Finding the Right Distribution Channel

Wired reports that in the ongoing war for control of the digital music marketplace, Napster has partnered with cell phone provider Ericsson to develop the first digital music service for cell phones.

Is this a viable strategy? Let's consider:

• Napster's main obstacle in the digital music marketplace is the presence of current market leader, Apple. One of the most effective ways to knock off a dominant market leader is to look for markets that they do not want or are not prepared to enter. People who don't have portable mp3 players -- like an iPod -- may simply not want to deal with the fuss of setting one up; if they can get a simpler solution via a cell phone, though, they might be willing to take it on. In this way, Napster can find a market that for digital music that previously did not exist.
• Best of all for Napster, Apple is probably a bit uneasy about cell phone distribution; after all, if that emerges as a viable alternative, demand for iPods, Apple's core digital music product that allowed the firm to capture the market in the first place, could drop. As a result, Apple may have difficulty entering this market.
  
• When finding distribution channels for a new and innovative service (like portable digital music), it is best to find distribution channels that are energized by partnering with you. Cell phones are quickly approaching commoditization, and hence cell phone providers should be looking for ways to gain revenue through the provision of other services. Digital music is a good start.

When looking to enter a market where there is a leader already entrenched, look to enter in a way that essentially finds a new market, and look to partner with firms that are energized by partnering with you.