Bernardo Melo, CEO of The Singing Machine Co., Tony Handal and Gary Atkinson sing with the company's ISM-1028 model machine. (Joe Rimkus Jr./Miami Herald)

The karaoke business isn’t known for being on the cutting edge of technology. Pop in a disc made 10 years ago, stare at a small monitor as lyrics fly by. And if you want to record your voice, you’d better have a cassette tape handy to pop into the machine.

The Singing Machine Co. in Coconut Creek is giving karaoke a high-tech makeover with the launch of a digital karaoke song store and products that can be docked to mp3 players and share performances on social networks.

Coming up with a digital solution is vital to keeping the 27-year-old company fresh. Stores are stocking fewer karaoke CDs, and fewer CDs in general. The machines are sold for personal jam sessions — not for a bar’s karaoke night. The company is facing growing competition for at-home singing entertainment from video games like Rock Band, not to mention online communities of karaoke nuts who record their performances on webcams and share with the world — no matter how bad they are.

So The Singing Machine partnered with Montreal-based Stingray Digital Media Group to kick-start an online store and community, called The Karaoke Channel, which is like an iTunes for karaoke lovers. Songs with sing-along lyric graphics cost $1.49, and a song without lyrics costs 99 cents. So far there are nearly 6,000 songs available to download.

”Music stores are going away and the CDs are harder to find,” Singing Machine Chief Executive Officer Tony Handal said in explaining what’s behind the company’s new product. “So how are you going to get the music to your customers?

“After awhile you’ve sung all the songs in your collection and you’re bored with singing the same songs. Solving the delivery of content problem was key to enabling or empowering the use of the millions of karaoke machines sold in the U.S. in the last five, six years.”

The store also provides free software to play the songs on a computer, create a video playlist, an .mp4 file to play on portable devices like an iPod or Zune, or burn karaoke discs with lyrics, called a CD+G (a compact disc with graphics) that can be played in any karaoke machine.

Of course Handal prefers if it was played in the company’s karaoke machines.

”Will it drive sales of our hardware? It might, and that would be good. But we already have a good market share.” Handal said.

Rather, he said, it’s the new line of machines coming out that will drive awareness of the new digital offerings. Machines with USB ports and video cameras will record performances to be saved and uploaded to The Karaoke Channel’s online community. New iPod docking stations will let users sing along with a karaoke song on the device — or hook in any mp3 player via an audio jack.

And if you don’t have an extensive karaoke selection for your party, pay for a day, per month or buy a year-long subscription to access all the songs. The company is working on a version of the machine that would allow you to stream songs directly via Wi-Fi. Subscriptions start at $14.95.

”Karaoke tends to be three or four years behind everyone else in technology,” said Bernardo Melo, vice president of sales. “So now we’re just getting into the time where the masses are comfortable enough with their iPods that they’ll like introducing other things such as karaoke with their iPod.”

For example, USB devices have been around for several years now, but it’s not until everyone is carrying a large-memory USB flash drive in their pocket or purse that the masses will use a USB to record performances.

“If you’re too far advanced, people don’t get what the USB is doing on the karaoke machine. People think of karaoke as a simple solution.”

Since The Singing Machine’s expertise is with hardware, partner Stingray handles most of the online side and adding new songs. Profit for each song download is split between Stingray, The Singing Machine and the record label.

The digital music market has grown substantially in the past few years, and is now at about $3 billion in the United States, according to Forrester Research report “The Global Landscape of Online Music Stores and Services.”

Although a pay-per-song model is the most popular way to purchase music, report author Sonal Gandhi said The Karaoke Channel’s subscription option just might break the mold and be a more desired option.

NICHE MARKETS

”I think it’s a really neat idea,” Gandhi said. “There is a market for niche, and a market for subscriptions that are intelligently designed for the needs of the people. I don’t want to own 50 karaoke songs . . . maybe ownership isn’t so important.”

Gandhi said although the typical price for a regular .mp3 is $1.29, the karaoke price of $1.49 for a .smc file probably won’t turn off buyers since this is more than just music.

”Being the first in the market and having the device connection really helps them to lead in what the pricing should be,” Gandhi said.

Although it’s the dominant brand in the United States, the company has been singing the financial blues. In March, the 34-employee company (15 in Florida) reported a loss of $2.2 million for the past fiscal year. In June, it was delisted from AMEX and now is an over-the-counter bulletin board stock. Sales have been slumpping as retailers are stocking less machines for the upcoming holiday season, Handal said.

About 40 percent of its business comes from the United States, and the rest is to Europe and Australia — but Handal said sales were down worldwide.

”I anticipate we will go through at least a year of downturn,” he said. “Inventories will sell out and our customers will have to restock. . . . When you get caught in a downturn, you have to buckle under and hold on.”

RAISING AWARENESS

In the 1990s, the company did as much as $80 million in annual sales. This year, it was about $31.7 million. It does about 92 percent of its business during the holiday season, and this year is coming out with eight new karaoke machines. And with 600,000 machines expected to be sold, buyers will be given two free downloads to learn that digital karaoke options exist.

”We had new products before the downturn,” Handal said. “When the downturn hit, we were faced with either abandoning products or take the beating and keep on going. We chose to take the beating. And since we already swallowed those expenses, we won’t be seeing them in the coming year.”

Part of the investment includes an online store. For the first time, consumers can buy machines and music CD+Gs directly from The Singing Machine. Before, the machines were only carried by big box stores like Toys R Us, Kohl’s, Radio Shack, Sears, Costco and Sam’s Club. And it is also selling non-karaoke Disney electronics, like Hannah Montana television sets and a High School Musical iPod alarm clock radio.

And within the first day of opening the store, there were five karaoke machine orders — which took Handal and his team by surprise.

Even though the songs will be available in digital format, the company will still sell a handful of CD+G albums.

”We’re not really cannibalizing our old sales,” said Gary Atkinson, Singing Machine’s general counsel. “We’re just adjusting to what people want these days. They want to create their own playlists.”

Aside from battling a tough economy, the company also must compete with other home entertainment — especially such video games as Lips, Karaoke Revolution, Boogie Superstar, Guitar Hero World Tour and Rock Band, which let gamers belt out the lyrics to popular songs on the game systems they already own. And on games like Rock Band and Lips, new songs are continuously released for download.

Some bars, such as Ye Olde Falcon Pub in Davie, have even been offering a Rock Band night.

”I don’t perceive any degradation in our sales by virtue of the video games and the increase of karaoke activities,” Handal said. “If anything, it’s increased awareness among Americans that singing can be fun and there are many ways to accomplish it.”

And with a new product comes new marketing. The online store has its own Twitter account, MySpace page and Facebook groups and fan pages.

And the online community will have competitions and prizes for some of the best and silliest karaoke home performances. Next up are promotions with cruises to sponsor onboard karaoke nights.

”We’ve got a lot of fun things coming along,” Melo said. “We just got to make sure all of the bugs are fixed and we know exactly what the consumer behavior is online.”

– Bridget Carey