Is Napster hurting record sales?

No, say the numbers. Business is looking good, even if the Backstreet Boys don't reclaim their rightful world supremacy.

By Eric Boehlert

Published November 27, 2000 8:30PM (EST)

The holiday music buying rush is on -- and this year, more than ever before, industry observers are scrutinizing sales numbers as if they were tarot cards, striving to discern any iota of information that could help them predict the future. Is Napster finally undermining sales? Or, even more importantly, will the Backstreet Boys reclaim their rightful place as the No. 1 boy band in the universe?

The bad news for skittish music retailers is that they thought that by now a federal court would have stepped in and shut Napster down, removing its threat to Christmas CD sales once and for all. The good news is that even the cheapest of holiday shoppers isn't likely to download swapped songs onto a burnt CD and then wrap it up as a gift.

In other words, shoppers still need to get their hands on old-fashioned shrink-wrapped CDs, so no doubt they will be flooding stores in coming weeks during the music industry's annual fourth-quarter game of make-or-break.

"Digital downloading will have less of an impact during the months of November and December," notes Joe Pagano, vice president of music and movie buying for the 412-store Best Buy chain.

In any case, to date it's so far, so good. Beginning in late October with the arrival of the latest by rap/rock bandits Limp Bizkit, "Chocolate Starfish and the Hot Dog Flavored Water," retailers have seen a string of blockbuster albums debut big, in the range of 500,000-plus CDs sold in the first week. Limp Bizkit actually came out of the gates with 1.05 million albums sold in seven days, according to industry sales outfit SoundScan, making it the best first-week tally ever for a rock record.

Two weeks later, on Halloween, new releases from Jay-Z (558,000), Outkast (525,000) and U2 (427,000) all roared into stores. "That was our biggest sales day of the year," reports Carl Singmaster, who owns seven Manifest record shops in North and South Carolina. U2's first-week tally actually marked the band's best debut since SoundScan began tabulating sales electronically a decade ago.

R&B crooner R. Kelly then stunned the industry by selling 543,000 CDs the next week, easily the best debut of his career. For the week ending Nov. 12, album sales jumped 9 percent compared to the same week in 1999. For the year, that put sales of albums, which drive the industry, up 6.4 percent compared to 1999.

If Ricky Martin's sophomore release slumped one week later (racking up just half of what his debut did), that was offset by the surprisingly strong showing of soul siren Sade's comeback album (370,000 copies sold), as well as the runaway success of the "Now That's What I Call Music" compilation series, with "Vol. 5" hitting 444,000, a new best for the genre. And then there's the Beatles' latest greatest hits, "1," featuring 27 of the Fab Four's top songs. It's a No. 1 blockbuster, selling 595,000 copies in its first week. More importantly, retailers suggest that, unlike other big name titles whose sales often drop off in week two and three, look for "1" to stay strong as a stocking-stuffing favorite for the next month.

Another bonus: With Thanksgiving falling so early in November this year, and Christmas falling on a Monday, that gives retailers five full weekends of shopping, and one of the longest Thanksgiving-to-Christmas periods possible.

So short-term, all's well, right? Napster, despite all the hue and cry and wailing and moaning, is still irrelevant to the larger picture? Well, maybe. Singmaster at Manifest worries that if fans have been downloading music for free all year, they'll simply leave CDs off their holiday wish list. Others, pointing to a scorching spring when instant, multiplatinum albums by 'N Sync, Britney Spears and Eminem created traffic jams at check-out counters (combined, the three titles sold more than 5 million records in just their first week), and year-to-date sales increases which flirted with 10 percent, can't help wondering what could have been. "You'd think we would be farther ahead than by six points," notes Geoff Mayfield, director of charts at Billboard magazine. "I certainly thought we were heading toward a higher terrain."

Especially when you consider so far this year 15 No. 1 albums have debuted with sales north of 500,000. That's the most ever recorded.

But the intriguing thing is that most retailers are not blaming Napster -- at least, not yet. Instead, they're blaming their own industry.

So what happened? A dreadful summer release schedule, for one thing. "August and September really took the air out of the tires," says Mayfield.

