major record lables destroy their industry .. nyt-op-ed

Apr 8 06:40 UTC 2007

  


 April 5, 2007
 Op-Ed Contributors Spinning Into Oblivion
 By TONY SACHS and SAL NUNZIATO

  http://www.nytimes.com/2007/04/05/opinion/05sachsnunziato.ht
  ml?em&ex=1176004800&en=847c0199941e74fe&ei=5087%0A


 DESPITE the major record labels best efforts to kill it, the sin-
 gle, according to recent reports, is back. Sort of.

 Youll still have a hard time finding vinyl 45s or their modern
 counterpart, CD singles, in record stores. For that matter, youll
 have a tough time finding record stores. Todays single is an in-
 dividual track downloaded online from legal sites like iTunes or
 eMusic, or the multiple illegal sites that cater to less scrupu-
 lous music lovers. The album, or collection of songs the de fac-
 to way to buy pop music for the last 40 years is suddenly look-
 ing old-fashioned. And the record store itself is going the way
 of the shoehorn.

 This is a far cry from the musical landscape that existed when we
 opened an independent CD shop on the Upper West Side of Manhattan
 in 1993. At the time, we figured that as far as business ventures
 went, ours was relatively safe. People would always go to stores
 to buy music. Right? Of course, back then there were also only
 two ringtones to choose from riiiiinnng and ring-ring.

 Our intention was to offer a haven for all kinds of music lovers
 and obsessives, a shop that catered not only to the casual record
 buyer (Do you have the new Sarah McLachlan and ... uh ... is
 there a Beatles greatest hits CD?) but to the fan and oft-ma-
 ligned serious collector (Can you get the Japanese pressing of
 Kinda Kinks? I believe they used the rare mono mixes). Fourteen
 years later, its clear just how wrong our assumptions were. Our
 little shop closed its doors at the end of 2005.

 The sad thing is that CDs and downloads could have coexisted
 peacefully and profitably. The current state of affairs is large-
 ly the result of shortsightedness and boneheadedness by the major
 record labels and the Recording Industry Association of America,
 who managed to achieve the opposite of everything they wanted in
 trying to keep the music business prospering. The association is
 like a gardener who tried to rid his lawn of weeds and wound up
 killing the trees instead.

 In the late 90s, our business, and the music retail business in
 general, was booming. Enter Napster, the granddaddy of illegal
 download sites. How did the major record labels react? By contin-
 uing their campaign to eliminate the comparatively unprofitable
 CD single, raising list prices on album-length CDs to $18 or $19
 and promoting artists like the Backstreet Boys and Britney Spears
 whose strength was single songs, not albums. The result was a lot
 of unhappy customers, who blamed retailers like us for the dearth
 of singles and the high prices.

 The recording industry association saw the threat that illegal
 downloads would pose to CD sales. But rather than working with
 Napster, it tried to sue the company out of existence which was
 like thinking youve killed all the roaches in your apartment be-
 cause you squashed the one you saw in the kitchen. More illegal
 download sites cropped up faster than the associations lawyers
 could say cease and desist.

 By 2002, it was clear that downloading was affecting music retail
 stores like ours. Our regulars werent coming in as often, and
 when they did, they werent buying as much. Our impulse-buy week-
 end customers were staying away altogether. And it wasnt just the
 independent stores; even big chains like Tower and Musicland were
 struggling.

 Something had to be done to save the record store, a place where
 hard-core music fans worked, shopped and kibitzed and, not inci-
 dentally, kept the music businesss engine chugging in good times
 and in lean. Who but these loyalists was going to buy the
 umpteenth Elton John hits compilation that the major labels were
 foisting upon them?

 But instead, those labels delivered the death blow to the record
 store as we know it by getting in bed with soulless chain stores
 like Best Buy and Wal-Mart. These big boxes were given exclusive
 tracks to put on new CDs and, to add insult to injury, they could
 sell them for less than our wholesale cost. They didnt care if
 they didnt make any money on CD sales. Because, ideally, the per-
 son who came in to get the new Eagles release with exclusive
 bonus material would also decide to pick up a high-speed blender
 that frapp'^Heed.

