"I'd say across the board [sales] for mom-and-pop music stores are down 11 percent this year," says Don Van Cleve, president of the Coalition of Independent Music Stores. "It's always been a tough business, but now it's a brutal one."
Just ask the suits at Trans World Entertainment, the country's largest music retailer and the owner of nearly 1,000 record shops, including Camelot, Strawberries and the chain that calls itself "fye." Through the first three quarters Trans World posted a net loss of $17 million. It's never a good sign when an industry's No. 1 retailer routinely fails to post a profit.
At least Trans World outperformed Tower Records. The 41-year-old chain, which started as a Sacramento drugstore and during the '80s championed CDs while turning its enormous catalog-stuffed stores into cultural meeting places, lost $40 million over the first nine months of the year. By contrast, in 1995 the chain pocketed $15 million in profits. A last-minute deal with creditors in October allowed Tower to keep its doors open, at least through next April.
Music retailers have a laundry list of concerns, such as sky-high $19.98 CD list prices set by record companies, the shrinking pool of commercial singles (see related story) and major labels' rewarding mass merchants like Best Buy with exclusive product. (U2's recent DVD concert release was shipped to Best Buy two weeks before any other retailer.) "There's a million things going on and none of them are positive," complains Van Cleve.
The record labels are generally implacable in the face of complaints about rising prices. Decades of experience has shown them that when fans really want a new record -- whether it's Garth Brooks, Madonna, the Backstreet Boys or the hot new band of the moment -- resistance to new, higher prices evaporates. The trouble today is that not as many fans want the new BSB or Garth Brooks, and there is no dominant commercial trend.
The music business is to some extent dependent on the vicissitudes of pop culture; most observers agree that, after a decade of often double-digit growth, driven first by the hard rock band Nirvana and then by record-breaking teenybopper artists like 'N Sync and Britney Spears, the industry is looking for a new focus.
That problem is exacerbated by the continued runaway sales of blank, recordable CDs, or CD-Rs. As Salon reported last year, lots of music retailers find themselves in the awkward position of watching CD-Rs become the bestselling item in their stores, while at the same time realizing CD-Rs could literally drive them out of business. Thanks to CD burners hooked up to computers, the phenomenon of file sharing introduced to the masses last year by Napster, and popular at-home CD taping courtesy of Phillips stereo components, millions of consumers are simply making their own CDs and taking a giant bite out of over-the-counter sales.
For instance, industry observers used to be able to look at a superstar's first-day sales numbers and, based on a reliable formula, be able to project how many copies that album would sell after seven days in stores. Now with CD-Rs, labels often see a big first-day sales number and then watch it tail off over the next six days, falling short of projections.
"We saw that with the last Blink-182 record," says Mayfield at Billboard. "If you looked at first-day sales you'd think it was going to have a huge week. Yet it only ended up having a very good week. Some labels are starting to worry that, you know, Charlie bought one copy and made three copies for his friends."
Industry analysts predict 1.2 billion blank CD-R discs will be purchased this year in North America, an increase of 50 percent over last year. By comparison, roughly 750 million pieces of prepackaged music will be sold domestically in 2001.
It's not just the dirt-cheap CD-Rs themselves, it's the presumption among so many young consumers, radicalized by Napster, that music should be free. "I think it's going to be difficult to recapture people who stopped paying for music," says Singmaster. "According to their value system, they shouldn't pay for music."
That attitude does not bode well for XM and Sirius, two fledgling satellite radio firms launching a service that offers digital-quality, sometimes commercial-free programming. If fans don't want to pay $16 for CDs, will they pay more than $100 each year for something like radio, which has always been free?
Next page: Clear Channel loses $232 million, and record companies aren't hiring