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The Downward Spiral of Music Retailing
chundo writes "Business Week has an article about the financial problems plagueing specialty music retailers. Tower Records, Musicland, and Sam Goody are all "hemorrhaging money", despite efforts to move sales online. Some chains are trying to adapt - Virgin Megastore is testing an in-store service to download songs to portable players, and their Radio Free Virgin unit hopes to break into digital music retailing. Is the failure of conventional music sales reinforcement that the RIAA's business plan just doesn't work, or will it just provide them with more ammunition against the P2P crowd?"
Both, unfortunately.
"Proudly Posting Without Reading The Article"
It's fairly obvious to me that the falling sales are both proof that the business model is failing (due to a change in the market environment) and that it will also provide ammunition for the RIAA's anti-P2P argument.
The RIAA is, I believe, misunderstanding the situation in that they would lose sales regardless, but the reality of any situation rarely intrudes on the legalities.
Of COURSE the RIAA will use this as evidence against P2P. Hatch wants to blow up your PC. Perhaps he should think about blowing up the RIAA instead.
The first candidate for House or Senate who proposes rolling back copyrights to 14 years has my vote, regardless of party.
Napster-to-go says "Fill and refill your compatible MP3 player", which is a lie. It's not MP3. It's WMA with DRM.
WRONG!
According to the RIAA and MPAA low sales is because of piracy, therefore we must have more laws and no rights.
Why buy entire CDs when we can pay only for the song we like a from a per song legal music download site? The MPAA claims that movie viewing has gone down, but they fail to take into account that you can see movies as well at home on a home theater system without the $5 popcorn or the chewing gum on the floor.
Fight Spammers!
"The downward spiral of music retailing"
Is it directly proportional to the downward spiral of music quality? How about to the downward spiral of RIAA-member customer "relations?"
The real problem is that nobody in the industry is trying to adapt to all the changes that have come about in the past few years. The RIAA has spent all its effort trying to stop P2P sites rather than finding an alternative to lure consumers back to buying.
And while all this was going on, the retailers were just sitting on their butts not doing anything. What the CD retailers should have done was band together and get on the RIAA's back about coming up with a better product that would bring back consumers to CD purchasing.
The retailers will always have the hardcore music listeners who will continue to buy CDs no matter what. They are the people keeping those businesses around at least for a little while longer. Unfortunately, the average CD buyer has been swayed by P2P sites, being satisfied with the quality of the files they get from them.
So, what the retailers (and RIAA) should be doing is developing new incentives for people to go back to CDs (or another media). Why not add cool features (like they've been experimenting with) such as bonus content, exclusive concert ticket buying rights, etc.? Or, they should really push the DVD-Audio and Super Audio CD formats (preferably picking one as the standard), which offer far superior sound to MP3s.
Perhaps it is too late. Perhaps the procrastination has killed the CD industry. I hope not, personally, because I highly prefer a physical product to MP3s.
They just sell the same crap you get at Target. Real specialty music stores are doing quite well, at least from what I know from articles like this. When you sell the same crap as everyone else, the only ways you win are through convenience (e.g., location) or price. When you sell good music - a rarity through the Big 5 - that people want, they'll come back to you both because you offer a unique product and because, at least in some cases, they'll want to hear some of your suggestions. A rapport develops that no crappy chain can emulate or replace.
Why? They want to know why they can't sell music? Here are some lyrics from some song...
Tell me, tell me, baby
How come you don't wanna love me
Don't you know that I can't breathe without you
Tell me, tell me, just how
What am I supposed to do right now
Why can't you love me?
Why-y, tell me, my baby
Do you think that would appeal to me, glasses wearing, Linux using, me? Maybe they should try songs marketed towards the demographic with some discretionary income.
Silly RIAAbit. According to a recent NPR piece, several folk and indie labels are doing just fine, thanks; one label just had its best year ever. Seems they distribute music people actually want to - gasp - Buy...
"My strength is as the strength of ten men, for I am wired to the eyeballs on espresso."
