How Local Record Stores Weather the Digital Storm
BY PATRICK WALL
It’s 5 p.m. on an unseasonably warm Tuesday in April, and Papa Jazz is busy. In a lot of ways, Papa Jazz embodies the stereotypical independent record store — it’s housed in a relatively small storefront in a cool part of town, and despite its small size, the walls are lined with 12-inch vinyl records and narrow aisles are defined by racks of new and used CDs. Consumers mill about the store sifting idly through crates of old, dusty vinyl records while some scour the DVD racks for a cheap score. Many are conversing with the staff; co-owner Tim Smith is ordering a record for a customer. Many of the customers have been here before; some might never come again. But most leave with something.
If it seems like this could have been a scene out of High Fidelity, the 2000 film adaption of Nick Hornsby’s classic encapsulation of the record store experience, it’s because it could have been. But High Fidelity hit theatres almost seven years ago, and a lot’s changed in the record store business since then. National chains like Tower Records and Sam Goody are pulling out of once-fertile markets. Big-box retailers now control a majority of the compact disc market. In the midst of a seven-year CD sales decline, a paradigm shift in music sales from brick-and-mortar shops to point-and-click web stores and cutthroat price slashing at the Wal-Marts of the world, some people are starting to hear rumors of the demise of the independent record store. Local shopkeeps like Smith have heard it, too. Most don’t believe the hype. In fact, they’re disproving the myth simply by existing.
“If you’re going to open a hamburger shop across from McDonald’s, you’re going to get killed,” says Papa Jazz co-owner Tim Smith.
The Seven-Year Itch
But that’s not to say the hype isn’t valid. The fact is CD sales are in a downward spiral that’s only getting worse. More and more online stores are opening each year and many famous record stores — independent or otherwise — have lifted the needle out of the groove.
In High Fidelity, fictional record store owner Rob Gordon was an obsessive list maker, particularly obsessive when it came to making top five lists. In order to understand what’s going on in the record store industry, let’s break it down into the top fives.
Top five battles record stores are facing:
1. CD sales are sagging.
2. The Internet’s emerging presence.
These two go hand in hand: CD sales are tanking, and it’s hard to say the Internet hasn’t played a hand in that.
“The Internet has changed the way everybody buys music,” says Randy Dunn, who’s now at Earshot Records in Greenville but was a longtime Manifest employee and opened Acme Comics and Records. “The last five years have been the rise of file sharing and post-Napster digital music. Anyone that wants to can find a place that will let you get free tracks and rare tracks.”
It’s indisputable that more and more people are venturing online to purchase (and, in some cases, purloin) music. Nielsen SoundScan, which tracks music sales, recently reported that digital sales of songs have risen 54 percent over first-quarter figures from last year, while physical CD sales have dipped sharply — 20 percent from where they were a year ago. This is not a new trend, but rather a sharp acceleration of the seven-year sales decline that has taken its toll on both the music industry and on record stores.
“It’s going down,” says Sounds Familiar store manager Will Kahler. “There’s no question. Obviously when Napster was the new thing and everybody got involved with that, that was an effect. But I think the thing that started hurting us early is when every computer you would buy would have a CD burner in it. Now that’s just the way of life.”
“When [former Manifest owner] Carl [Singmaster] closed the Manifest in Clemson, it was right after the kids got DSL in their dorms,” Dunn says. “The height of Napster and DSL on campuses … I’m surprised any college stores really survived, unless they were a full independent store.”
“It’s been a long, steady decline,” Kahler says.
The decline has gotten sharper in recent years. Billboard reported that record stores saw a 27 percent sales drop in 2006 on top of a 28 percent drop in 2005. Global music sales — both online and in brick-and-mortar stores — fell an estimated 2 to 3 percent last year, according to a Merrill Lynch research report, and a slow start in 2007 (U.S. music sales are down 10 percent) suggests another down year is likely. Indeed, the Enders Analysis firm predicts that overall music sales will fall to $23 billion by 2009, about half of the $45 billion peak of the CD boom in 1997.
With the compact disc market in decline, many brick-and-mortar stores have been closing. The Wall Street Journal reports that roughly 800 music stores closed in 2006, including all 89 locations of corporate music retail monolith Tower Records. Trans World Entertainment, which owns chain stores such as FYE, Sam Goody and Wherehouse, reported a sales decrease of 6 percent in 2006, despite operating almost 300 more stores.
Indie retailers have felt the crunch, too: The Almighty Institute of Music Retail, an industry research group in Studio City, Calif., estimates that 900 independent record stores have closed since 2003, leaving 2,700 nationwide. One such store was Uptown Sounds, a locally owned shop that concentrated on urban and hip-hop music. Its Dutch Square storefront is now dilapidated and its phone line disconnected.
3. New CDs are expensive.
Cheap just can’t compete with free. But most records don’t even approach cheap. When he sold Manifest in 2004, Singmaster told Free Times that one of the biggest mistakes the record industry made was killing off the single.
“We sold billions of singles,” Kahler says. “And [losing the single] hurt us, too. But we adapted.”
The record labels dumped the single because its profit margin simply wasn’t as high as a CD’s. Many see the move as shortsighted because singles served as teasers for albums. Many customers would purchase two or three cheap singles — and then buy the traditionally expensive album, too.
“$15 is an awful lot [to spend on a CD],” says Acme Comics and Records owner Phil Crouch. “And in some places you’ll spend $16 or $17. That’s crazy. I would rather lose money on a CD than sell it for $17.”
4. Big-box retailers are tightening their grip on the CD market.
As music stores fold by the hundreds, big-box retailers have tightened their grip on the new CD market. Big-boxes such as Best Buy, Target and Wal-Mart account for at least 65 percent of music sales in the United States, up 20 percent from a decade ago. Wal-Mart alone accounts for nearly 20 percent of all music sales in the United States.
The rising pressure from big-box stores has only added to the squeeze. Big-box retailers are able to sell new CDs as loss leaders — a common practice in which retailers slash prices on hot new CDs, sometimes well below the wholesale price, in hopes of getting the customer to stick around and buy bigger-ticket items like televisions and refrigerators.
“There aren’t any big Christmas bonuses any more,” Kahler says. “Those days are gone.”
“If it’s a huge title, a lot of people are probably going to download it, and that’s no more of a challenge than having a big-box retailer down the street,” says Manifest store manager Jonathan Steude.
5. Capricious youth.
The rise in digital music has also coincided with a precipitous decline in younger customers, many of whom are more savvy with the Internet and often opt for the cut-rate prices of big-boxes.
“Your average older person is not necessarily going to buy an iPod and never set foot in a record store again,” Kahler says. “It’s the high school kids and college kids we’re not seeing. They don’t know [the record store]. There’s no connection. They’ve never had a pleasant experience or an occasion to do it.”
“A lot of people know about music and listen to a lot of music, but they’re not buying it,” Crouch says.