BusinessWeek: Virgin May Give Apple A Good Run

When running a race, one strategy is to get out front early and maintain your lead. If you are strong enough to stay ahead of the pack, you donit have to worry about finding elbow room, or saving that little bit of reserve energy for the final sprint near the end; you just cruise and let the others fight over second place.

Such is the way it is with iPod and iTunes Music Store; Apple established an early lead and, while not resting on its laurels, is cruising through the course with the stride of a champ. Thatis not to say that others are going to be satisfied with second place, however. In his BusinessWeek Online column, Byte of the Apple author Alex Salkever is reporting that British Billionaire, Richard Branson, founder of Virgin Airlines and a whole line of Virgin-branded personal entertainment devices, and of course, Virgin Records, is entering the music download service race. Mr. Salkever believes that Apple may yet have a challenge for the lead as the Virgin marketing juggernaut comes to bear on digital music.

Hereis a excerpt from the article, Virgin May Show Apple a Thing or Two:

The entry of Virginis online subsidiary, Virgin Digital, might change all that. Branson, chairman of the British conglomerate, is a master marketer. He has brought hip and fun to stodgy fields such as airlines (preflight massage, anyone?) and mobile-phone service (who else offers personalized daily predictions from cartoon character Sponge Bob Squarepants?). True, he flopped with the introduction of a soft drink, Virgin Cola. But overall, Branson and his irreverent marketers have had a golden touch, particularly when it comes to reaching younger demographics.


Those same cell-phone teens buy a significant chunk of the CDs sold today. So they could likely be turned into online music buyers without too much trouble. Virginis 23 music stores across the U.S. already serve millions more customers than all the online music stores combined. Add on Virginis hundreds of stores in Europe, and you have a global music powerhouse. "You look at all the users of digital downloads, the numbers are still very small compared to traditional brick-and-mortar retail," says Zack Zalon, president of Virgin Digital.


That would give Virgin a "clicks and bricks" play that neither Apple nor any other online-music seller currently can match. Wal-Mart is a huge CD seller in the U.S., but has been notoriously gun-shy on clicks-and-bricks. Hewlett-Packard (HPQ ), which will distribute iTMS on its PCs and sell an HP-branded iPod, has the largest retail presence of any computer maker (see BW Online, 1/14/04, "Apple + HP = iPod Forever"). But HP has no history as a music vendor online or off, and it would need to start marketing almost from scratch.

The article also notes that Virgin Digital will be delivering its music downloads in the WMA format, something TMO confirmed with the company. Virgin Digital has no plans to offer Mac-compatible downloads.

Thereis much more in the full column at BusinessWeek Online, and we recommend it as a very interesting read.