June 9, 2007
COMMETARY: RETAIL RECOVERY
If The Stores Are Healthy, The Rest Of The Industry Will Follow

by Clark Benson, CEO of AlmightyRetail.Com

Yes, a 20% year-over-year drop in CD sales sucks. But it could get a lot worse—causing serious harm to the whole music industry, not just the record biz.

As Billboard's Ed Christman mentioned in his column a few months back, a good chunk (my best guess is one-third) of that 20% is directly attributable to the closing of retail storefronts. From 2003 to 2005, music retail closings averaged 550 per year. Many of these were stores that the industry at large could afford to lose, both from chains that had overbuilt in the '90s (malls didn't need two CD stores) and from underperforming indie outlets. But in 2006, 750 core accounts, including more than 100 Tower stores with huge selections that fostered browsing and impulse buys, went bye-bye.

So far this year the pace is slower—230 closures to date, with some bright spots (Dimples, Rasputin and other indies opening stores in old Tower locations). This leaves about 4,850 pure-play music retailers in business. (I'm counting book/music combo stores but not big boxes like Wal-Mart or Best Buy.) It is vitally important to act on issues that affect these stores now, because they are operating without much cushion, and if they go away or get out of music, they aren't coming back.

In addition to the retailers, record labels still make most of their income from CD sales, and realistically their model won't be able to be turned around fully for at least a few more years.

If you are an artist, manager, agent, promoter, music publisher or radio programmer, your thinking may still be, "Bummer, but times change—glad I'm not on that side of the biz." That thinking is flawed.

The old paradigm—in flux, but not yet fully changed—had record labels spending the upfront money to break an artist. At a typical major, the ballpark math went like this: 50% of new releases were total stiffs, 20% lost some money or broke even, 20% made a decent profit, 8% were gold/platinum successes and 2% went mega. Those big worldwide profit centers erased all the misses.

Let's focus on the 90% that weren't hits. The label would cough up the entire marketing/PR/radio promo/tour support spend on that artist. The artist may have gotten a middling radio hit, which the label then chased with a huge spend on the second single, which tanked. The album scanned, let's say, 200,000 units, and the label was $1 million in the hole after the first album. The second album never had a song catch on and sold only 50,000, at which point the band was dropped. The artist then moved on to indies, or maybe another major took a chance. And so it goes.

A stupid, inefficient system, to be sure, but that's the way it is, or was. The point here is that the label spent $3 million marketing the act—a spend that hopefully raised the act's profile, so it could make a decent living for the rest of its career from touring, merch or other benefits of now having a "brand." No manager or agent is going to invest that kind of money upfront (though the mega-management rollups in the works may change this for big-push artists). I know, the argument is that indie rock acts like Arcade Fire don't need the imaging and marketing to get big. But that argument doesn't fly for, say, upcoming superstars in pop, R&B, hip-hop and other genres.

Here's what retail needs to get healthy, which in turn will keep the labels healthy, spending money marketing artists to the benefit of the whole industry:

Get rid of $17/18.98 list prices.

Continue catering to the collectors and the audiophiles.

Stop the exclusive digital release-date windows and big-box exclusives.

Stop demanding that your releases come out in the cluttered fourth quarter.

And don't forget the easy stuff. Retailers tell us they are getting serviced with 50% fewer promos than just five years ago, even though 97% of them still use CD players for in-store play. (It's the sound quality.) Mailing play copies to the right stores isn't going to break even the tightest budget.

It's understandably easy for us cutting-edge types to get excited about the new digital frontier. But it's not an all-or-nothing game. Stick music fans in an Amoeba or Virgin Megastore, or some other deep-catalog CD store, and they will discover just as much new music as an all-nighter on MySpace. Why alienate the 75% or so of the music-buying public who still like the CD until they are ready?

Clark Benson is founder and CEO of market research firm the Almighty Institute of Music Retail, which operates the ISIS listening stations. Benson, also CEO of Ranker, has ranked far more than 100 Top Bands on this list.

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Article List

• August 13, 2010 - The Tennesean - Anita Wadhwani: Nashville indie record stores' sales spin in right direction

• January 3, 2010 - Delaware News Journal - Delaware music shops get creative to compete with downloads, chain music stores

• September 24, 2009 - Los Angeles Times - L.A. independent record shop is still in a groove

• August 20, 2009 - CNN Money - You can make money off online music

• June 14, 2009 - New York Times - Retailing Era Closes With Music Megastore

• May 13, 2009 - Medill Reports - Resurgence in vinyl helps record store in recession

• April 26, 2009 - Los Angeles Times - In a digital age, vinyl albums are making a comeback

• April 18, 2009 - Charlotte Observer - Record stores band together

• April 17, 2009 - Detroit News - Record Store Day spins profits and good beats at Metro Detroit shops

• April 17, 2009 - Associated Press - Record Store Day celebrates indie retailers

• April 10, 2009 - Detroit News - Street Corner Music moving to Oak Park plaza

• April 10, 2009 - Toledo Free Press - New record store shakes up Adams Street

• January 8, 2009 - OC Register - Closing date for Virgin Megastore at The Block

• October 28, 2008 - Reuters - AC/DC back in "Black" with global smash

• September 23, 2008 - Chicago Daily Herald - Independent music stores haven't yet disappeared from suburbia

• June 23, 2008 - New York Times - For Tom Petty Fans, the True Sound of Vinyl, Also Captured on a CD

• April 19, 2008 - Lafayette Journal Courier - For some, record stores live on

• April 19, 2008 - New Jersey Star Ledger - It's Record Store Day. Play it again, Sam!

