MP3s, Napster, and other Internet file-trading programs were supposed to cannibalize retail music sales and destroy the recording industry.


But thanks in part to clever Internet marketing, just the opposite has happened — at least in some cases. The music industry has smashed several retail sales records during the last few months.


Eminem fans last week flocked to the store to purchase 1.76 million copies of the rapper’s new album. Britney Spears’ May 13 release sold 1.3 million copies. And boy band ’N Sync’s album “No Strings Attached” moved an amazing 2.4 million units in April to become the highest first-week selling album of all time.


Insiders are attributing some of the retail success to Internet-based promotions. And now, with Per’s recent investment in Cell, it’s possible for Roxette to mount the same kind of campaign should they, and their management, decide to take advantage of that capability.

“We created a lot of hype around the Eminem website,” said Ray Ibe, director of new media at the rapper’s label, Interscope. “We offered downloadable clips at site about three weeks before the album came out.”


Interscope has a viral digital marketing plan to create a buzz for fans. By gathering email addresses from an artist’s homepage, Ibe is able to send emails out to large groups of fans to let them know about upcoming events.


Ibe also used the site to seed the fan community with digital postcards and other freebies.


From a marketing standpoint, the Internet seems be a boon to sales, as long as the technology is kept under control.


“The Internet allows for a project to gain a head of steam before it comes out,” said John Parres, an Internet specialist with Los Angeles-based Artists Management Group.
“Evidence of that comes from The Blair Witch Project, which was available online four months prior to release,” Parres said. “With music, the Internet is allowing the word-of-mouth to build so that when a record finally does hit a store, you have to go to (the) store and buy it.”


But not everyone is convinced that the Internet is helping the industry.

Tracey Kitching of the UK Fan Club was one of the first to speak out against MP3s on the Roxette Mailing List. Her point was that many, if not most MP3s are made in violation of copyright laws and artists miss out on revenue. At this point, however, there are still relatively few people with portable MP3 players (like Diamond’s “Rio”) or some other means for moving the music off a computer. Most people still want — or need — to buy a CD of the music they really like. But with Sony and others making such units now, this will probably change, and the warnings of Tracey and others may prove true. The recording industry is certainly in turmoil about this issue and how it will impact the future.


On another negative front, The Los Angeles Times reported that technology has been having a negative effect on independent record store owners, citing the decline of Oliver’s Records in Syracuse, New York as an example. According to the report, sales at the store dropped to $3,500 in April, down from an average of $40,000 in the three previous months of April.


But online retailers targeting the same college students as local record stores are seeing increased sales, which indicates that increased competition, and not Napster, is to blame.


“We don’t feel that Napster was damaging our business as much as has been projected,” said Ted Hooban, director of digital products at CDNow.


CDNow claims to have 3.7 million users who have purchased at least one album over the Internet and its site has about 850,000 unique visitors a day. Instead, Hooban said the problems small retailers have been experiencing stem from the convenience of the Internet.


“Companies like CDNow and other online retailers are why these small stores are having trouble,” he said. “If you’re on Napster and find a great song or artist you like, inevitably you’ll want to get more of their music. And if you can’t find it through Napster and you’re already online, you’re going to head to an online retailer.”


Per and Marie both are investors in Boxman, another online retailer based in Scandinavia.