Circuit City, Napster Launch Digital Music Partnership

Circuit City Stores Inc., the beleaguered electronics chain, is making a big jump into online music, launching a new digital music partnership with Napster.

Called Circuit City + Napster, the service will cost $14.95 a month and won't be tied to the use of any specific electronic device. Powered by Napster's digital music subscription service, it essentially offers the same thing as an enhanced Napster subscription, plus "continuing access to exclusive songs and new releases on a weekly basis."

Such service presents an appealing alternative for heavy music users, providing access to more than 3 million songs for a fixed price. And for those who don't want to pay the monthly fee, the plan also sells songs at 99 cents, as well as prepaid download cards.

The announcement comes at a time when consumers have flummoxed both retailers and music companies with sweeping changes in the way they buy and listen to music.

While pundits once predicted that online music services such as Napster and iTunes would quickly devour conventional retail CD sales that seems to be only partially true. Yes, retail CD sales are falling, with independent record stores among the biggest casualties. And yes, online sales are skyrocketing. But despite an explosion of choices, consumers seem to actually be buying significantly less music overall.

Last month Nielsen SoundScan said digital sales of individual songs in early 2007 were up 54% from a year earlier, to 173.4 million from the year-earlier period. But CD sales in the same period fell 20% to 81.5 million units, resulting in an overall slide of 10% in music sales.

The Napster deal could give Circuit City a much-needed edge in music sales. Earlier this year, the Richmond, Va.-based retailer, citing holiday price wars on flat screen TVs, closed a number of stores, and laid off about 3,400 workers, replacing them with cheaper employees.

And it could give Napster, a pioneer of digital music sales, greater visibility at the retail level. Napster currently charges $9.95 for a basic subscription, and $14.95 for a subscription that also allows users to download songs onto an MP3 player.

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