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N2K hopes to dominate
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January 19, 1999: 12:10 p.m. ET
CEO Jon Diamond explains Internet retail strategy for expanding company
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NEW YORK (CNNfn) - N2K is not sitting idle. The online music retailer aims to stand toe-to-toe with Amazon.com, currently the dominant player in the Internet retail music business as well as book marketing.
CNNfn spoke with N2K's Jon Diamond, chief executive officer and vice chairman, about where the company is heading and how it plans to implement a winning strategy in the rapidly expanding online retail business.
Here is his "Business Day" interview:
DEFTERIOS: This is not an easy task for you, of course. Because Amazon.com (AMZN) keeps on moving and branching out into video, into music. What is the key strategy to confront this expanded space that they've developed on the web?
DIAMOND: Well, when we look at Amazon, Amazon has developed a strategy to become one of the dominant retailers on the Internet across a wide variety of product categories including music.
Our strategy has been consistent from the beginning to be the music category on the Internet as has CDnow (CDNW). We both realized our visions, our strategies were similar. And we felt we could dramatically accelerate the business model by combining the two companies together.
And our strategy really evolves more from the music industry perspective of looking at -- how does a record executive sell music? How do you market, promote, distribute and create awareness for the artist on your roster and the catalog that you have.
So, we developed our business model based on that. And looking at the music industry from the perspective of the music industry creates awareness for their artists and for their product through radio, through cable television, through print, through various media platforms.
So, we've developed a business strategy where we have partnered not only with the America On-Line's (AOL) and Yahoo's (YHOO) and all of the major portals and directories on the Internet.
But with major media partners like radio stations, cable television channels, print partners as well as major media partners like Disney (DIS), ABC, CBS (CBS) and so on. So, our strategy is to build brand on the Internet for music with all the content, the programming, the features that we have in music on the Internet.
DEFTERIOS: I want to get into a couple different strategies. Number one, you say you're not cannibalizing sales at an HMV or a Tower. This is complementary on the web.
DIAMOND: We think so. I mean, there are certainly those buyers who don't go into the record stores that we're reaching. But there are those buyers who are looking for the convenience, the selection, the breadth of product that we have on the Internet who are coming to our service.
So, we think the Internet is actually going to provide an incentive for the music buyer to get more exposure to music, to buy more music. And we'll probably have an additive effect on the music marketplace.
DEFTERIOS: And you can carve out especially a CD on the web, according to your web site here, where you can put together your own play list, if you want.
DIAMOND: That's right.
DEFTERIOS: There's a huge concern though about copyright issues and pirating, more importantly. How are you dealing with the encryption problems?
DIAMOND: Well, we're on the board of the Recording Industry Association of America, so we're part of this process now in developing the standards for electronic commerce. So, the role that we're looking to have is the standard-bearer for the music industry. So, whatever standards are adopted, we'll adopt those standards and step into that space in a responsible manner.
DEFTERIOS: Now, why is it -- after we see a deal like this today with Excite (XCIT) and At-Home (ATHM). These stocks have quadrupled over the last year. Yours has been pretty much flat relative to the rest of the Internet sector. Do people not buy in to this concept of music on-line?
DIAMOND: Again, we don't comment on the stock price or the behavior of our stock in the market. But you know, certainly we think people are looking at the merger. And you know, in about a month -- or a few weeks actually, we'll have a new model that we'll be sitting down with analysts in the financial community to go over what the combined company looks like from a financial perspective.
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