If you've been reading the trade journals, you know that the music industry's in a state of general panic. According to the Dec. 29 issue of Billboard, total sales for 2001 were 5.3 percent lower than in 2000, album sales were down 2.8 percent, and singles sales were down an astonishing 40.7 percent. (That last stat may have something to do with the fact that record labels don't want to make singles at all; they'd obviously prefer to coerce you into buying the entire Britney CD, even though you know every song except "I'm a Slave 4 U" totally sucks.) Industry types blame the slump in record sales on free file-sharing sites such as the now-defunct Napster and spin-offs such as Morpheus and Gnutella. The suits at the major labels are the shrillest denouncers of Internet file-sharing; unsurprisingly, they also rake in the lion's share of the profits from "legitimate" sales. Artists generally make between 50 and 75 cents per CD, whereas the record company earns between $3 and $4. After the artists pay back the label's advances, they often wind up with nothing. Factor in flat sales, and everyone's in trouble: Bands are dropped, labels go under and one-stop distributors declare bankruptcy. Independent record stores such as Streetside Records, Vintage Vinyl, Euclid Records and Record Exchange suffer the consequences in myriad ways.
One challenge these outlets face is the rise of big chains and megastores, which cut into their business by offering new CDs at bargain-basement prices. "Best Buy can sell computers and big-screen TVs and make all their profit there," explains Steve Pick, Vintage Vinyl general manager (and RFT contributor). "They don't need to make the profits on their CDs, which they can sell at cost or at a loss. It hurts us when they can sell something at $9.99 that costs us $10.50 to get it into the store."
Another corporate trend that threatens to leave small-scale retailers out in the cold is the exclusive-release deals offered to favored customers. "U2 worked out a deal where their DVD was released two weeks early just to Best Buy and then to the other retail outlets," Pick says. "Now, the U2 DVD is not something that Vintage Vinyl would sell well, but it set a bad precedent." (As if fucking over Negativland wasn't enough to prove they're greedy bastards!) Randy Davis, president of Streetside Records, was irate when he heard about the U2 DVD: "We didn't think it was a fair-trade practice. I bitched and moaned to the manufacturers, and I just made sure my stores had it in stock from day one. Here's an industry that has consolidated street dates for the entire industry, consolidated pricing, and yet somebody did a deal with a retailer giving them an exclusive!"
Pick disagrees with industry analysts who attribute flat sales to online music piracy. "I think that's baloney," he scoffs. "Anything that makes people excited about music is a good thing, and online file-sharing programs are designed to do that. There is some loss in sales that's offset by gains in sales for other people. I think the big mistake that the record labels made was in attacking Napster, which was the single biggest promotional tool for music to come around in years."
As for the future of music retail, Pick is cautiously optimistic: "The record labels want it to be a downloading thing where they can cut retail out of the package entirely. I don't think that's going to happen. I think there will be independent record stores for a long time to come. For us, we'll probably shift the focus away a little from new releases and more onto used and catalog."
Joe Schwab, owner of Euclid Records, made this shift a long time ago, but that doesn't mean he's sheltered from the industry meltdown. Like many specialty record stores, Euclid deals almost exclusively with one-stop distributors to stock new releases. "Our biggest one-stop, the biggest in the country [Valley] just went under. It's pretty bad for us because we counted on them; we took a higher price on stuff because they had the deeper catalog. Now we're scrambling to try to find more obscure releases.
"It's a real problem because, as a smaller outlet, we can only carry so much, mainly due to space restrictions," Schwab continues. "And then there's the economics of it. I mean, you can only make $4 on something that you're paying $13 on for so long. We have to rely on special orders and bringing in stuff that you can't find at the big boys, the Best Buys and the Borderses and that sort of thing."
Fortunately, Schwab has found his niche. Approximately 40 percent of his business is mail-order used vinyl. "If we were trying to make our living selling new CDs, I'd have been out of business 15 years ago," he laughs. Like Pick, he believes that the labels, not Napster and its clones, bear most of the blame when it comes to slow sales: "The whole structure of how new CDs get sold is so out of whack right now. No one cares about albums as albums. It used to be, someone like Bruce Springsteen would put out a new release or something, and there was this constant anticipation for two years. Now, they're just forgotten and swept under the rug. If the labels don't think it's going to go multiplatinum, they dump it."
Davis believes that by de-emphasizing the singles format, record labels are beginning to phase out retailers altogether: "There's kind of a contrary business model in that [the labels] have gotten rid of singles, quote unquote, because they cut into the sales for CDs," he says. "However, their download-subscription model is based on individual titles. Isn't that a single? One of our bitches to them has been 'You guys have alienated the youth community.' Even though 15 bucks is nothing like what it was to us, it's still 15 bucks. Kids have a lot of choices as to what they want to do with their money. They can't come in and buy a $3 or $5 single anymore. But [the labels] are making something similar online, and I think they're conditioning the youth consumer that [the computer] is the place they're going to be buying their music in the future.
"When I started buying music, it was in big department stores," Davis continues. "Then it went over to the independent retailers, and now it seems to be going back to the big conglomerates. Best Buy can sell some stuff for a lot less than I can because they have other ways to make up the profit. Does that mean that customers will only buy CDs there? I don't think so. A lot of the [big-store] customers are casual customers. When Soundscan goes out and tests customers, they consider an avid consumer someone who buys six discs a year. My average customer visits us 18 times a year and buys three discs per visit! So, for a lot of those [big-store] customers, maybe having the information and a knowledgeable staff just isn't that important to them."
It is to some of us. We'll be very careful next time we're shopping for refrigerators.