• April 18, 2008 - New York Times - Record Stores Fight to Be Long-Playing

• April 18, 2008 - Dallas Morning News - Retailers hope Record Store Day turns up volume at mom-and-pop shops

• April 16, 2008 - Timeout New York - Platter Up

• December 27, 2007 - Los Angeles Times - Virgin Megastore to close shop

• December 16, 2007 - New York Times - For a "Dinosaur," an Exuberant Second Life (Looney Tunes Reopens)

• December 3, 2007 - Detroit Free Press - The same old song: Music store closing

• November 7, 2007 - Washington Post - Eagles soar past Britney to top of charts

• November 4, 2007 - The Ledger - Two Young Entrepreneurs Unafraid of Risk of Going on Records

• August 20, 2007 - Billboard - Almighty Taps Hans As VP

• June 29, 2007 - ABC News - Long Live the Record Store

• June 28, 2007 - Orange County Weekly - Locals Only

• June 13, 2007 - Reuters - McCartney's Starbucks album heats up U.S. charts

• June 9, 2007 - Billboard - Commentary: Retail Recovery

• May 9, 2007 - Columbia Free Times - High Fidelity

• March 22, 2007 - NARM Awards - Almighty Retail Named NARM Related Supplier Finalist For Third Consecutive Year

• March 16, 2007 - Chortler - Shout! Factory Has Revamped Its Website

• March 9, 2007 - PhillyBurbs.com - Internet killed the record store?

• March 4, 2007 - Sacramento Bee - New groove for Solomon

• February 28, 2007 - USA Today - Exclusives aim to pull music fans into stores

• February 28, 2007 - New York Newsday - Latin record shops thrive despite changes in music business

• February 23, 2007 - Montpelier Bridge - Buch Spieler Sails On Despite a Music Industry Decline

• November 20, 2006 - Austin 360 - In Austin, Niche Indies Rule

• October 20, 2006 - Sacramento Bee - Tower brand could survive

• October 15, 2006 - Pittsburgh Tribune-Review - Tables have turned on record stores

• October 14, 2006 - Sacramento Bee - Small labels lose valuable ally in Tower

• October 6, 2006 - Desert Sun - Record Alley remodels

• September 27, 2006 - Music & Copyright - Niche Marketing of CD albums continues to rise in the US and Physical Sales overall decline

• September 22, 2006 - CNN.com - Indie stores confront a new era

• September 19, 2006 - New York Newsday - 34 years, and that's not all, folks

• August 18, 2006 - The Roanoke Times - Plan 9 Music puts new spin on 5 Record Exchange stores

• August 3, 2006 - The Hollywood Reporter - Nervous music retailers face hazy digital future

• July 16, 2006 - New York Times - The Graying of the Record Store

• July 13, 2006 - Rolling Stone - The iTunes Holdouts

• July 11, 2006 - Roanoke Times - Record store's "last dance"

• July 5, 2006 - Port Townsend and Jefferson County Leader - Quimper Sound moves, expands to change with times

• June 6, 2006 - Billboard - NARM Nominations Announced

• May 10, 2006 - Detroit MetroTimes - Out of the Groove

• March 18, 2006 - Billboard - Indies in a bind

• January 16, 2006 - Los Angeles Business Journal - Slipped Discs

• January 6, 2006 - Los Angeles Times - Indie record stores doing slow fade out

• December 26, 2005 - Los Angeles Times - The Music Stops for Indie Shop

• December 1, 2005 - Rolling Stone - Fall Sales Dry Up

• October 13, 2005 - Desert Sun - Music snobs rejoice: Independent record stores still thrive in desert

• September 12, 2005 - Salt Lake Tribune - Twilight for Starbound Records

• August 18, 2005 - New York Post - Oldies are now singing a new tune - Music stores go digital

• July 2005 - Rolling Stone - Record Biz Still Sinking

• June 18, 2005 - Billboard - NARM Noms Announced

• March 21, 2005 - CMJ - Hart of the Matter

• February 16, 2005 - MSN - Genius Loves Company

• October 12, 2004 - Rolling Stone - Wal-Mart wants $10 CDs

• July 10, 2004 - Billboard - Almighty Institute To The Rescue

• January 14, 2004 - Creative Loafing Charlotte - Manifest Destiny

• December 29, 2003 - New York Times - on the rise of mass marketers

• November 13, 2003 - Rolling Stone - Best Buy snags rights to band's new DVD

• October 9, 2003 - USA Today - Best Buy wins sales rights to Rolling Stones DVD box set

• October 6, 2003 - Reuters - Stones Paint It Black For Retailers

• May 31, 2003 - Billboard - Retail Track

• May 9, 2003 - Hits - Rerap