A Year Ago: The arrival of MP3

The MP3 walkman device from Diamond Multimedia may be just another gadget for playing music but its arrival has prompted a definitive statement from experts about the future of music retailers: "Adapt or perish."

Diamond Multimedia's Rio PMP300, launched in the US yesterday, is the first MP3 player from a leading hardware manufacturer and is being watched carefully by an industry with very little clue how to deal with digital music being distributed over the Internet. "Of course the industry will be concerned," says Ken Wirt, Diamond's VP of corporate marketing, "but I think it is missing the point, not to mention a great opportunity."

Wirt's wording may of course be fashioned to avoid direct conflict with the music industry which is undoubtedly being forced to do something it doesn't really understand. Jollyon Benn, operations executive for piracy issues at the British Phonographic Industry reckons the opportunity Wirt is promising has to be recognised and recognised soon. "It's inevitable that the Internet, probably within the next ten years, is going to take its place in delivering music direct to the end user without any intermediary," says Benn. "Of course there are opportunities to embrace technologies like the Rio but whether or not the retailers will accept it without a fight remains to be seen."

The direct sales model -- something the PC industry, particularly Dell, has adopted with enormous success -- cannot however survive in these "simplistic" terms. Bob Lewis, director general of the British Association of Record Dealers, believes MP3 "presents an extremely serious threat to music retailers" but is confident that two factors will save retailers from doom: "Packaging and shopping" will provide the final defence for retailers against the Internet and the threat of MP3 "not from piracy -- that's still going to be an issue for another five years at least" says Lewis, but from being made redundant. "This new MP3 player will, I'm sure be a great success" says Lewis "but retailers are already realising that MP3 and the Internet need to be embraced and they are planning change to cope. But people still want the cases and the notes inside the cases and ... won't give up shopping just because they can download a file off the Net."

How music retailing will change remains to be seen. "Who knows what the virtual record store of the future will look like" says Lewis. "Probably people selecting music and arranging it in the order and arrangement they want on a CD and then paying for the finished product."

HMV, Virgin and Our Price were all asked to comment. None returned ZDNet's telephone calls.