NEW MEDIA: SPOTLIGHT ON VIRGIN MEGASTORES - Virgin Megastore site aims for a slice of internet music sales. The threat posed by online sales led to Virgin creating its site, Alasdair Reid says

The Oasis CD you got free with The Sunday Times the other week was an interesting production - although, irritatingly, it was one of those free offers that turns out to be not quite as free as you first thought.

And the whole business was more elaborate than it needed to be. To get access to the disc's content you had to be connected to the internet too and you had to divulge lots of personal data (fair enough, data capture is the future, isn't it?) before you could get going. And then you realised that the reason you had to stay on the internet while the disc was playing was that you were only going to be allowed to play the thing four times before access was withdrawn.

It was a prime example of the way in which digital technologies both excite and scare the hell out of everybody in the music business these days. For individual artists the threats are as huge as the opportunities - these days you can be in closer contact with your audience if you choose, but, equally, that audience is increasingly likely to want to download your output for free.

The record companies are obviously trying to guard against that - which is why they've leapt into bed with erstwhile digital pirates, for instance, the Bertelsmann deal with Napster. As with the bands themselves, the record companies have got to believe there will be new and better ways of monetising their customer base.

However, there is surely one group of people for whom the digital cloud promises more darkness than silver-lining. They're the piggies in the middle of all of this. The retailers, especially the bricks-and-mortar retailers. Some of them have been running like hell just trying to keep up with the first phase of the revolution - online retailing, with order fulfilment in the form of old-fashioned CDs sent through the postal service.

And initiatives such as the Oasis one the other week must dismay them because they threaten to cut them out of the loop altogether.

But Virgin Megastores doesn't seem very scared. Last week the retailer had news for anyone who doubted its determination to stay at the leading edge of music retail in this country when it unveiled a new transactional website. It has an unforgettably catchy URL - virgin.com/megastores/uk - which is no accident, as it happens, because the strategy is to drive traffic from the busy concourse that is the main Virgin portal rather than trying to tough it out as a standalone brand.

And traffic is also right at the heart of a new approach where content is concerned. The site is crammed with exclusive material intended to make this a desirable destination for anyone interested in music, not just those who are on the verge of buying a CD. There's streaming from the Virgin in-store radio station, promotional videoclips, virtual artist signings plus news, reviews, interviews and gossip updated on a daily basis. There will also be downloadable games.

The idea seems to be to create a virtual version of hanging out at the record store - the logic being that if, in the time-honoured expression, you spent a lot of time hanging about at the barber's, you're going to end up with a haircut. But, as Zoe Bartels, Virgin Megastores' head of new media, points out, content is hugely important as people move toward purchasing decisions.

Bartels explains: "Recent Forrester research points to the fact that 90 per cent of people in one sample used the web to gain product information. This ultimately influences their buying decisions, whether they choose to purchase online or offline. Again Forrester research shows that poorly managed content causes people to abandon shopping trolleys before the checkout if they cannot get the information they require easily."

But what does the market think? Is the new site merely a defensive measure?

Will it help Virgin stay at the forefront of the music retailing business?

Pete Robins, the media director of Media.Com, says the initiative reminds him how much ground Virgin has already lost. "If you were buying on the street you'd know to go to HMV or to Virgin but online you might use Amazon. You don't necessarily associate Virgin with online sales," he points out.

And that might be a fatal position to be in as the CD itself begins to run out of shelf life. Some research indicates that CD sales will remain level for the foreseeable future with sales of paid-for music downloads overtaking CD sales by 2004. Other estimates - clearly the ones that Virgin listens to - say the market won't evolve quite so dramatically. Virgin believes that by 2006 only 9 per cent of the UK music market will have found its way online.

But even if that is the case, is Virgin going to be one of the main online players by then? Robins thinks having free games downloads is an excellent move where the new site is concerned. It will certainly help to drive traffic. But he is sceptical about whether enough visitors can be persuaded to stay and buy music.

John Owen, the communications director of Starcom Motive IP, tends to share that scepticism. Contextual selling - the notion that if you attract curious music enthusiasts you'll end up being able to sell music to them - works better in theory than in practice, he suggests. "Contextual purchase is basically impulse purchase and impulse isn't that strong a factor in this market. When I want to buy a CD I tend to go where I know they have good prices or exhaustive stocks. The people who succeed in this market have clarity of brand and simplicity of offer. For a start, you have to have a good URL. It worries me that Virgin doesn't seem to have cleared even that hurdle, he states.

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1 Job description: Digital marketing executive

Digital marketing executives oversee the online marketing strategy for their organisation. They plan and execute digital (including email) marketing campaigns and design, maintain and supply content for the organisation's website(s).