Vivamusic sets up physical store to compliment online biz

While many brick and mortar companies are trying to carve a niche in the Internet sector, one online music distributor is doing the opposite.

SINGAPORE--While many brick and mortar companies are trying to carve a niche in the Internet sector, one online music distributor is doing the opposite.

Vivamusic.com Pte Ltd today opened its flagship store, Vivamusic Hub, here occupying 4,400 square feet at Cathay Cineleisure Orchard.

At the store, customers can literally "make" their own CDs by selecting from a database of 2,000 songs and then "burn" these songs onto a CD...all this through five Liquid Kiosk Network machines.

Customers pay between S$2 to S$4 per track on top of a S$5 basic fee (for the CD), Vivamusic.com director Eric Tan told reporters during the soft launch of Vivamusic Hub today. By year end, customers can choose from 50,000 songs from the kiosk, he added.

This customization is possible as a result of a resale agreement with US-based Liquid Audio Inc, which has a database of 70,000 downloadable songs. Liquid Audio also provides digital rights protection for the music its sells online.

Recording companies including BMG, EMI, Universal Music, Warner Music, Avex Trax and Rock Records supply the titles to Liquid Audio, which gets a cut off from every sale. Vivamusic.com's Web site also sells Liquid Audio's 70,000 songs.

According to Vivamusic.com CEO Mark Lai, the company is also talking to a few recording companies to avail other song titles (especially Asian ones) for sale on the former's Web site and physical store. Lai expects to offer Japanese and Korean songs by year end.

Founded in August 1998 as a Web consultancy firm, Vivamusic.com (previously called Digital Renaissance Pte Ltd) revamped its business in January to focus on selling music. Its online music site was launched in February.

Tough business, says IDC

On the surface, it seems that Vivamusic.com is competing with music retail giants such as HMV and Tower Records here, but Lai disagreed. "We are an online music distributor extending itself physically. The physical store will complete our overall strategy. We don't see them (HMV and Tower) as a threat to our business."

Meanwhile, Lai expects online sales to make up 20 percent of Vivamusic.com's total revenue by year end from "negligible" at present. He also expects the remaining 80 percent to come from selling CDs and music tracks from its physical store.

Commenting on whether the reason for a physical store is because the company lacks confidence in online music sales, Lai said: "No, not at all. We've had this idea (of setting up a physical store) all along."

While Hong Kong-based IDC Internet analyst Matthew McGarvey commended Vivamusic.com's move to go "offline", he cautioned that business will be tough for the company.

"It is the right move...consumers like physical stores. But it is tough business on both ends (online and offline). Setting up a store requires significant investment and they (Vivamusic) are getting competition from offline stores," he told Singapore.CNET.com in a phone interview.

Vivamusic.com is not alone in the online music distribution scene. Local players such as Soundbuzz.com Pte Ltd and AudioLoad.com Pte Ltd are already in the game. However, Soundbuzz and AudioLoad do not have physical stores.

Funding, expansion

In January, Vivamusic.com received S$1.6 million from Vertex Management and S$400,000 from undisclosed angel investors, said Vivamusic.com's Tan, adding that Vertex holds majority stake.

Tan also said that Vivamusic.com is in talks with investors for its second round of funding but declined to disclose details. However, he expects to conclude this funding exercise by year end.

On listing, Tan said: "We do not have immediate plans. An IPO (initial public offering) may not neccesarily drive the success of the company."

He declined to reveal the company's monthly burn rate but expects to break even by the end of 2001.