Sir Richard Branson is selling Virgin Megastores to a management buyout team and exiting the music retailing business four decades after it helped him start on the road to becoming a mogul. Some odd, bold move or calculated business strategy? It’s easily the latter.
With music retailing slowly morphing into an industry that uses internet downloads and digital forms of music instead of the physical CD, the move should not come as a surprise to anyone. From an economic perspective, the music industry worldwide is reaping what it sows as sales of $15 CDs are losing out to the 99 cent download. Plus, there are “subscription” music services where customers can ‘rent’ music for a monthly fee and never have to buy or carry another CD again.
Branson’s move here, even in the industry that started his career as a global entrepreneur, has been timed perfectly. Branson, like most business owners, knows entrance and exit strategies with the best of them, and apparently he sees the brick-and-mortar music retailing business slowly becoming extinct in the iPod age.
Should other music retailers listen up? Most of them have, and have dropped prices on CDs to levels comparable to music downloads, or are using CDs as loss leaders to get traffic inside stores for other, higher-margin purchases. But, for Branson to sell off what was his business baby should signal a shift to the music retailers who have not listened so far: compete in the new internet music distribution era or perish.
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