AOL to sell CDs and CDs online–watch for an AOL Music label as well.

AOL cuts out the middleman: Reduced video, DVD and CD sales through Amazon signal AOL’s effort for more revenue from its entertainment-focused audience. Two years ago, in 2001, AOL invested $100MM in Amazon as part of a multi-year sales pact, during a quarter when they were really hurting for cash; in return for the investment AOL got access to badly needed collaborative filtering technology to incorporate into Shop@.
Given that Amazon.com was the second most-viewed Internet shopping site in the U.S. in May with 35.9 million visitors, according to research firm ComScore Networks Inc., this audience segment and product category on AOL probably do not represent a large part of their online business, but the move can provide the AOL unit with desperate needed revenue–one of the ways they have made their numbers in recent quarters is to cut over $100MM in staff and costs–showing a positive uptick with new merchandise segments will make a difference to their annoyed corporate parent.
“America Online subscribers can buy CDs and videos “on impulse,” said Bill Wilson, AOL Entertainment’s new SVP. In other words, AOL promotes a first listen by an artist, the member plays the cut and then purchases the music–in some cases with fees going to AOL both from advertising and promotion from the label and later for merch.
In addition, this move paves the way for AOL to position itself not only as a maker of hits–the must-be destination to break new songs, new movies, and new media–but a developer and packager of such hits–remember, much of the AOL Entertainment team came from BMG and have kept their close ties to the music business. Further, AOL’s great job developing the online radio business, which it now dominates, can provide a great advertising and distribution medium in which to sell new products.