JB Hi-Fi to offer cloud music service

Australian electronics retailer JB Hi-Fi has this morning announced plans for an online music streaming service for Australian customers by mid 2012, taking on Sony and beating big names like Amazon to the local punch.

JB Hi-Fi's new concept store at Westfield Sydney.
(Credit: Luke Hopewell)

JB Hi-Fi's CEO Terry Smart dropped the streaming music bombshell this morning at the announcement of the retailer's $134.4 million net profit after tax for the year ending 30 June 2011.

The service, called "JB Hi-Fi Now", will sport around 100,000 local and international artists at launch, with an offering of between six and eight million tracks.

"We will continue to grow this number over time," Smart promised.

"The service will allow for unlimited access and listening to music from your Mac, PC or mobile device," he added.

The company's investor presentation reveals that Mac and PC users will get the streaming service first with mobile user support coming later.

Smart told ZDNet Australia that the company intends to roll the service out to all mobile platforms, including Android, Windows Phone 7 and BlackBerry.

"We plan to be across all platforms over time," he said.

Smart also remarked to ZDNet Australia that the new streaming offering has been six months in the making, and is supported by an internally developed private cloud infrastructure. Pricing for the service will also be based on a subscription model rather than pay-per-song access, Smart said.

"It will be a subscription-based model, either monthly or pre-paid for a year," Smart told ZDNet Australia, adding that the service had been developed with the "blessing" of all of the major music labels. The blessing, Smart said, means that the JB Hi-FI Now service won't suffer any legal headaches over copyright.

"We're dealing with all the major labels in getting the repertoire from that. We don't anticipate any legal issues at all. This is all being done with the blessing from the labels and commercial arrangements, and that's the important thing," he said.

Amazon's music streaming service and Apple's iCloud have both been said to be heading for possible legal headaches when dealing with music in the cloud, while Google's Music offering has been aiming to carefully sidestep legal complications since its inception.

JB Hi-Fi's service will eventually become a music download store, building on the store's strong background in the music retail sector.

The electronics and media retailer hinted that the store may also become a digital software marketplace.

"Post launch, the 'JB Hi-Fi Now' digital platform will continue to develop and provide us with opportunities to leverage our existing strong software supplier relationships," the company revealed in its investor presentation, making it a future challenger for the Mac App Store, for example.

Online vs. bricks and mortar

In the company's profit announcement, Smart said that while the retail environment continues to be challenging, JB Hi-Fi's telco and computer sections will be its most profitable going forward into financial year 2012.

Smart said that because of the company's low cost of doing business, it could compete on price like no other bricks-and-mortar store could. Smart wants to beef up the company's online offering to make it as competitive as offshore, netting it customers that would normally look abroad for their purchases.

JB Hi-Fi reported a spike in online sales for the year ending 30 June 2011, with a 51.6 per cent increase on last year's sales figures.

Smart has planned JB Hi-Fi online improvements, including new features like the ability to order a product online for pick up in a store, and an overhauled mobile shopping offering. The company also revealed that it intends to revamp its gift card offering so that customers can manage them online.

Smart said that as Australian bricks-and-mortar-only distributors begin to recognise that their customers can get cheaper prices online and offshore, prices will fall.

"What you are going to see in the market, though, is because of this transparency that online is giving to worldwide pricing, you are going to see the distributors react and respond to the worldwide wholesale price, so we do end up in Australia with a competitive offer in all categories, and keep sales in Australia."

Going forward, Smart said that the retailer will continue to stock a comprehensive range of new products like the PlayStation Vita and a legion of new tablets, but added that he didn't understand why stores like Harvey Norman go for product exclusives at launch.

"We'll always look to see the possibility of getting products exclusively, but it's not part of our strategy. We look to offer the biggest range at the best prices, and we stick to those basics.

"It's not more expensive [for us to get a device exclusively], but I'm not sure that it makes sense at times for suppliers to be doing it. They do restrict their distribution of products. We're the largest computer retailer in Australia, and if people want to get exposure for that product, it needs to be in a JB store," Smart explained.

Harvey Norman has claimed two retail tablet exclusives in the last six months, with the BlackBerry Playbook and the HP Touchpad launching exclusively through the retail giant.