Big Box Retailers Doing Not Quite As Crappily As The Rest Of The Industry–But They’re Getting There

Apr 27th, 2007 // 7 Comments

bbuy.jpgToday’s Wall Street Journal examines how the “big box” retailers–i.e. Wal-Mart, Target, Best Buy and other places you only go to when in disguise–are faring in today’s increasingly iffy music-retail landscape. The stores are facing a number of problems nowadays, including an overall sales slump (of course) and increased pressure to remove albums with “offensive” lyrics and subject matter. But that doesn’t mean they aren’t just as powerful as ever:

In past decades, deejays and music critics helped shape musical trends. Today, many music industry executives agree, the big boxes have become the new tastemakers. Even as compact disc sales fall, their choices dictate which CDs are widely available on store shelves across the U.S. Big boxes are the industry’s biggest distribution channel — and the rock, hip-hop, jazz and classical music titles they choose not to carry face drastically reduced chances of reaching mass audiences.

Thanks largely to aggressive pricing and advertising, big-box chains are now responsible in the U.S. for at least 65% of music sales (including online and physical recordings), according to estimates by distribution executives, up from 20% a decade ago. Where a store that depends on CDs for the bulk of its sales needs a profit margin of around 30%, big chains get by making just 14% on music, say label executives who handle distribution. One of these executives describes the shift as “a tidal wave.” Despite the growth in online digital music sales, physical CDs still are the core of the recording industry, accounting for about 85% of music sales.

That sizable chunk of the market, though, only affects a relatively small amount of artists: According to the article, a typical Best Buy only stocks between 8,000 and 20,000 titles, while the biggest Tower Records location featured nearly 100,000 titles–not exactly good news for emerging acts on lower-profile labels. One thing the story doesn’t address: Why the heck does Costco still use long-boxes? Maybe more teenagers are shoplifting those Ray Charles and Time-Life Singer-Songwriter sets than we realized.

Can Music Survive Inside the Big Box? [WSJ]

  1. Hallux Valgus

    “the big boxes have become the new tastemakers”

    sorry, I couldn’t read past that.

  2. GLewis

    The longbox is poised to make a tremendous comeback, industry wide.

    You have to admit… It does make it easier to carry all 50 versions of The Jam’s greatest hits at one time.

  3. coolfer

    nice article, but two or three years too late.

  4. Chris Molanphy

    It’s too complicated to explain in detail, but Eliot Spitzer is partially to blame for this state of affairs.

    In the early ’00s, he successfully shot down the labels’ Minimum Advertised Price programs, which started in the late ’90s and forced retailers to price CDs at least at cost or at a profit, or else lose advertising dollars. The program kept CD prices above 10 bucks and pissed off bargain-hunting CD shoppers – but it made it possible for all-music retailers (Tower, Newbury, etc.) to compete with the likes of Wal-Mart and Circuit City, who started regularly pricing hit CDs at a loss in the mid-’90s.

    Spitzer argued that the labels’ program amounted to both price-fixing and collusion; and while I can’t argue with those charges on a legal level, the result was what this article is depicting: unrestrained big boxes undercutting both the little guy and the large-but-vulnerable guy (again, Tower). It’s the most Phyrric victory I’ve ever seen in this business – a rare instance where the evil-seeming labels were actually on the right side for once.

  5. baconfat

    yeah i remember feeling slightly guilty going to the website and getting that check for like 12 bucks in the mail in the aftermath of the price-fixing ruling, considering at the time i was working in independent music retail. i’m all about the little guys in this battle, but the majors gave up on them long ago, sadly.

  6. Trackback

    REVIEW / Wainwright takes command, with talent overflowing “his arrangements, once called pop-opera or neo-Weimar, have become Wagnerian, Britten-esque and, at times, evocative of late Beatles, Queen and mid-period Andrew Lloyd Webber, sometimes all in the same song.”

  7. leevilgenius

    As much as the “evil” record industry is to blame — I, as many, can give you chapter and verse on how they’ve slowly hung themselves over the last 2+ decades — you can’t dismiss radio’s culpability, nor music retail’s living off of co-op dollars instead of profit from sales.

    The inability to set minimum price is the death knell of stand-alone music retail. It is impossible for music to compete when Best Buy sells the new Avril Lavigne for $9.99 ($18.98 msrp) and independent retail — unless they buy direct from the majors — PAY over $12.00 just to stock it.

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