easy enough to document Wal-Mart's missteps -- embracing Microsoft's now-defunct Windows Media Audio standard, for instance -- but the truth is that no one has ever made any headway against Apple in this market, ever. Amazon is by the far the best non-Apple performer, and even it hasn't been able to garner more much than 10% of the market.
So cut the world’s biggest physical retailer just a teeny tiny bit of slack.

Mike Flacy at Digital Trends blamed what he called Wal-Mart's "censorship":

Wal-Mart's long-standing policy of only carrying edited versions of albums with parental advisories drove users to other alternatives like iTunes. iTunes, as well as other music services like Spotify, give the user a choice between the two versions of the album.

Some music fans said the Wal-Mart product was never properly promoted. "I never knew Wal-Mart had an MP3 Store. Shows how much they advertised for it," wrote "JDK122" on CNET News.


The Associated Press wrote that "the dynamic of retail is changing, and sometimes companies are better off focusing on what they do best rather than offering something that doesn't deliver an above-average experience for consumers."

"It is very easy to become antiquated very quickly in the entertainment industry," it quoted market research company NPD analyst Marshall Cohen as saying. "If you are losing ground, and they probably were losing ground more rapidly year after year, it's probably better to regroup and retool."


Wal-Mart said that "the sale of physical record music products on as well as in Walmart U.S. retail stores will remain unaffected. Walmart Soundcheck will remain operational as a live streaming site without any download options." It also said it would "continue to provide support to our customers who previously purchased digital music through Walmart Music Downloads so they may continue to enjoy and manage their existing WMA files."

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