Downloads Didn’t Kill the Record, er, CD Store

Discussion
Jul 25, 2005
George Anderson

By George Anderson

There’s no question that music download services, such as Apple’s iTunes Music Store, have had an impact on the bricks-and-mortar side of music business, but the prediction by
some that the traditional record store was ready to join the endangered species list has not come to pass.

Eric Howarth, co-owner of the independent M-Theory Music, told the San Diego Union-Tribune, “If I had listened to the naysayers three years ago, we’d never have opened.
We’re doing well.”

Mr. Howarth’s businesses has prospered because of a shopping experience that combines a unique in-store ambiance with knowledgeable staff who can help consumers find recordings
beyond the Top 40 recordings and “Best of” recordings found in most general merchandisers.

George Whalin, president of Retail Management Consultants, said, “A good-sized segment of the population still likes to go into entertainment-oriented stores.”

Other bricks-and-mortar outlets, said Mr. Whalin, are prospering by bringing their virtual business into stores.

Virgin Megastores has been successful in this regard by offering downloading kiosks in its stores next to its extensive CD collection, he said.

Moderator’s Comment: Where is the future of the music retail business going? What lessons does this segment of the retail business offer others dealing
with the complexities of multi-channel sales?

George Anderson – Moderator

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9 Comments on "Downloads Didn’t Kill the Record, er, CD Store"


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Ed Dennis
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Ed Dennis
15 years 7 months ago

The death of the record store is only one “click” away. The distribution of self service kiosks that will burn your CD on the spot is being delayed by incredible leaps of technology. All are currently afraid to make the investment for fear that the next wave of technology will devalue their investment. As this fear subsides, you will suddenly see CD/DVD Kiosks everywhere. This will happen even faster than the digital photo printing stations that are now in virtually every drug store and discount store. The photo processors were able to protect their position by installing digital printing equipment but there are a lot of places that did photo developing. CD/DVD outlets are fewer in number (due to inventory demands) but, with burn on demand, the inventory cost and space requirements disappear. For a couple of thousand bucks, anyone will be able to open a “Record” store with every album that has ever been pressed only a few clicks away!

rod knaub
Guest
rod knaub
15 years 7 months ago

The Grateful Dead learned from bluegrass bands to allow taping of shows. Some credit this to their popularity. If I were in a band today, my concerts would be sent to all attendees’ home computers.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
15 years 7 months ago

When I was young, shortly after the earth cooled, my buddies and I went to record stores to meet girls. We stole some 45s (truthfully) and some girlish hearts. (Hey, we couldn’t drive or drink, and the Internet hadn’t yet been invented by Al Gore. We were on bikes, for Pete’s sake, and had nearly zero disposable income.)

But, we understood the nature of music stores — meeting members of the opposite sex — and according to my kids, that hasn’t changed. When music can easily be copied from friends or downloaded via the Internet, why go to a retail store except for the experience?

John Kill
Guest
John Kill
15 years 7 months ago

Not everyone owns a computer, and not everyone who does is comfortable downloading music. Even those who DO download don’t always own iPods. CD-Rs still play a vital role in the music distribution chain as they are often the only way many people can bring downloaded music with them.

As iPods come down in price and more consumers get comfortable with the new digital paradigm, CDs will indeed become “dinosaurs” and retailers will need to serve as iPod filling stations – complete with a full array of impulse items and digital music accessories (belt clips, colorful skins, batteries, etc.).

mike sidders
Guest
mike sidders
15 years 7 months ago

Funny timing on this article, as I have just divested myself of my entire CD collection (over 4,000 titles collected since 1982). I burned everything to my PC and sold it at all used stores and eBay, at a pretty penny I might add.

I am convinced that the CD is a dinosaur – going the way of the 8 track tape. As a huge music fan that has lived through (and dumped huge money into) vinyl, 8 tracks, cassettes, CDs, and now electronic, I am confident when I have seen a format change that will alter the industry. No, it may not happen tomorrow, but it will happen. My advice is to sell those CDs while they’re still worth more than drink coasters.

Mike Sidders

* listening to Muddy Waters on my iPod as I type this *

Mark Lilien
Guest
15 years 7 months ago

In the 1970’s, when I worked for Korvettes (an early discount store chain), it was the largest customer of all the major record companies. Korvettes could play each company against the other and, as a result, got great promotion allowances, unlimited return privileges, and profitable wholesale pricing.

Well, after Korvettes left this planet, there was a major consolidation in the record business. After this consolidation, promotion allowances were reduced, returns were limited, and wholesale pricing firmed up. As a result, the retailers had more and more financial problems, and there has been no national music specialty store chain with consistently decent financials. Between the low margins and the high shrink rate, music-only retailers had a devil of time making any money.

The best thing to happen to music retailers lately is the growth of hundreds of new small labels not distributed by the majors. Music retailers have a chance of survival as long as there are a significant number of suppliers who have minimal bargaining power.

Peter Fader
Guest
15 years 7 months ago
Despite the growth of (and excessive attention placed upon) digital downloads, the CD is still king. And this will be the case for many years to come. If the music industry ever stops shooting itself in the foot by creating every imaginable form of ill-will with its customers, there are enormous profits to be made with new CD technologies such as the wonderful (but largely ignored) dual-disc format. Retailers have a great opportunity to step into this void and become the music lover’s best friend. They need to find a way to work with (instead of competing against) digital formats. I thought that their “Echo” plan a few years back was a good initiative, but they never figured out how to get it off the ground. Some retailers will figure this out and will make tons of money. Starbucks is obviously the first one to point towards this, but there is plenty of room for other retailers to come up with other kinds of customer-friendly business models that will set the industry as a whole… Read more »
Warren Thayer
Guest
15 years 7 months ago

It’s fun to go to CD stores and look through selections, somehow more quickly and easily than online. You run into surprises you weren’t looking for, so there’s some of the “treasure hunt” involved as well. But, that’s just me. For the definitive answer on this, hold on, let me push this button here… PAGING RYAN MATTHEWS!! PAGING RYAN MATTHEWS!!

Jack Smith
Guest
Jack Smith
15 years 7 months ago

I hold an undergrad in music and, while completing my MBA waaayyyyyy bacccckkkkkk in 1996, I wrote my final paper on the impact of digital technology on the music business. While it is not transpiring as quickly I has predicted over 10 years ago, the death of the CD is progressing nicely. And it can’t come fast enough for me!

Brick & Mortar will survive as performance houses (not bars). They’ll have digital kiosks and will sell music related items (shirts, posters, etc.) but NOT CDs.

Bill Gates alluded to wireless overthrowing the iPod format. Once you can get your music via wireless downloads, that will be the straw that breaks the laser’s back.

wpDiscuz

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