No, that's just bull, the fact is, I and many, many others just don't have the money to spend on music...plain and simple. It's just not a high enough priority.
The US economy has crashed and record sales are down, doh!
Put people back to work and record sales will go up, doh!
When Richard Branson started the music retail arm of his empire (of course, back then his empire was only a youth advice center anyway!) he capitalised on a big gap in the market. In the UK at the time (the early 70's), all record stores were really boring places, no music playing, and the people in the store didn't care about music.. it was just another thing they sold, along with pins and ribbons. Richard Branson figured he'd create somewhere where music was playing, where the staff were all hippies who 'digged' music, and where customers could lounge around on beanbags smoking pot and checking out the latest tunes. What's more, he'd sell the records cheaper than anyplace else. His store (in Oxford Street, and on which he actually paid no rent to start with!!) was flooded with customers for quite some time. He noticed after a while, however, that while sales were brisk, a lot of people were just turning up and smoking pot all day without buying anything. He cleared these people out, and made it so that people would still want to come to the store, but not that they could stay there all day. And so was developed the current model of 'specialty record store' retail. This is a model that hasn't changed since the 70's! Virgin Megastores tries new things like having listening booths, and computerised searches of their CD database.. but it's too little too late, in my opinion. The next model of retail kicked off in the late 90's with the discounted 'pile it high, sell it cheap' WAL*Mart model of selling records. The big problem, however, is that this is not much different to how records were sold in the UK in the 60's! The staff at Wal*Mart don't know music, and they could care less about what you're buying So.. it seems we've come FULL CIRCLE. And let's face it, the whole music industry has lost its vibe anyway. I remember back in the 'good old days' that it was fun to go buy records, and it was a real thrill to get them home and put them on. Nowadays? Sure, there are a lot of good gigs going on, but few people exhibit the same excitement over CDs these days, since you probably heard half of the tracks on MTV/the radio already anyway. I think commercially music has lost its way, and while there's still a LOT of great music out there.. music just isn't as fun anymore. These stores are feeling the pinch. Why go and hang out at a record store when it's not fun anymore?
More then likely it will give them more ammo against the P2P crowd. The RIAA and the companies it represents are trying hold onto a buisness practice that doesn't work with the changing market. The real estate market is going through a similar problem. Instead of fixing the way THEY do things, they expect everyone to buckle and do things the way they've been doing them for so long. The RIAA knows they aren't going to get too much money out of the people they're suing, it's mainly a scare tatic. We sue a few people and guess what, people might not want to do it just because they don't want the hassle. So even if sales keep dropping they'll never admit it's them. And when/if sales do return to normal, they'll just simply praise their own efforts. Either way, the people on the technology side lose.
The answer, obviously, is that there isn't money to be made in P2P, at least not really. Kazaa can maybe make more money off of advertising than they spend on hosting, but thats because the overwhelming majority of the content is provided by users for free.
Of course, its not really free. The record companies pay to record, produce, and market it. If they had to cover the costs of actually producing content on ad revenue from a P2P service, they would go bust, like every other dot-com that thought they could make it big off of banner ads while giving their product away for free. They quite reasonably don't want to do that, because they have a business model now that, provided their consumers respect existing copyright laws, is quite a bit more profitable.
Is it just me, or is sales for EVERYBODY seem to be a little bit slumped? From what I learned in a basic economics class, is that the economy can go up and down. You would think that since we've got the worst economy in 20 or so years, maybe people are holding off on buying CDs to do things like, oh I don't know.. PAY THE BILLS?
Perhaps sales for them will start going back up when jobs quit getting exported overseas, when people start buying things as locally as possible, and corporations stop paying people dick for wages. I think if this were to happen, people here would have more money, and they could buy more CDs.
There is no good new music out there. Period. It's all a rip-off of something else, which sucked.
CD's are over priced. I wanted to buy a older CD (Metalica's, Ride the Lighting) and it was $14. Come on, that album came out 20 years ago, why so much?