As the labels looked ahead to cash in during the holiday shopping season of the fourth quarter, superstar releases were virtually nonexistent between July and September. "It was the driest summer in memory, and I've been doing this 15 years," says Singmaster. The SoundScan numbers confirmed his perception, showing total music sales for the month of August that declined from August 1999 -- the only month of the year to suffer that kind of softness.

Not surprisingly, music retail giants Musicland (owners of the Sam Goody and Suncoast chains, among others) and Trans World (Record Town, Camelot, etc.) both blamed their weak third-quarter results on slim pickings in the new-release racks.

That midyear slowdown is another reason this holiday shopping spree is so important for the industry. Which is why the entire industry is waiting with bated breath to see what happens with the new release from the Backstreet Boys. Their latest, "Black & Blue," reached stores Tuesday. The boy group's 1999 release, "Millennium," stunned retailers when it debuted with 1.1 million albums in its first week. (It has since gone on to sell 13 million.) But a mere 18 months later, the bar for the Boys to beat has been raised to 2.4 million. That's how many albums its pop competitors 'N Sync sold earlier this year, crushing the previous one-week industry best.

Although both acts record for Jive Records (home also to R. Kelly and Britney Spears -- easily the hottest label in the business), there's little doubt the sales competition between the boy wonders is fierce. The final tally for "Black & Blue" won't be known until Thursday, but industry observers seem to think the Backstreet Boys will fall short of 'N Sync, coming in closer to 1.7 million.

But again, nobody is blaming the Napster bogeyman for potential Backstreet Boy (relative) sluggishness. And that's for a couple reasons, namely "Shape of My Heart" and "Bye Bye Bye." The former is the name of the Backstreet Boys' current single, which has turned out to be a solid, if unspectacular, success on radio and MTV. (In 1999, the Boys rode the wave of "I Want It That Way," recently dubbed by Rolling Stone magazine as one of the 10 best pop songs of all time.)

By comparison, "Bye Bye Bye" turned out to be 'N Sync's career-making single, and may go down as the biggest radio hit of this year. Also, the legal hurdles faced by 'N Sync last year as it jumped labels from RCA to Jive kept pushing its album release date back month after month, which in turn caused fan demand to continue to build up, and created an unprecedented commercial phenomenon: The band sold a million albums the first day the record was in stores.

Not that the Backstreet Boys don't have a few cards to play of their own. First there was the eight-figure Burger King advertising campaign in August and September featuring the band. (Burger King will also sponsor the group's tour next year.) Supported with saturation TV time buys -- the costly kind record companies simply cannot afford on their own -- the fast-food chain sold five different Backstreet Boys music samplers for $2.99, weeks before the new single went to radio. (Look soon for Backstreet Boys action figures at Burger King.) "There's no question that's going to help launch the record," says Jay Coleman, founder of Entertainment Marketing Communications International, which marries advertisers with artists.

Also sure to boost the first-week sales tally for the Backstreet Boys was the fact so many kids were out of school and in stores over the holiday weekend. While they visited those stores they were sure to find no shortage of great deals on "Black & Blue." That's because earlier this year, under pressure from the Federal Trade Commission, record companies agreed to do away with their minimum advertised price policy. That meant retailers, particularly aggressive mass merchants, were free to use CDs as a loss leader. Last week Best Buy was selling "Black & Blue" for $9.99, and losing nearly $2 per CD in the process. (Best Buy, like all retailers, purchased the title from Jive's distributor for roughly $12.) At half the suggested retail price of $18.99, those $9.99 fire sales could generate an extra BSB boost.

Of course it's not all about the Boys and it's not all about teens. That same Thanksgiving week, rap kings Wu-Tang Clan dropped a new one, as did country crooner Tim McGraw (aka Mr. Faith Hill), and soul siren Sade, her first in eight years. Meanwhile, Neil Young offered up a retrospective box set, while Elton John released a live album. One week earlier, the Beatles, James Taylor and the Eagles all put out greatest hits packages, hoping to satisfy the baby boomers' never-ending appetite for all things '60s and '70s.

Which leads to the curious question: 30 years from now will nostalgic, 40-something music fans be lining up for the Backstreet Boys' boxed set? Or will they just download it?

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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