Dozens of independent record companies, including China's second biggest record label What's Music, have signed agreements with Cerberus, the company behind the Virtual Record Store. But the big companies such as EMI and Warner are watching cautiously from the sidelines.
"At this stage we are not talking about Top 10 hits but funk, dance and indie chart compilations," said Ricky Adar, a former telecommunications engineer and the entrepreneur behind Cerberus. "If the major industry wants to come aboard then they can do, but at the moment if you want to buy the Spice Girls we would say go to Our Price."
Cerberus is planning to open a chain of similar "touch-screen" record kiosks over the next couple of years in a variety of venues including motorway service stations and supermarkets. Its development will be watched closely by the major music retail chains such as Virgin and HMV, owners of the world's biggest record shop in Oxford Street. "We don't believe digital technology will kill megastores," said a spokesman for Virgin. "People like to collect things and keep them and that goes for CDs as well."
The megastores will, nevertheless, need to work hard to attract customers. "The record stores have been a bit slow to catch on but if they want to set themselves apart from on-line services they are going to have to make a bigger effort to show consumers what to consume," said Kim Thesiger, managing director of the Internet production company Webcast. Live appearances in the shops by recording artists, in-house virtual record stores, cafes and restaurants are all likely to proliferate as the shops struggle to attract customers.
Digital record distributions also poses a major challenge to bands who will no longer be able to sell a whole album on the basis of one hit. "At the moment artists are extremly keen to have concerts webcast. But when people start to realise they will sell fewer albums as a result they may have to think again," said Paul Jessop, director of technology at the International Federation of the Phonographic Industry, the lobby group for the major record labels.
For the main record companies, the new record distribution technologies and outlets will present both a threat and an opportunity. "We think this will increase record sales overall. If we can get what the public wants out into areas where you couldn't get it before, then people will buy more of it," said Mr Adar. But the new technologies will allow recording artists to bypass record companies altogether and distribute their music directly. Whatever happens, it is clear the music majors need radically to rethink their role."It's far better to embrace this revolution," said the Virgin spokesman.
Meanwhile, Virgin is planning to launch Virgin Megastore On-line, which will enable people who have the right recording equipment to download records onto their personal computers. The site will also have "virtual listening booths" and "pay-per-listen" facilities by which consumers can pay to hear a track. "The main issue is how quickly the record companies allow this to happen. They are the inhibitors today. It's not the technology," said David Clarke, managing director of VirginNet.
For the time being, the record companies are focusing their energies on lobbying Brussels, where the European Commission is due to publish its long-awaited proposal on copyright protection to prevent cyberspace piracy.
Illegal copying from the Internet and satellite and cable channels is already costing record companies millions of pounds, adding to the estimated $5bn lost to them from pirate recordings and unauthorised sales of CDs.
"It is very dangerous to be a virtual record store without proper protection," said Rick Dobbis, president of Polygram Continental Europe. "We have to ask does the proper and neccessary regime exist to support this business - and the answer is not really, at least not yet."Reuse content