Sony launches iTunes competitor Qriocity in Europe in a bid to gain direct access to consumers

The fortunes of media product stores changed when consumers chose MP3s over CDs. Now, retailers will be singing the blues as Sony’s Qriocity brings an unlimited music streaming service to consumers.

Music streaming and cloud-based music storage services are by no means new, but Sony’s Qriocity service marks the first time a major music publisher has decided to completely bypass traditional retail channels.

Qriocity offers consumers two subscription packages – Basic at £3.99 per month and Premium at £9.99 per month. Whilst the Basic package offers subscribers unlimited access to Qriocity’s music library, the Premium package has additional features such as playlist creation and extended access to advertising-free radio channels.

Impact on retailers: streaming music sales to replace downloads as well as CDs

The increasing consumer shift to music downloads has already severely damaged sales of media product stores such as HMV and Virgin Megastore, and things are set to become even worse for these retailing brands as music streaming services become more mainstream.

Spotify, Lala and now Qriocity all offer consumers unlimited access to music from their favourite artists for a monthly fee. Spotify is currently only available in selected countries in Western Europe but already has seven million users, of which 250,000 are premium members. These figures look set to treble as Spotify plans to enter the US market by 2011. Sony’s arrival as a major music publisher is likely to further damage store-based music sales and even poses a significant threat to iTunes and Amazon MP3 online sales.

Media product stores will be hit hard – top 10 store-based music sellers

Source: Euromonitor International, Retailing.

Video sales – Netflix-style on-demand service to bypass retailers

Media product stores should also worry about Sony’s expansion into video streaming. The new Qriocity service will also offer a wide selection of high and standard definition video content, including many of the latest DVD releases.

As of 2010, this service is available in the US, France, Germany, Italy, Spain and the UK. Unlike the Music Unlimited service offered by Qriocity, video content can be rented by consumers on an à la carte basis. Similar to Netflix, once payment has been completed, viewers will have 30 days to use the purchased content. Once started, consumers can play, pause and rewind for 48 hours.

“Every cloud has a silver lining”

While Sony’s Qriocity service fulfils many consumer demands, there are deficiencies which retailers can take advantage of. Firstly, as of 2010, offline mode is not available to subscribers, which means that if a subscriber is not connected to the internet, they will not have access to Qriocity’s music database.

Secondly, several record labels and smaller independent labels have yet to sign up to Qriocity’s Music Unlimited, which means that artists like AC/DC and The Beatles are unavailable to subscribers.

Finally, Qriocity’s video service is only available on selected Sony devices such as Bravia televisions and the PlayStation 3. This means that Qriocity’s impact on DVD sales for retailers will be lessened because Sony only commands a 9.4% share of digital television volume sales in the markets in which Qriocity’s video service currently operates.

Impact on manufacturers

Sony stands to benefit the most from this new digital retail platform as it can generate 100% margins for its Sony Music Entertainment and Sony Pictures Entertainment subsidiaries. Other music publishers and film studios are also likely to retain much higher margins on content sold through Sony’s Qriocity service than through store-based channels.

The future appears bleak for store-based retailers

E-tailers and cloud-based services appear to be the future for many media products, with downloads and streaming services taking a growing share of revenue away from store-based retailers.

Media product stores have already seen their book, video game and music sales decline as a result of eBooks and MP3s, and with the rise of on-demand services and the likely migration of DVDs to the cloud, will there be anything left for media product stores to sell?