|XCHANGE changed digital software delivery with its promise to connect any wholesaler with any retailer.|
Where Software & Retail Connect
For the past decade, XCHANGE Market Corp. has been supplying physical stores with the tools to carry digital products, securely linking leading music software packages to the retail point of sale.
MUSIC SOFTWARE and music retail didn’t mix, or at least that was becoming the conventional wisdom around 2009. For retailers accustomed to selling software in boxes, the catch-22 was that most of these products quickly became obsolete without updates—but how do you update software that comes in a box? On the other hand, how do you stock and sell software that doesn’t come in a box? While those questions went unanswered, retailers simply had to gather up stocks of outdated boxed software, ship them out for return, and order in the updated versions to replace them. Once the collection, processing, and vetting of old and new products was done, many software titles had become unprofitable. Undoubtedly many retailers were unhappy with the status quo, but Guitar Center was the first to ask for an all-digital alternative for selling software to consumers. Rather than look for a solution in-house, the chain turned the problem over to Ray Williams, a Canadian music software veteran who’d been managing director of Steinberg Canada and founder of the International Music Software Trade Association, or IMSTA. The technology Williams developed became the independent XCHANGE platform, and it’s now music retail’s foremost system for selling software without the box.
“XCHANGE was a solution to a problem,” says Williams, founder and CEO of XCHANGE Market Corp. “The business happened by necessity, driven by the joint needs of those wanting to retail music software and those wanting to wholesale it. We put a technology in the middle of these two groups that was tailor-made for what they needed.”
|XCHANGE Market Corp. founder Ray Williams.
A decade in, XCHANGE now connects more than 300 brands and a total of 7,800 products to more than 700 retailers. The way the platform is designed, retailers authorized to carry a given software product are able to access that product digitally from their point-of-sale, delivering a unique license code for the consumer in under a second. The system brought new meaning to “just in time” delivery, allowing dealers to offer up-to-date music software products without maintaining an inventory or battling to keep boxed software current. When XCHANGE is linked directly to a retailer’s ecommerce site, consumers can buy licensed copies of the software through that retailer online, downloading the software in the middle of the night if they want to. In its latest push, XCHANGE has been promoting a growing number of subscription-based software products, conducting a recurring revenue stream to the retailers who carry them. It’s not as if XCHANGE invented digital software delivery, notes Williams, but it changed the sector by offering an independent platform open to every software maker and every retailer.
"Some people understandably
have a hard time wrapping their heads around
selling something that’s invisible."
“XCHANGE is not a software vendor, so it won’t compete with its customers,” Williams explains. “It’s not a distributor, so it doesn’t get in your way by collecting your money or setting up terms of trade. It’s a neutral party that accepts all comers and provides a service that is straightforward: Vendors use XCHANGE to simply deliver the code safely and securely to the reseller.”
Back when it launched in 2009, though, XCHANGE was still an experiment. Its initial rollout across 250-plus Guitar Center stores gave it an immediate presence, and it found early software adopters in Antares, Cakewalk, MAGIX, Image Line, and Harman, among others. The real promise of the platform, though, was always its potential to connect any retailer with any software wholesaler anywhere in the world—and for that, more companies needed to buy in. “There was some pushback, because this was a significant break with the current business model,” Williams says. “And some people understandably have a hard time wrapping their heads around selling something that’s invisible.”
On the supplier side, some companies didn’t like the sound of just-in-time delivery if it meant losing the chance to sell major retailers 100-plus boxes of software at a time. Some even thought the lack of inventory pressure would cripple the retail model for music software altogether, leaving everyone poorer as software suppliers sold their products direct-to-consumer through the limited window of their own websites. “Of course none of it turned out to be true, though this was the thinking at the time,” Williams says. “But the plain truth was that a system like XCHANGE made a lot of sense for the retailers. If it wasn’t going to be XCHANGE, it would be something else, but this definitely had to be done.”
"The platform is a 'leveler' allowing
any software company to offer its product
to any reseller willing to sell it,
no matter where they are in the world."
As Williams recalls, though, retailers had their own doubts and misconceptions. Some dealers expected to “stock” serial numbers just as they’d once stocked boxes, not realizing the “zero-inventory” concept would be one of the main benefits of XCHANGE. Others were skeptical of the “human-less” purchasing chain, wondering if it would make their purchasing teams obsolete. Still others struggled to get their websites configured to the platform’s technical standards. XCHANGE Market Corp. ended up investing in hundreds of retail webinars for buyers, managers, and sales staff to answer questions and explain the purpose and benefits of the system.
In the end, though, there were probably three main factors that sold the industry on XCHANGE. One was the clout of Guitar Center as an industry trend-setter. Another was Williams’ reputation as founder of IMSTA, an organization widely trusted as an advocate for the music software sector. And the third was the undeniable sales bump user companies recorded once the XCHANGE technology was up and running. “Companies soon began to generate significant business,” Williams recalls, “and within a few years we could see that the business was going to be a real contributor to the m.i. market.”
|XCHANGE has recorded rapid growth in Asian markets.
Today, XCHANGE is a B2B conduit for leading software vendors including Avid, Ableton, Hal Leonard, PreSonus, Alfred, and Arturia—but also lesser-known suppliers such as the Russian brand Reveal and the Indonesian company Kuassa. Among its other major vendors is Music Marketing, which distributes brands such as Melodyne, FabFilter, FL Studio, MAGIX, u-he, and many more. “The platform is a ‘leveler,’ allowing any software company to offer its product to any reseller willing to sell it, no matter where they are in the world,” says Williams. From its home base in Ontario, Canada, along with a U.S. office in Los Angeles, XCHANGE now serves companies in 60 countries from developed markets including Germany, Japan, and the U.K. to emerging territories such as China, Egypt, Russia, Chile, and Poland. It’s not unusual for the XCHANGE team to answer a support email from Japan at 11 p.m. on a Sunday, says Williams, and it’s paying off in global sales gains—from Asia and Eastern Europe especially.
"Asian and East European markets
have been starved of
attention, service, and support.
We are determined to show them
the kind of respect they deserve."
“These markets have been starved of attention, service, and support,” Williams says, “and we are determined to show them the kind of respect they deserve. Beyond the economic factors, there is conventional wisdom that hampers business development: If I had a dollar for everyone who told us ‘you cannot sell software in China,’ we would all be driving Ferraris—but this is a myth. We don’t believe that a music producer in China is very different from one in the USA or Germany, and we therefore aim to offer the same level of service and support to every world market. They will respond.”
All told, XCHANGE Market Corp. recorded revenue gains of more than 100% last year, “and the trend line of digital software sales in m.i. retail is still pointing straight up,” says Williams. With XCHANGE becoming increasingly global, the company has now added German, Chinese, and Japanese manuals to its user portal, among a handful of other efforts to expand the system’s scope and usability. For retail users, the company recently rolled out XCHANGE TV, a web-based system for streaming music software videos and other content, filtered to feature only the products sold by each store, directly to screens within the retail showroom. Ultimately, says Williams, the XCHANGE platform could be extended into markets beyond the music industry—since the same technology could just as reliably deliver any kind of software.
"The sky is the limit."
“The sky is the limit, and the real limit is that there are only 24 hours in a day,” he says. “We are in a unique position where we are relied on to service a growing and increasingly important segment of retail—and we don’t take this responsibility lightly, so we are always focused on keeping the system running and running well. We have a dedicated, caring, accessible programming staff and helpful administration and salespeople who really care. We are less a ‘technology company’ than a service company that utilizes technology.”