Facing the music – The death of the record storeFebruary 5, 2007
When Sony Music became the largest record label to start selling music online in 1997, hoping to ape Amazon‘s success with books, most pundits (this newspaper included) smugly argued that it was likely to end in tears (see article). Book stores, it was said, were dying because they could not compete with Amazon‘s millions of titles. But customers would stay loyal to music shops because buying online would deprive them of the joy of browsing the aisles and impressing dauntingly hip sales staff with their insights into obscure acts.
Almost a decade later new book stores are popping up across Britain, while record stores are in danger of dying out. On January 11th HMV, Britain’s biggest music retailer, posted a first-half loss. Music Zone, whose 104 shops specialise in cut-price CDs and DVDs, went into administration on January 3rd. Virgin Megastores, some of whose stores occupy the choicest spots in British retailing, said that Christmas music sales had fallen from a year earlier.
Smaller independents are faring no better. Mike Caddick, who has owned Swordfish Records in central Birmingham since 1979, says that a couple of years ago his city had at least seven independent record shops. Now his is one of only two.
The assault has come on two fronts. Supermarkets have been selling music aggressively in the past five years. TNS, a research firm, reckons they now account for more than a quarter of all sales. Most stock no more than the 100 bestsellers, but according to the British Phonographic Industry these titles make up about a third of the country’s total album sales.
By concentrating on the fastest-moving stock, supermarkets have been able to drive down prices, turning music retailing into a high-volume, low-margin business. This has rippled through the industry, forcing record stores to cut their prices in turn. TNS reckons that the average price of an album has dropped by 16% from £11.25 ($22.10) in 2000 to £9.41 last year.
Music stores have tried to compensate by trimming their selection and promoting DVDs, on which they make more profit. But that seems only to have compounded their problems. Dan Cryan of Screen Digest, a firm of analysts, says the promotion of DVDs in music stores may have hastened the decline in album sales. But DVD sales are falling too, largely because viewers over the age of six get bored watching the same movie repeatedly and more films are available on television.
The second threat to high-street music shops is the internet, which has made copying and stealing music easier but also allowed consumers to sample (legally) a wider choice of albums than even the biggest music stores stock. Online retailers such as Amazon have more than doubled their share of music sales to about 11% over the past five years. Legal download services, including Apple‘s iTunes, account for less than 3% of the market, according to Verdict, a research firm, but their share may quadruple over the next five years. Music lends itself to internet selling, says Nick Harrison of Mercer Management Consulting, because the customer either knows what he is after (and can order online) or else wants to browse a large range, which may not exist on the high street.
But the dwindling profitability of music shops may ultimately limit that range. Peter Quicke, the managing director of Ninja Tune, a niche recording label, says stock-trimming by high-street stores is forcing firms to produce fewer albums and cut what they spend promoting new acts.
“For the consumer to be able to find anything and everything, shop-front or not, the product needs to be out there and people need to know it exists,” says Hector Dewar of Defected Records, an independent dance label. “Try asking the sales assistant in Tesco for his opinion on the latest music trends.” The greatest losers may be small recording companies, and those who love their music.
in: The Economist