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Manifest Destiny
Demise of Carolinas' biggest indie record stores says it all about today's music business
By John Schacht
Page 3 of 5
The result is yet another bugle blowing "Taps" for the same CD sales they're kvetching about on the other end. If that doesn't make sense, remember this is the same business model that created the "piracy" it abhors when it eliminated CD singles and tried to charge $20 for a 25-cent CD -- when a lot of listeners only wanted the one song. Why'd they do it? Well, because they could, and because they knew that music is like crack to some people; they'll pay anything to get it.
Now the industry is trying to get Pandora back in her modem, with laughable results. The RIAA likes to suggest that its lawsuits have put a dent in file-sharing and helped spark the retailers' fourth-quarter comeback this year. But a more accurate interpretation is that those lawsuits only helped Apple's Steve Jobs get a huge jump on his internet competition. Since iTunes surfaced in April and grabbed 50 percent of the market, users downloaded 25 million songs through the end of the year. Before being sold and temporarily shut down in December, mp3.com added 200,000 new subscribers between March and May. Also in December, a digital version of a song, OutKast's "Hey Ya," outsold the top conventional single, an industry first.
CD sales, on the other hand (if you can believe the RIAA), have free-fallen 22.3 percent from January 2001 to January 2003; the first half of 2003 saw another drop of 9.8 percent before things finally leveled off in the fourth quarter. The result was a violent contraction of the independents' market share, as retailers mighty (Wherehouse Records) and meek (roughly 220, according to Benson) alike fell by the wayside. And even though 326 of the 1,000-plus bankruptcies and liquidations came about as a result of the pummeling one Mart (Wal) put on another (K), the former made up for it by opening new stores almost everywhere you look.
Trapped In A Big Box
With all those closings, you'd think the major labels would try to stem the tide and convince the fleeing masses to return to the independents, chain or otherwise. But you'd be wrong. One label, Universal, did slash its deep catalog prices by 25 percent in September, but with lower prices came lower profit margins for an industry already on life support. Instead, the labels and the rapacious monsters they've created, like the Rolling Stones and the Eagles, found new ways to squeeze more money out of their fans and screw most retailers in the process. Both signed deals with mega-retailers like Best Buy and Wal-Mart for exclusive releases, dooming the independent retailers to 30 days of telling their own customers: "No, you have to go to Best Buy to get that Stones' DVD you've seen advertised on TV."
And apparently people are going in droves to the Big Boxes for music. Discount stores like Wal-Mart accounted for only 13.5 percent of music sales in 1994; a decade later the behemoth controls 34.8 percent, according to Benson. And it's not just the exclusives that got them that share of the market. The big discount stores -- with the labels' blessings -- have been offering top sellers at below-cost prices for years, and it's not because they're really big music fans (go ahead, ask one for that first Strange Cargo disc or the latest by the Mekons). If Singmaster or any other music-first retailer did that (and most of them, in desperation, have tried), they'd have to recoup the cost of that below-wholesale CD by overcharging you for a refrigerator on your way out.
Jim Parker, or Jimmy Repo as most people call him, the owner of Repo Records, says of the Big Box phenomenon, "It's very sad that the community has embraced the Targets and the Best Buys; (the customer) is looking for the price instead of the convenience of customer service."
Together with the iTunes-only releases available just for internet users, the Big Box exclusives may not be the biggest straw, but for some they are the last one. Even outside analysts cringe at the new trend of exclusive deals and what they mean for the average retailer.
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