New Kiosks Could Hold Key to CD Sales.

Record-store kiosks that allowed customers to customize their own cassettes failed miserably. But kiosks offering downloadable digital music are all the rage these days, and experts say that this time, they're going to work.

Companies making kiosks, which are expected to emerge on the retail scene en masse by the end of the year, said their products will supply brick-and-mortar retailers with many of the advantages of Web sites that allow digital music downloads. That means a huge catalog of songs that don't have to be stored on site.

"It's different from the previous generations of custom cassettes, because you can build CDs digitally and retain that high quality level all the way to the CD," said Rob Lewis, senior product manager in charge of kiosks for Liquid Audio Inc., whose core business is offering digital music downloads via the Internet. "Unlike with cassettes or home burners, you can print text on the CD, print the liner notes and get a jewel case, so it looks like a professional product. And it's custom everything."

Most of the 70,000 tracks authorized for digital download on Liquid Audio's online music network have been authorized for inclusion on its kiosks as well, including recordings from Sarah McLaughlin, the Indigo Girls and REM.

Because of advanced technology, the new kiosks are easier to use than the customized cassette models, which were often difficult to maneuver.

"People can shop through a kiosk the way they shop through a store today," Lewis said. "It's a similar kind of experience created when you look at clothes, go through the rack, try things on, and buy or don't buy. Here, you listen, buy it or don't, and move on to the next. We mirrored the business model of the store in the kiosk."

Social aspects of brick-and-mortar shopping will also play a role in the predicted boom of kiosks.

"We believe that people still like to shop, it's entertainment," said Chris Sherman, marketing manager at New Media Network, an L.A.-based company offering retailers the chance to sell products via the Internet and through kiosks.

New Media Network's kiosks will allow consumers to download entire albums, not individual songs, on customized CDs. Sixty independent labels have signed up with the company, but the major labels have been more hesitant to enter the market.

Most companies making kiosks have been unable to seal deals with the major labels as of yet, though Carlsbad-based Digital On-Demand Inc. has won contracts with Sony Music Entertainment and EMI Recorded Music. The company is currently installing its kiosks in stores including Wherehouse Music, Musicland and Virgin, as well as Kmart and Target.

"It didn't happen overnight," said Eric Weisman, CEO of Alliance Entertainment Corp., which owns Digital On-Demand. "We convinced them that we had a good strategic vision for why the transmission of media to the point-of-sale location... was important."

Support from the retail community and efforts by Digital On-Demand executives to develop a suitable royalty structure helped convince Sony and EMI to sign up. The kiosks are currently being installed in retail stores and are expected to arrive in L.A. in April.

Downloading an entire album off any kiosk can take from five to 20 minutes, still much faster than ordering online. Consumers, particularly those living in smaller markets with limited record stores, can also benefit from access to huge music catalogs stored in a system connected to the kiosks.

"Let's say you want some totally obscure record. It doesn't make any sense for a record company to make several thousand records when only three people want it," said Michael Leventhal, music and technology attorney for Squadron, Ellenoff, Plesent & Sheinfeld LLP. "Go to a kiosk. Order it, the kiosk accesses a master hard drive, and biff-bang-pow, there's your disc. The label makes money and they didn't have to undertake the mass selling of the disc."

That still doesn't mean everything people want will be available. But it does mean that record labels can save money, and might be more willing to give unknown artists a shot.

"If you know that only three people are going to buy it, are you actually going to go ahead and digitize the disc?" Levanthal said. "Probably not. But let's say that for us to make money, we need to make 5,000 physical discs. Now with kiosks, maybe that number is 200. That's a much smaller expense."

Retailers can see benefits as well.

"The retailer doesn't have to house as much physical stock," Sherman said. "So it makes the wide selection available, but brings that wide selection into smaller markets, which couldn't be done before."

Of course, the time window for kiosks might be a narrow one -- especially as more people have access to faster Internet connections. "In the future, when everybody has broadband and wonderful storage capability, they won't be as important," said Leventhal.

For now, however, the necessary technology isn't pervasive.

"The network connection can go down. The bandwidth needed is not always there. You need technical expertise," Lewis said. "For many home consumers, there is definitely a market for (home digital downloads). But that isn't true for the vast majority of consumers. The vast majority of consumers are going to want to buy something in a retail store."