When Metallica hit record stores with its latest release this summer, it knew it had to deliver value beyond the disc. It just didn't want to do so at the expense of its highly visible campaign against MP3 file-sharing networks. So, while the metal foursome's St. Anger drew mixed reviews from critics and fans alike, the band made sure that online downloads would fail to duplicate the album in its entirety.
The CD came packed with a bonus DVD as well as a unique Speakeasy code to unlock additional Metallica-related content online. Produced by AOL Time Warner's (NYSE:AOL) Warner Music label, it's not the first pre-recorded CD packed with enough gizmos and gimmickry to entice buyers. It won't be the last, either.
Yesterday's Financial Times reported that Warner and Sony (NYSE:SNE) are set to test a new dual-format disc by early next year. With one side offering a CD's worth of music and the other promising DVD eye candy, the major labels are looking to redefine the perceived value of the music disc.
It's worth a shot. While the swapping of video files is alive and well on the Web, the substantially larger file sizes have kept the pilfering process in check relative to MP3 trading. While all five of the major labels are supporting the plan in hopes of putting an end to three consecutive years of falling CD sales, there are more than a few retailers that are also bound to rally around the new format's introduction.
Consumer electronics superstores Best Buy (NYSE:BBY) and Circuit City (NYSE:CC) use rock-bottom pricing on CDs the way grocers use cheap milk -- to attract foot traffic and produce higher margin sales throughout the store. So, while Best Buy sold its Musicland subsidiary back in June, it still has to face the music. Even such discount department store giants as Wal-Mart (NYSE:WMT) and Target (NYSE:TGT) could use a kickstart in their ailing CD departments.
But will this be enough to offset the bad will that the labels have provoked in going after individual participants of file-sharing networks? The labels still want to be heard. Come next year, they will probably want to be seen as well.
Will the dual-format disc be enough to save Sony or will it have to rely on its chips, components, and PlayStation business to see it through? Will we see consolidation in the music industry as a result of recent weakness? All this and more -- in the Sony discussion board . Only on Fool.com.