Amazon.com and other like online sellers are killing these companies. Why? I can sit at home and order new, used and hard to find CD's, DVD, books and more. Why drag my ass out to Tower Records (Which always plays the worse music on the store's stereo system) and pay too much for music and DVD's.
The music biz business model is not working in todays market, so they'll blame pirates. Make a good product and sell it at a fair price.
Linux O Muerte!
bingo. although it should be noted that p2p only gets a small amount of attention in the article. the bottom line is that the retailers are getting creamed on price. simply, there are other channels that offer the same material for less and consumers are going there instead. sure, p2p is considered a factor, but the three big culprits are:
- discount stores: walmart, target and friends can flog the most popular cd's at a discount - sometimes even as loss leaders to generate traffic. with prices sometimes several dollars less than, say, hmv people will pick up the new madonna cd along with their toilet paper. this price discount is all about volume
- online sales of new cds: amazon for instance. they can underprice tower records because of volume just like walmart, but also because of reduced operating costs of not having a physical store front.
- online sales of used cds: ebay here. even for something as durable as a cd, the used price always comes in lower than new. with the internet facilitating used cd sales, it's taking a big chunk out of the retailers.
note also that this is only about retailers, not labels or artists. the riaa is concerned about geffen moving units. it doesn't necessarily car if those units are moved through tower or target or amazon.2 1337 4 u!
I have no idea how Sam Goody would be hemorrhaging money when they inflate their shipping costs by 875%.
I bought the GBA game Advance Wars from them and paid $14 US for shipping. It took well over a week to arrive, and when it did the postage mark was for $1.60 US.
I let them have it in an email, but they claimed it was all part of the "third party shipping".
Whether it's games or music, if they're going to practice business like that, I hope they fold sooner than later.
He earned no less than $10 during the four short minutes we shared a train.
This goes for DVDs at the offending retailers as well.
-matt
I agree with you that the RIAA will do all it can as it writhes in its death throes after having missed the bus when the Napster Revolution took place.
It reminds me of what Thomas Jefferson wrote:
To see a world in a grain of sand, and then to step back and see the beach where the sand lies
When the price of a new CD went to $20 I simply stopped buying. I have no downloaded MP3s and no copied CDs. I've simply curtailed my music purchasing due to what I see as exorbitant pricing. Period. And until prices come down I will not purchase another CD. I am who the music industry is loasing as a customer, and they just don't get it.
Imagine that - go to any store, download an album onto the iPod in a matter of seconds (via the fast Firewire or USB2 ports). This way anyone with an iPod, no matter what OS or platform, can get music onto their iPods!
You've just named a grand total of two projects that have been able to stay afloat because of donations from the public; and only because these are extremely high profile projects. I'm not even sure Blender counts, because the original company that created Blender just sold the source code, they didn't continue to develop it.
Go ahead and ask the average SourceForge developer if they're able to quit their day jobs and continue their projects based upon PayPal donations. I dare you. I'll tell you right now, the positive response rate will be in the neighborhood of less than one percent. Less than one percent of open source developers are able to write open source for a living.
Similarly, if you switch the music business over to a harebrained donationware scheme, you will absolutely kill the independent artist, the person who languishes in his/her studio day in and day out just so they can sell a couple thousand copies of an album for $10 a pop.
That's the great thing about capitalism: companies charge what the public will bear. You may not be willing to pay $20 for an album, and that's perfectly fine-- that's your perogative. However, you may be willing to pay $.99 for the one good song off an album, in which case I would refer you to the iTunes Music Store.
But under no circumstances should the entire industry go to a "take it all, and maybe you'll throw us a dollar" model. It will kill the independent musician.
they have reasonable prices (about $11-$14 new)
they have a good selection (everything but pop and newer country)
they have a knowledgeable staff
quick special ordering
they carry smaller, independant labels you'll never find at *insert huge chain here*
Just an example, the new Radiohead album:
borders: $19.99
independant record store: $12.88
You have two consoles before you. On the left, the blue console. It has a full catalog of DRM-restricted songs made by many major record labels. You are not allowed to burn those songs, listen to the in your car or portably, and each downloaded song costs one U.S. dollar. If your hard drive crashes and takes your licenses with it, you've lost rights to all the songs you once had, and you must buy them again. Downloads are quick and easy.
