By Patrick Avenell
A fast start is imperative for JB Hi-Fi’s new music streaming service, JB NOW, to be profitable, according to RBS director – retail analyst, Daniel Broeren.
This new music streaming service, which was announced at the same time as a $134 million annual profit, is set to launch by the end of 2012.
Broeren said that for this service to break even, JB will need to recruit around 25,000 subscriber, a plausible figure considering JB is currently one of the country’s largest hard music retailers by volume.
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“For JB Hi-Fi to succeed in its music streaming business, moving quickly and leveraging its current market strength will be crucial,” Broeren said. “JB has already overcome two of the most significant barriers to entry: agreement from record labels, and brand equity and consumer trust.
“We note that it took Spotify two years to secure agreement from record labels before entering the US market.”
Broeren also notes that entanglement in a certain service will apply, with consumers that sign up for JB NOW then loathe to depart the subscription system to join a competitor.
“Importantly, once consumers have built their personal libraries with JB NOW, a competing site would have to offer a significant improvement in functionality to attract customers away,” Broeren said.