Almighty Press


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.

Permission granted by copyright holder for this express use only.



Article List

November 21, 2013 - New York Times - Records Are Dying? Not Here

March 27, 2013 - Glendale News-Press - It's a matter of record: Burbank's Atomic Records and Backside

December 30, 2012 - Detroit News - As one record shop closes, vinyl music plays on in another

April 20, 2012 - Boston.com - New vinyl album releases give record stores a kick

November 20, 2011 - Salon.com - In an iTunes age, do we need the record store?

June 9, 2011 - NJ.com - Curmudgeon Records closes its doors for good

April 16, 2011 - Wall Street Journal - One-Day Record-Store Revival

February 1, 2011 - Charlottesville News & Arts - Plan 9 Changes Location

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





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