Best Buy may be retreating a bit from the music business. But the Richfield-based consumer electronics retailer is still finding ways to stay in the game.
A recent innovative deal between Jay-Z and Samsung could wind up helping Best Buy. The rap/hip hop artist recently struck a deal with Samsung in which the Korean electronics maker purchased one million copies of Magna Carta for $5 million and distribute it free to owners of Galaxy S III, Galaxy S4 and Galaxy Note II devices via a special app three days before the album’s early July release date.
So if Jay-Z album give away leads to additional sales of Galaxy smartphones and tablets, Best Buy, which hosts 1,000 Samsung Experience shops in its stores, also benefits from those sales. That’s probably why you see Best Buy’s logo appear at the very end of commercials that promote the Jay-Z and Samsung partnership.
Under CEO Hubert Joly, Best Buy plans to reduce the amount of space it devotes to CDs and DVDs in favor of higher growth merchandise like appliances, mobile device, and store-within-a-store concepts like Samsung Experience.
Not only does Samsung lease the store space from Best Buy but the retailer also likely takes a cut of any sale the originates in the store-within-a-store.
In short, the deal allows Best Buy to continue to position itself as a music destination without having to get its hands dirty in the relative thankless task of directly selling music.
It’s just as well since Best Buy hasn’t had much luck with music in recent years. The retailer bought Napster for $121 million in 2008 only to sell it to Rhapsody three years later. Best Buy also tried to market itself as a seller of musical instruments. But it seems like the company is phasing out that business, according to the redesigned store space Joly showed to investors.
Interestingly enough, Samsung may have borrowed a page out of Best Buy’s playbook a few years ago. In 2008, Best Buy reportedly paid $14 million to exclusively sell 1.2 million copies of Guns ‘N Roses’ “Chinese Democracy” but actually budged over 600,000 units.
Samsung probably hopes it will get more bang out of its $5 million investment with Jay-Z.
Instead of selling music through the usual channels like iTunes, Jay-Z has chosen a maker of electronics devices to distribute the album. At $5 a pop, Jay-Z probably earned a much higher royalty for his music than any deal he could strike with iTunes.
Unlike Best Buy, Target Corp. continues to invest in its music section.
Earlier this year, Justin Timberlake partnered with Target to exclusively release an extended version of 20/20 in stores, backed by a well-received commercial that aired immediately after JT’s performance during the Grammy Awards.
Despite booming digital sales of music and movies, the Minneapolis-based retailer continues to stock its shelves with the old fashioned CDs and DVDs, hoping its exclusive partnerships with Taylor Swift, Beyonce, and JT can still drive traffic to its stores.