United Airlines is adding a digital download music store to its MileagePlus Progam, allowing members to redeem miles by turning them in for music.
The store, which features 7 million tracks, is run by Choose Digital, a Coral Gables Fla.-based company that plans on offering a turnkey solution that will allow other frequent buyer clubs and customer loyalty programs to offer music to their members. The store will also offer movies at launch as well as planning to incorporate television programs, book and video games offerings in the future.
"Content has to be the king," says Choose Digital CEO and co-founder Stephen Humphreys. "The store needs to be able to offer the favorite bands of everyone." So far, Humphreys says he has signed up the four majors and some large independent music distributors and labels. He acknowledges that Choose Digital had to give some suppliers advances, in order to sign them up.
The digital music store within the United Airlines MileagePlus Program operates on the wholesale model with Choose Digital paying the standard wholesale rates of 70 cents or 90 cents per song to the labels, depending on list price and then offering its music to United Airlines members at the list price equivalent of travel miles.
"Consumers are very savvy and know how much their points are worth," he says. "We want them to spend their points on stuff they are buying anyway."
"Being chosen by United Airlines to bring digital media to one of the world's largest loyalty programs is testament to the partnerships we've struck, and the quality and scale of the technology we've built," Humphreys said in a statement. "Consumers are more connected than ever, yet the loyalty and incentives business is strangely disconnected. For the first time, Choose Digital is providing consumers with easily accessible content from major media companies that can be redeemed across multiple digital devices."
Humphreys, the former president and CEO of Grass Roots America, a performance improvement company that provided businesses with employee and consumer engagement programs, says the idea to launch a music store as an incentive for loyalty programs came out of 30 years of experience in that industry.
But in setting up the Choose Digital store, Humphreys says he is very aware of past promotions by well known consumers brands that offered free music to their customers and the resultant low redemption rates. The consumer experience in those instances haven't been too good, he notes. In most of those instances, consumers got a code and then would have to go to a website to redeem it, but often they couldn't get what they wanted so they didn't use it, he said.
Not only is the Choose Digital back-end store opening with 7 million tracks, he says the company will add to the offering by signing on other independents as it goes along, but like all new start-up digital download stores, it is still catching up on ingesting all of its inventory.
It took 18 months to build the system and millions of dollars with the help of a bunch of dedicated engineers, Humphreys says. "We are a very easy-to-use website," he says with the usual features such as song samples.
Humphreys says he funded the site with a syndicate of private investors, who hold a significant portion of the equity. If the operation achieves its goals, it will go to the next round of financing so that it can expand into a global operation with a wide range of content from around the world.
Initially, as a special offer, Choose Digital will plan special versions of albums or songs by working with record labels. The first such offering being made to United Airlines Mileage Plus members is a bonus remix of Jennifer Lopez's Dance Again, which will be given to customers with the purchase of the singer's greatest hits album, Dance Again...The Hits.
As members sample and buy music, it will give Choose Digital "a good picture of what they like and what they are engaged by so we can then begin to profile them and come up with very finely tuned promotions for them," Humphreys says. "If you want to be relevant to the customer, you have to engage them."
Since Choose Digital plans to offer their system to other loyalty programs, he says they had to build a turnkey solution that can be seemlessly integrated onto the websites of the various consumer brands' loyalty membership programs, he said. "The loyalty industry wants their customers to stay on their site," he says. "They don't want the consumer leaving to go to another site and then they can lose control of the user and their data."
Humphreys says he has already lined up a bank and a hotel chain as the next companies to incorporate the Choose Digital store, but he declined to name which ones at this time. Moreover, in addition to offering their digital download store to consumer brands, Humphreys says there are plenty of companies that run hundreds of loyalty programs and he will offer to provide the system to those companies as well so that they in turn can offer it to the loyalty programs they run.
He says that the company hopes it can achieve $150 million to $200 million in revenue within five years. He says he came up with that number by studying membership data redemption rates on products offered by consumer loyalty programs. In the end, he admits he doesn't know exactly how large Choose Digital will be, but he adds, "we are confident that there is a big space here."