Napster vs. the record stores

Is the file-sharing craze bruising retailers?

Published August 7, 2000 6:31PM (EDT)

As record companies skirmish in court with the file-swapping phenomena known as Napster, music retailers have become the weary refugees trapped between warring countries.

From their frontline view of the battle, store owners are reluctant to pick sides in this high-stakes conflict; like skeptical civilians, they see through both sides' wartime rhetoric. Indeed, of the myriad players involved, directly or indirectly, in the swapping saga, retailers may be among the few who seem to view both parties -- Napster and the major labels -- with equal contempt and suspicion.

"They both rip off artists," says Carl Singmaster, owner of Manifest Records, a retail chain with seven stores in North and South Carolina.

Another oddity: Retailers can't seem to agree on the central question: Is Napster good or bad for music sales?

The answer is crucial to the legal strategies put forth by Napster and the Recording Industry Association of America, which is suing the former on behalf of the major labels. Trying to prove "irreparable harm" done by Napster to the record industry, the RIAA offered the court two recent studies on sales conducted by SoundScan, the industry's official sales counter. Both suggested that Napster users, content to get free music online, are buying fewer CDs (especially near computer-saturated college campuses). Napster counterpunched, pointing to competing studies that suggest just the opposite -- that the service is whetting appetites for new music and driving consumers into stores.

Which study is correct? Don't look to retailers for a definitive answer. In an informal survey of independent music chain operators, who, together, own nearly 50 stores that cater to mostly college-aged crowds, owners appear to be split over the crucial cause-and-effect question.

"Our sales have been great," reports Brett Wickard, owner of Bull Moose Records, a nine-store chain in Maine. "We've had absolutely no negative effect from Napster. Sales are actually up because Napster has brought music to the forefront. Everybody's talking about music." He scoffs at the notion that Napster cannibalizes CD sales. "If Napster is stealing sales from Eminem, I want it to steal from every new release. Because that was our biggest selling CD, ever."

Dylin Radakovitiz, who owns four Dimple Records stores in the Sacramento, Calif., area, agrees that Napster is making her cash registers ring. "Our sales are up 19 percent over last year because of all the publicity," she reports. "You can't open a newspaper or magazine and not see a Napster headline. We've never got so much free advertising. Music is exciting again."

Others shopkeepers have competing evidence. Carl Singmaster, head of the multi-chain Manifest Records in Clemson, S.C., has a branch at Clemson University that would seem to be a perfect Napster test case; it's the only music store in town and it doesn't compete with any nearby mass-merchant discounters.

According to Singmaster, his Clemson outlet (which caters almost exclusively to college students) is experiencing its second consecutive year of declining sales. "That's the first time in 15 years that that's happened to one of my stores, and we've weathered a few price wars." Singmaster initially blamed his staff; now he blames Napster. "Considering my other stores continue to grow, you have to start to look at other factors," he says. "Napster seems to be the culprit, which is why I tend to believe the RIAA study."

Like Singmaster, Mike Negra, owner of five Mike's Movie and Music stores in Pennsylvania and Virginia, reports that sales at stores near campuses have recently dropped dramatically, while business at his other stores remain robust. "I think the RIAA concluded music sales were off by 6 or 8 percent in college towns. I think it might be more than that."

In New England, Newbury Comics has been a music-buying mecca for college students for more than two decades. Last year the Boston company's 21 stores took in $70 million in revenue. This year, owner Mike Dreese reports comparable sales for the month of June were off 8 percent -- the company's single largest monthly drop in nearly a decade.

Do sagging retailers blame Napster creator Shawn Fanning? Not entirely.

"I think the RIAA did more with its lawsuit to spread file-sharing than anything else," says David Lange, who runs Compact Disc World, an 11-store chain in New Jersey, which is hitting its projections this year. "The labels are great at marketing music in a traditional way, but this fight is all about company control."

"The music industry is faced with a disaster," says Ron Rosenberg, who founded Record Exchange 22 years ago, and now owns 11 stores in the Mid-Atlantic states. "They knew it, but couldn't get its act together and do anything." He is referring to the early days of CDs, when a new unprotected digital format portended the future danger of piracy on a widespread scale; the industry failed to create a proper watermarking system to curtail such behavior.

Rosenberg argues the labels have themselves to blame for the Napster debacle. "By not having locks on the doors they encouraged it," Rosenberg says. "Why anybody in their right mind didn't see this coming 10 years ago is beyond me. That's what pisses me off."

Others retailers envision an even darker scenario. Even if the RIAA manages to shut down Napster, retailers are convinced record companies will begin using the Internet to muscle into brick-and-mortar sales territory

"My problem's not with Napster, it's the labels who want to go directly to my customer," complains Radakovitiz at Dimple Records. "They've been doing it for years with their 13-CDs-for-a-penny record clubs."

"What was BMG's recent purchase of [the online music store] CDNow all about?" asks Manifest's Singmaster. "They're going after us directly. They want to cut out the middleman."

Nevertheless, as equal-opportunity critics, retailers have little patience with the argument that music should be free, or that Napster actually helps expose new acts. "Music is free right now at," says Wickard at Bull Moose. "So go download all those unknown acts they have. But don't be a hypocrite and download only the major-label stuff from Napster."

Meanwhile, Lange suggests the Napster-sponsored "buycott" was a mistake. "They were desperate at that point. And when you're facing the death penalty you do things that seem contradictory."

The "buycott" was launched hours after U.S. District Court Judge Marilyn Hall Patel ordered Napster shut down. Napster CEO Hank Barry subsequently urged the company's 20 million users to buy CDs, which would prove that Napster is good for the music industry. But if Napster users make such great CD consumers, Lange and others wonder, then why did the company have to initiate a special promotion to get fans to buy CDs? And more importantly, why did so few users oblige? According to SoundScan, virtually none of the acts Napster asked its users to "buycott" saw a sales increase.

If the "buycott" had worked, it could have sent a powerful message: If a mere 2 percent of all Napster users purchased the same album by Limp Bizkit, the record would have shot to No. 1. Instead, Bizkit -- among Napster's most-prominent supporters -- only sold an additional 1,000 copies during the "buycott," a figure that represents less than one-hundredth of 1 percent of Napster's user base.

Singmaster is not surprised: "I've never had one person come into the store looking for a record and say, 'I heard it on Napster.'" \

By Eric Boehlert

Eric Boehlert, a former senior writer for Salon, is the author of "Lapdogs: How the Press Rolled Over for Bush."

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