One the right, the red console: a vibrant P2P network teeming with shares. It has perhaps 50% of the musical selection blue, but with the added benefit of hundreds of terabytes worth of movies, software, images, and, well, above all, porn. All content is free, based on open standards, and unrestricted. Downloads are quick for popular media, but can take days or even weeks for hard-to-find items.
Which would you choose?
C'mon, be honest. That the latter exists right now and the former isn't even close to is beside the point. Human nature being what it is, blue has almost no chance of ever succeding while red is right there by its side.
I think there is a world market for maybe five personal web logs.
Is the failure of conventional music sales reinforcement that the RIAA's business plan just doesn't work, or will it just provide them with more ammunition against the P2P crowd?"
The RIAA uses P2P as a scapegoat for the failed business models of the labels it represents and their inability (or unwillingness) to adapt their copyright stance in the face of new technology. In fact, the answer to your question is "both" in that as the reports of declining sales come out, the RIAA uses P2P to distract attention from the fact that labels have degenerated into top-heavy marketing machines.
The RIAA is not the record industry. When the RIAA says "we", they mean the big 5 record labels (Universal, Sony, EMI, Warner's, BMG). The RIAA is the recording industry's lobbying arm, charged with keeping the names of the labels out of the headlines as they seethe forward into the breach.
I'm wondering if accused P2P users can adopt a defense that they are non-profit broadcasters who got caught not paying their compulsories.
When I was a kid, we only had one Darth.
But we all cared about music, and we knew music very well. All the store sold was musical equipment, stereo equipment, and music - not pins and ribbons here. But my bud was in school and didn't really care too much about the store - it was a trap for him (the family business) and he was more concerned with getting his phd so he could get on with a career of his own.
Anyway there were probably tens of housands of music stores like that back then. Some were hard core, some were family businesses - but most all had one thing in common: the people running them at least KNEW something about the music they specialized in. A good many of them traded in used records as well.
But most of those places are gone now - they died even before the chains started feeling the pinch. With the chains in the back pocket of the majors, I think this change is actually a good thing. Because the one thing the indierecord stores CAN provide like no other is service. If the indies were to specialize in indie artists, in providing a local "hangout" and a place for people to gather and trade knowledge and music, they could once again become a dominant force in the industry.
Consider: why is it OK to hang out in a book store, sit and drink coffee and read all day, but record stores think this is so bad?
Even with the internet, people still like gathering and hanging out. Provide a place for them to feel comfortable and organize your service around that model, and there's no telling where the stores of the future could go. Think about people sitting around, drinking coffee and eating crullers, trading music on their ipods, exchanging knowledge - maybe even bringing in their old LPs to have them "ripped" to SHNs or APEs on the store's high quality LP playback system.
No matter how they spin it, I just never hear a downside when talking about the death of the (old) music industry. It's a great time to be alive... unless you're a slave of the RIAA.
There's an answer that could virtually wipe out P2P music swapping, but the record companies are so blinded by greed that they will never see it.
Ever since recorded music first came into existance there is one thing that consumers have wanted and the record companies have steadfastly refused to deliver:
The ability to purchase exactly the songs you want and only the songs you want. At various times you've been able to buy singles in various formats (45 rpm, CD, cassette) but even then, the record companies dictated which songs were available.
The answer is amazingly simple: Put every song in existance on-line in one central location for download at a reasonable price (25 cents per song or less) in standard mp3 format with no DRM crap. This would be enormously successful and would generate huge revenue.
But the record companies will never agree to this and never even allow it to enter their minds. They are still locked into the mindset of "why should we let people buy one song for a quarter when we can force them to buy an entire CD for $18".
