Industry Roundup

"Clean Slate" ends: As of early April, the US music industry no longer offers amnesty to confessed downloaders. Begun in September by the Recording Industry Association of America (RIAA), the "Clean Slate" program's intent was to discourage music fans from continuing to gather freebies online by promising exemption from copyright infringement lawsuits if they signed statements that they had removed shared music files from their computers. More than 1100 music fans signed, but Eric Parke of Novato, CA sought an injunction against the program on the grounds that it was a "fraudulent business practice." The RIAA responded by halting the amnesty effort and asked the judge in the case to dismiss Parke's lawsuit. Trade group officials promised to uphold their part of the bargain for those who signed.

Tower settles: Tower Records' website operator has settled complaints brought by officials of the Federal Trade Commission (FTC) that a weakness in the website allowed hackers to view private information about thousands of customers. A website redesign in late 2002 left sensitive information—including names, addresses, and purchase records—available to anyone who wanted to view it. During an eight-day period, hackers had access to private information on more than 5000 customers. No credit card or Social Security numbers were hijacked during the period, however. On Wednesday, April 21, MTS, Inc. of West Sacramento, CA, Tower's corporate parent, agreed that it would maintain a "reasonably designed" program to assure the security of online customers. Failure to do so could result in fines up to $11,000.

Q4 sluggish for Ultimate: The Denver-based Ultimate Electronics chain had flat results during its fiscal fourth quarter, ended March 31. Sales for the period totaled $243.2 million, compared with $242.5 million in the same three months last year. Ultimate posted a $6.3 million net loss for the period, compared with net income of $5.6 million for the same period the previous year. For the fiscal year, the company reported a 1% gain in revenue, $712.9 million vs $704.4 million the previous year, with a net loss for the year of $15.8 million, compared with net income of $4.7 million the previous year.

CEO Dave Workman attributed his company's difficulties to "the ineffectiveness of our television advertising campaign, price compression in key product categories, slowing demand in established categories, low consumer confidence, competitive pressures and a dilution of skilled personnel resulting from our recent expansion." Ultimate also carried the expense of opening 10 new stores in the Dallas–Fort Worth area, and had serious problems with a new computer system that grossly miscalculated inventories and sales commissions. The company has retained an industry "turnaround specialist" to help it out of the doldrums.

Audiovox soars: Recoton's Audiovox Electronics Group (AEC) posted a 70% jump in sales for the first fiscal quarter, ended February 29, compared to the same period last year. AEC gross totaled $136.5 million, a big step up from the $80.3 million reported in the same period a year earlier. The numbers were boosted by the parent company's acquisition of Audiovox Germany, which added $15.7 million to the company coffers. AEC profits rose 56.6% to $21.3 million, up from $13.6 million the previous year. Loudspeaker brands Jensen, Acoustic Research, and Advent are now part of AEC, which has enjoyed continual growth over the past three years, the company reported.

MP3 players surge: Factory-to-dealer sales of MP3 portable music players doubled last year, according to figures supplied in mid-April by market research firm In-Stat/MDR. More than 24 million units were shipped, a dollar value in excess of $3 billion. The devices are now in approximately 23% of US homes, In-Stat noted. The global market for portable music players will expand 16% annually over the next four years, researchers predict, and the market for players with hard drives will expand 100% this year. Apple Computer's iPod is the top seller, claiming 22% of the market.

Rising star? Sirius Satellite Radio added 90,000 subscribers during the first quarter, bringing its total to 351,663—a phenomenal 35% increase, but still far behind the 1.6 million subscribers claimed by rival XM Radio, which added 320,000 subscribers during the same period. Sirius may get a boost from increased exposure in Wal-Mart stores this year, where Jensen will place new Sirius receivers in mid-summer, simultaneously with a Radio Shack rollout of its own Sirius receiver, called the Orbiter. More than 10,000 Echostar dealers will also offer Sirius receivers; DISH Network subscribers will be able to get Sirius transmissions beginning in May.

Sirius suffered a late start compared to XM, which claims 72% of the market in subscription activations, but hopes to catch up within the next two years. The company has signed deals with ST Microelectronics for new chipsets beginning next year, and in 2005 Daimler Chrysler will offer Sirius radios in 11 models, including Jeep vehicles. Sirius posted total revenue of $9.3 million in the first quarter, ended March 31, a huge increase from the $1.6 million in the same period last year, but also had an increased operating loss of $119.5 million, versus a loss of $99.1 million in the same three months last year.

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