Music retailer finds commerce in communities
N2K has an important lesson for all Internet-commerce sites interested in increasing revenues through community: "It's the customer, stupid!"
Niche markets are, by definition, not typically well-served. N2K's site shows that if you can give a niche market the information and tools that your members will want, then you can build tremendous amounts of customer loyalty.
N2K's flagship site is Music Boulevard (http://www.musicblvd.com), one of the largest music sales sites on the Internet. Music Boulevard was launched in August, 1995, by Telebase, an online commerce company, and it provides content-rich access to a wide amount of information that music fans want, such as artist biographies, tour schedules, music samples, and reviews. And, of course, there are provisions for fans to buy CDs, T-shirts, and other paraphernalia.
In 1996, Telebase merged with N2K, a provider of graphic design, packaging, and retailing services to the music industry. Following the merger, N2K began to explore ways to increase site visits and revenue.
Following old media's lead
Although Music Boulevard was somewhat successful, the revenues it was generating were by no means astounding. According to company documents filed with the SEC, Music Boulevard only did approximately $85,000 of business in the first three months of its operation.
The company hit on an old-media concept that it thought might also work in the new-media world: radio's use of genre-specific formats.
"Radio stations aggregate listeners and fans around format," said Jim Coane, president and chief operating officer at N2K. "If you look at how radio and the fan have evolved, there's a tremendous loyalty between fans and their favorite station. Our strategy is to create this same kind of loyalty through genre-specific music sites."
Essentially, N2K realized that it couldn't have a single site that adequately addressed the needs of all fans. Instead, the company created genre-specific sites that are focused on the specific needs of the community. This would allow fans of classical music to get detailed information that was appropriate to them, while also allowing jazz fanatics to get the same level of service.
Among the sites that N2K now produces are Classical Insites (http://www.classicalinsites.com), Jazz Central Station (http://www.jazzcentralstation.com), and Rocktropolis (http://www.rocktropolis.com).
A focus on community
For example, Classical Insites has a very large amount of information that is of interest to the classical music fan. Among the services that the sites provide are real-time audiocasts of classical performances, links to other classical music sites (such as orchestra and opera company sites), a RealAudio simulcast of New York's WQXR classical radio station, and a learning center. The site also has message boards and chat rooms, detailed artist biographies and discographies, and other elements one would expect to find in a community-centered site.
But what N2K's community sites do not have is just as important: namely, a strong focus on selling products. Rather than pushing CDs onto visitors, Classical Insites' focus is "to be able to respond to the instant-gratification sale" that naturally occurs through discourse and review, "and also to drive a more informed sale through community," Coane said.
This not-in-your-face attitude is what makes Classical Insites and its sister sites successful, according to Jonas Gray, director of Classical Insites. "Classical music is disappearing from schools and from music bins at record stores."
The classical music community seeks a refuge where it can meet to discuss artists and albums, and to learn about events in the field. Classical Insites aims to be just that.
"Without a doubt, this is the premiere classical music site on the Net," Gray also said. "Visitors become much more like members of a special club."
Indeed, in early December, several of Classical Insites' frequent visitors flew to New York for a face-to-face dinner.
The high level of loyalty engendered by the site has resulted in a substantial amount of sales. This in turn gives users a high level of comfort with N2K's product services.
"Most record stores don't have huge classical inventories, so it is much more practical and efficient to order the product online than to call in an order at the local record store," Gray said. "We have access to more than 200 Pavarotti titles, while most record stores only carry a dozen or so. Traditional retailers just cannot afford to keep low-turnover titles in stock."
Another positive side effect of the community focus is that Classical Insites has a highly focused audience, allowing N2K to sell advertising on the site at a premium.
All told, the strategy seems to be paying off, with N2K reporting revenues of $3.6 million for the third quarter of 1997, this is a substantial increase from the small $450,000 earning that was reported in the same period just one year ago.
Although N2K has a variety of community operations, each of which has a self-contained content and editorial management staff, the sites all share a common set of technology resources. For example, each of the genre-specific Web sites all refer back to the Music Boulevard Web site for information on specific recordings.
If you look at the link behind a Pavarotti record at Classical Insites, you will see a URL pointing back to Music Boulevard. The URL includes a CGI reference to a template, which tells Music Boulevard to present the album notes in a style that is appropriate to the Classical Insites site.
According to Jon Williams, managing director of technology at N2K Entertainment, templates include information for HTML elements such as background color, text color schemes, navigational objects, ad content, and even language.
The Music Boulevard Web site runs a highly customized version of the Apache Web Server on a Sun Microsystems' Ultra server. Its back-end database is an Oracle7 server running on another Sun server. The various community sites use whatever Web technology they choose for the presentation of their information, although each site must refer back to the Music Boulevard site for artist and discography notes.
The database content is built from a variety of sources: album titles and catalog numbers come from N2K's distribution partner, and information such as song titles, performers, composers, and other production notes are merged in from other sources. N2K then adds its own sound samples and the album art. Binary objects such as album covers and song samples are then kept on a RAID farm, and the database contains URL pointers to these objects.
Online ordering and fulfillment are also shared among the different sites. N2K has a single system that accepts and approves payments, and another system submits orders to the distribution partner via EDI, as needed. The transaction server is another Sun Enterprise server, using EDI software written from scratch by N2K's developers.
RealAudio encoders in New York provide analog-to-digital conversion for the different sites as needed. ISDN lines have been permanently installed at the major concert halls in New York, allowing N2K technicians to encode live performances on the spot and relay them to the server farm in Pennsylvania on the fly. For Classical Insites' simulcast of WQXR's radio shows, an antenna on the roof of N2K's New York headquarters pulls the signal out of the air, where it is encoded into RealAudio and then forwarded to the server farm for publishing.
Community pays off
Having proved its success, N2K is taking the concept of community to new markets. Recently the company announced that it would be establishing sites devoted to specific artists such as David Bowie (http://www.davidbowie.com) and Leonard Bernstein (http://www.leonardbernstein.com).
N2K has also started its own record label and is beginning to sell its own products on the Web site, as well as through traditional retail channels. The company is also exploring technologies that allow users to download songs and cut their own CDs.
Regardless of these other ventures, N2K has an important lesson for other I-commerce sites. By targeting niche markets that are not being adequately served in mainstream markets, you can build high levels of customer loyalty to your site. This in turn will help to generate commerce in the form of transactions and advertising. But you must focus on the needs of the community, and not simply use their needs as a marketing vehicle.