Plus (on amazon etc.) you have an essentially unlimited selection. You can read what other people and reviewers have to say about a particular album. You can typically listen to far more extensive (albeit shorter and lower quality) song clips. You can take your time and just put something in a wish list. You can easily skip over to related titles. Overall it's a much "richer" experience.
I still sometimes go in stores and do the serendipity thing especially in a really good used store (like Amoeba in SF). But, overall, online's bothe better and cheaper (except for loss leaders). That's hard to beat.
- If I want to buy a "top 40" record, I'll pick it up for $12 at Best Buy or Target or something like that the next time I'm in the neighborhood.
- If I want to buy an obscure record by a local or indie artist, I'll visit the local House O' Piercings And Attitude (aka indie record store).
- If I want to buy something that nobody'll have in stock and it'll have to be special-ordered anyway, I'll go to Amazon.
See Sam Goody in there? Neither do I. There's no reason for me to go out of my way to visit a place that charges 50% more than Best Buy for the same mainstream crap. Besides, my days of "gotta have that new record right now" are over. If I am feeling lazy and willing to pay the premium, I'll just buy it from Amazon.Forward, retransmit, or republish anything I say here. Just don't misquote me.
I spent 20 years of my life buying mostly overhyped crap by these companies. Almost every album I bought was a ripoff with just a couple songs of any quality on them. For 2 or 3 years I didn't buy any music because it was so awful, expensive, etc. Then I found p2p. I can listen to what I want at no expense to me. If I find a group I like that is independant I can buy the CD for a nice quality copy that supports the artists that have earned it.
At $15 to $20 per CD that works out to about 3 hours to 4 hours of work for someone working minimum wage. Who would work 4 hours so they can support Britney Spears' music career? The sooner her career's over the sooner we get to see her in Playboy.
The RIAA/music retailing business in its current form is dead. It's not dead because of P2P being good. It's dead because it has been a piece of crap years but they locked out competition. P2P is the only competition out there for RIAA. Anything hurting their sales helps respectable companies and artists enter the market.
But fuck them. Fuck them in their ears, just as we get fucked in the ears listening to the shitty music they put into the machine. Fuck their silly equations implying what music we "must" like. The stuff in these "speciality" stores is the crap that plagues today's radio stations. I Live in one of the most culturally diverse areas of the US, the New York Metro area, and most of the radio stations here are owned by the same company, and most of them play the same garbage. Do they think we want to listen to a bunch of whiney, scrawny white kids with tatoos or a bunch of illiterate hip hop artists talking about clubs, cars, guns and bitches? I certainly dont, and none of my friends do either. Maybe thats why album sales are down? Maybe its also the 18 dollar sticker adorning the cd's. Have i illegally downloaded music? yes. would i if i felt i had a viable alternative? no. Being morally bankrupt as they are ripping off the consumers, i hope they go financially bankrupt as well.
Which wouldn't have been playable on any of the current players.
Which would have required record stores to stock twice as many discs, meaning probably half as many selections, since they would have the old and new formats.
Which would have increased mastering, manufacturing, and inventory costs.
Which a lot of people wouldn't have wanted to update to because frankly most of us don't want to spend an additional $500-$1000+ for a difference we can't hear.
Which wouldn't have succeeded well at all for years at best.
Which might not have played an any computer players, ending that market.
And which wouldn't be immune from digital ripping, compression, and filesharing anyway.
You call that a plan?
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
I haven't bought any this year. I used to buy a couple per week. I have 61 mp3 files (I just looked) on my computer. I have thousands of ogg files, all ripped from my own cds. I don't buy fewer cds because I'm stealing music, I buy fewer because
a) I don't much care for what the studios are producing these days, and
b) I've got other things to spend my money on besides cds that may only contain one or two decent songs.
Piracy is an easy scapegoat, but as long as they believe that piracy is the cause of all their ills, they will continue to lose revenue and must eventually figure it out or die.
They are blind to their true problems.
"I might have made a tactical error in not going to a physician for 20 years." -- Warren Zevon