 The jig was up. It didnt matter that even a store as small as
 ours carried hundreds of titles youd never see at Best Buy and
 was staffed by people who actually knew who Van Morrison was, or
 that Tower Records had the entire history of recorded music under
 one roof while Costco didnt carry much more than the current
 hits. A year after our shop closed, Tower went out of business
 something that would have been unthinkable just a few years ear-
 lier. The customers who had grudgingly come to trust our opinions
 made the move to online shopping or lost interest in buying music
 altogether. Some of the most loyal fans had been soured into
 denying themselves the music they loved.

 Meanwhile, the recording industry association continues to give
 the impression that its doing something by occasionally threaten-
 ing to sue college students who share their record collections
 online. But apart from scaring the dickens out of a few dozen
 kids, thats just an amusing sideshow. Theyre not fighting a war
 any more than the folks who put on Civil War regalia and re-enact
 the Battle of Gettysburg are.

 The major labels wanted to kill the single. Instead they killed
 the album. The association wanted to kill Napster. Instead it
 killed the compact disc. And today its not just record stores
 that are in trouble, but the labels themselves, now belatedly em-
 bracing the Internet revolution without having quite figured out
 how to make it pay.

 At this point, it may be too late to win back disgruntled music
 lovers no matter what they do. As one music industry lawyer, Ken
 Hertz, said recently, The consumers conscience, which is all we
 had left, thats gone, too.

 Its tempting for us to gloat. By worrying more about quarterly
 profits than the bigger picture, by protecting their short-term
 interests without thinking about how to survive and prosper in
 the long run, record-industry bigwigs have got what was coming to
 them. Its a disaster they brought upon themselves.

 We would be gloating, but for the fact that the occupation we
 planned on spending our working lives at is rapidly becoming ob-
 solete. And that loss hits us hard not just as music retailers,
 but as music fans.

 Tony Sachs and Sal Nunziato own an online music retail business.
  
 

response 2 of 2:

Apr 8 15:37 UTC 2007

Thanks for the pointer, TS.  I feel like everything I might write in 
response to this article, I have written many times over the last 
8-10 years.  But, a tour of the highlights:
 
--  Amazon.com killed "CD tourism," the old habit of music hounds like 
    myself to travel lengthy distances in search of shopping opportunities.
    I had stores which I regularly called upon in Washington DC, 
    Philadelphia, Manhattan and Toronto; and on trips to other places, 
    I'd be searching out the CD stores in hopes of finding some obscure
    gem.  But the obscure gems are all just a few clicks away now.
    CD tourism is over, except for sentiment and nostalgia.
 
    Ann Arbor had benefitted substantially from CD tourism.  
    That is the only way that this city of 110,000 people could 
    support the rather large 1990s CD departments of Schoolkids, 
    SKR Classical, Tower Records and Borders.  The owner
    of SKR Classical wrote about how he used to have lots of weekend 
    customers who would travel lengthy distances to shop at one of the 
    best classical music stores in the Midwest.  Online shopping took
    that business away.

--  The authors write that Big Music was eager to get in bed with 
    Wal-Mart and the other big-box stores.  I don't know how much 
    choice they had, once the giant predatory retailers became 
    interested in selling CDs.  Big Music made an effort to stop the 
    predatory pricing with a policy known as "Minimum Advertised Price"
    or MAP, and this policy got them convicted of price-fixing at both 
    the state and federal levels.  So remember, the destruction of
    independent CD retail has been confirmed as government policy.

    The last report I saw was that big-box retail is now over 60%
    of CD sales, if I remember correctly; but the big retailers 
    are now threatening to dump CDs because of declining sales.

--  The informational role of independent CD retailers, and the 
    best chains such as Tower, in shaping consumer interests, was 
    completely taken over by Internet sources.  Once the audience is
    happy with their online sources of information about music, 
    it no longer matters if the people working in the store know 
    who Van Morrison is or not.  I ran into this early with the 
    somewhat arrogant staff at Schoolkids in the 1990s, when my 
    knowledge of the British folk field was vastly outstripping theirs.
 
--  It isn't just file-sharing that is a problem for Big Music:
    it's cheap storage and copying costs.    In the 1990s, to copy 
    an album on one side of a cassette represented a cost of $1-2
    for the tape, and a time investment of 45 minutes.  

    Now, a CD to copy one album in CD audio format
    is maybe 15 cents if one shops the blank CD sales.  That same
    CD will copy about 10 albums in MP3 format, so that gets you 
    down to 1.5 cents to store a copied album on CD. 
 
    And if you live a hard-disk-only lifestyle, then the marginal 
    cost of copying a new album is essentially free, until your 
    massive disk is full.