The future of music retail

Coolfer has an interesting post this morning, responding to Peter Kafka's suggestion that it's getting too hard to buy music because fewer retailers are stocking CDs. I think Kafka's confusing cause and effect--if retailers were still making lots of money on Britney and Rihanna, CDs would be sold front and center. But regardless of the chicken-and-egg question, Coolfer makes the very good point that most music purchasers don't seek out music and aren't willing to sift through the racks at their local record stores, but rather pick up a CD as an impulse buy on their way to the beer aisle. So what happens to those purchasers once CDs are relegated to a small corner in the back of Wal-Mart or Borders?

The most likely replacement scenario, I think, will be over-the-air digital downloads: users will hear a song on the radio or in some public space and make an impulse buy from their mobile phone or other portable device. But the technology to make this process as easy as picking up a CD is still in the very early, geeks-only stages.

With an iPhone, you can make a purchase only if you've got a Wi-Fi connection, not over your service provider's cellular network. (The same holds true for the iPod Touch, since it's not a phone at all.) And identification requires a third-party app like Shazam (which just added another 2 million songs to its already impressive database). Apple could make impulse buys a lot easier if it bought Shazam, incorporated its functionality into the iTunes Wi-Fi app, and created a cellular version of the iTunes store--perhaps giving users the ability to download a very small but highly compressed version of the song over 3G, then giving them the right to "upgrade" to a better-quality file later.

The Buy From FM feature on Microsoft's Zune player is another good idea, but it only works when you're listening to the Zune's FM radio--there's no identification of audio from outside sources--and of course the Zune isn't a phone (yet), and can't connect to Wi-Fi hotspots that require a browser-based log-in. Microsoft's also making a big push for its Zune Pass, which lets you stream any song in the Zune Marketplace on demand, but like subscription services from Rhapsody, this won't appeal to impulse buyers--by definition, those folks aren't going to pay $15 a month (or whatever) for the right to listen to music.

Internet radio with click-to-buy functionality is another strong contender--think of Pandora on the iPhone. But once again, there's a disconnect between hearing, identifying, and buying (which requires a Wi-Fi connection).

Don't get me wrong--the CD still has a lot of life left in it, and specialty music stores and online retailers will continue to sell them by the tens of millions. But as smartphones become more common, somebody (probably Apple) is going to close the loop in a way that makes impulse buys of digital downloads just as easy as grabbing a CD from the rack next to the cash register. Whoever does stands to become the Tower Records--or should I say Wal-Mart music section--of the next decade.