Why we should applaud JB Hi-Fi’s streaming music failure

So Australian music and home entertainment giant JB Hi-Fi has announced it is closing its streaming music service ‘Now’ after five years in operation.

It appears that the it was just too competitive, a bad cultural and operational fit, or probably both.

Shutting down when streaming music is just gaining momentum – big fail, right?

On the surface of it, maybe. But despite the pain it must have brought JB Hi-Fi, I give the venture a huge tick.

How can one possibly endorse a clear failure I hear you ask?

Two steps forward, one back

Despite this fairly significant hiccup, JB Hi-Fi is actually doing the right thing by its stakeholders by attempting to do two things:

1. The company is trying to avoid the digital disruption of their recorded music division by exploring how it can capture market share within the disruptive segments itself; and
2. The company is avoiding a concept this blog keeps banging on about constantly – marketing academic Theodore Levitt’s theory of ‘marketing myopia’ – where businesses risk permanent failure by clinging to temporary delivery technology instead of embracing their core customer benefit they provide.

Let’s look at these in more detail.

Putting yourself out of business

With regards to the first point, JB Hi-Fi stakeholders should be pleased that the company is doing what many before it have failed to do – gain a foothold in an area that is literally putting you out of business.

Sure in this case, streaming music has proven to be too big a challenge for a company more familiar with hard-goods retailing.  

But had organisations such as Kodak, Borders, Yellow Pages and others taken a leaf out of JB Hi-Fi’s book, they may well be still around or thriving today.

So in my view JB Hi-Fi should be applauded for trying to insure against its own demise, even if this particular service didn’t quite cut the mustard.

And this point provides the perfect segue to point two.

Focusing on the core benefit

Levitt argues organisations that rely on their former and current delivery technology (as Kodak and others did) are in grave danger because many delivery methods become outdated by new and often left-field technology. 

Who for example can’t see the irony of Apple the computer company exploding as a result of offering new ways to enjoy music to consumers while former household name Apple Records merely peddles its ageing back catalogue?

Yes a computer company ruling the music industry. And a computer company also ruling the consumer photography industry by way of its iPhones.

Credit where debit is due

So again, JB Hi-Fi deserve plaudits for understanding that its recorded music division is in the business of providing music to its customers. In the past that has been by way of CDs, vinyl and even cassettes. 

Pragmatically, the company knows this delivery mechanism is rapidly being engulfed by digital distribution – except in the case of vinyl which has staged a surprise disruption-defying comeback.

Okay so it didn’t quite turn out as planned this time round. But out of it they can take two valuable lessons:

1. The Streaming music patch may well be both too competitive and too difficult a territory for them to master; and
2. Unlike music, home entertainment products can’t be delivered digitally, but this doesn’t stop the company from using digital technology to promote, sell and service these physical products.

Backing the right horse

I’m not sure what proportion of their revenues comprise recorded music sales and given the dominance of iTunes, Spotify and other digital music providers, it may well be too late to gain a foothold among the well heeled various music delivery services.

But if they do see it as still being a viable revenue stream, there may well be other forms of digital music services that they can explore to shore up their share of this market.

In other words, this time round it was right race, wrong horse.

What are you doing to ensure your business model remains relevant and viable?

In addition to being a leading eBusiness educator to the smaller business sector, Craig Reardon is the founder and director of independent web services firm The E Team, which was established to address the special website and web marketing needs of SMEs in Melbourne and beyond.