Another way

Currently, the most successful forms of Internet equipment sales involve websites designed as online catalogs, such as Sweetwater.com (top), and auction sites like Digibid.com (middle and bottom).

Online companies have taken many forms, from the auction approach of Digibid, which grew from founder Hamm Brocious' studio liquidation business, to sites that are little more than an online version of a print catalog. The latter model has been used for several years by warehouse-type companies such as Sweetwater.com, which deals mainly in musical instruments and mid-level professional audio components. But the auction websites are a relatively new beast, and Digibid is one of the largest. (Digibid is owned by IndustryClick, which is owned by Primedia, which also owns the company that publishes Video Systems.)

Digibid began with a focus on professional audio products. However, it intends to develop its site to address high-end video, as well. "In the coming months we expect to go from what is a modest level of activity in that regard to a much higher level," Maxwell says. "It's going to become a major focus of the site, along with professional audio."
Maxwell acknowledges that video systems are, on average, more expensive than audio systems — sometimes by a factor of 10 or more. "But we don't shy away from that," he says. "We've done five-figure deals for consoles and workstations on the site in the past. The thing we find interesting is that the online market for video equipment is even more fragmented than that for audio, if you can believe it. There are not a lot of sites out there for video and the ones that do exist range from high-end to semi-pro on one site." Maxwell adds that the value of the transaction doesn't change Digibid's business model, and commissions will remain at 10%.

The list of websites that offer professional media gear is growing — Digibid.com, Musiciansfriend.com, Musichotbid.com, Sweetwater.com, Harmonycentral.com, Fullcompass.com. The proliferation of these sites underscores the fact that the technology used to create and manipulate music and images has undergone a tremendous convergence in recent years. The lines between what constitutes "professional" audio and video have been blurring with the advent of powerful digital audio systems and do-it-yourself cable channels. Clearly, the hybrid nature of these online sites is accelerating that phenomenon. And some sites that sell used equipment also sell new items.

And there's money to be made. Digibid recently paid $16 million for an assortment of musical instruments and low- to mid-market pro audio gear — enough to fill 700 shipping pallets — from barter company Active International. Maxwell characterizes the purchase as "defensive," adding that it was intended to prevent another mass merchant from a pre-emptive purchase and possibly flooding the market and thus hampering Digibid's effort to grow its market.

Next: Pros & cons