Almighty Press


March 18, 2006
INDIES IN A BIND

BY TODD MARTENS AND ED CHRISTMAN - Billboard

Smaller Labels Are Gaining Access To Big-Box Chains. Will They Turn Their Backs On Old Indie Retail Friends?


Patrick Monaghan was not trying to create a panic. But when he saw Best Buy was selling two dozen independently distributed CDs for $7.99, he could not help himself.

The Best Buy endcap is real estate reserved for the very rich, and in his view the very rich are the major labels. Yet here were titles by Antony & the Johnsons and Cat Power, each priced for less than a full-album download at Apple's iTunes store, let alone the wholesale cost of each of those CDs.

Monaghan, who runs Carrot Top Records in Chicago, went to the first place most music fans turn these days: the Internet. His blog—a rant against the labels that bought into Best Buy's program—generated responses from Matador, Merge and Secretly Canadian, among others, and began a dialogue about a label's obligations to its artists and its traditional retail base (Billboard, Feb. 18).

The discussion comes as independently distributed music enjoys a resurgence, with current-album market share increasing to 17.5% in 2005 from 15.8% the previous year.

At the same time, the retail base that has nurtured the independent labels is in trouble. For the year to date, sales at independent retailers are down 27.4% from the same period from last year. That is on top of the 28.1% sales decline retailers experienced in 2005, according to Nielsen SoundScan.

"It's the U.S. affairs and the economy we're in," Eric Levin of Criminal Records in Atlanta says. "Tire stores and nail salons are going out of business. I don't understand why a few indie stores going out of business is news."

Levin, who heads the Alliance of Independent Media Stores, has a right to be upset. The media has essentially pronounced independent retail dead, even though his store has recently expanded, and such outlets as Amoeba in Los Angeles and Good Records in Dallas are as strong as ever.

But while Levin and other independent merchants argue that their surviving indie stores are among the best the U.S. industry has to offer, he might be downplaying the actual number of such store closures. According to the Almighty Institute of Music Retail, which offers a store database online, almost 650 indie stores—and nearly 1,200 chain outlets—have gone out of business in the past two-and-a-half years.

As the number of indie stores has declined, Best Buy and other large merchants have shown greater receptivity to independently distributed titles, offering smaller or one-off marketing programs that are more affordable for cost-conscious labels.

That is good news for the labels, but puts them in the difficult position of sometimes turning their backs on their traditional retail partners, just at a time when the indie stores need them most.

Sub Pop GM Megan Jasper is a proponent of using indie-label marketing dollars to position CDs at independent retail. "The reason I don't mind paying for it is because these stores have supported us for over 20 years," she says. "They're the reason we've stayed in business. It's our responsibility right now to move forward in the digital world and simultaneously find a way to keep these stores relevant."

But as indie sales shift to larger merchants, it becomes harder for labels to place and promote their product in indie stores. That is because the shrinking account base limits the opportunities to secure premium space.

What is more, the diminishing availability of shelf space helps cooperative advertising retain a high pricing structure, even though overall U.S. album sales have dropped 21.2% from 2000's total of 785.1 million units to last year's 618 million units.

The Internet is also a factor. Labels looking for a way to forgo underwriting retail ad campaigns are increasingly turning to online solutions. Today, records can get a bounty of Web attention from the top online retailers for little money. However, it is likely that the days of free or cheap online store promotion will not last forever.

'MORE RELEASES, LESS SPACE'

In its textbook definition, cooperative advertising occurs when retail and manufacturers equally share the cost of advertising a product. But in the record business, it usually means that the labels and/or distributors foot the bill for any advertising, albeit through programs set up by stores. The retailer kicks in its share by placing the title on sale, taking a hit on the profit margin. The album is also given prime in-store real estate—such as hit walls, endcaps and kiosks—and retailers commit to ordering enough product to anticipate the expected boost in sales.

Label executives often forget the stores' contribution. One company head for an East Coast-based distributor angrily calls cooperative advertising "a misnomer," while the owner of a New York-based indie label disparages co-op as a "necessary evil."

Cooperative programs with national retailers are a massive investment for independent labels. Best Buy's smallest national program is $20,000 for a two-week hit wall; its top program costs $55,000, sources say. Trans World's programs include a $12,500 price-and-position package. Target recently raised its cost to $57,000, pointing out that the chain now has more stores, and has upped the program by one week to 10 weeks, but it also has a new-release wall priced at $34,200. Tower's new-release wall costs about $15,000 for 30 days. And the Gondola listening stations at Borders Books & Music cost about $6,500.

"There's this never-ending thing of more releases and less space," Kill Rock Stars president Slim Moon says. "It feels like we need to spend more now to get people to bring in more than one copy. That's not the way it used to be."

And it is not getting any cheaper. Eventually, independent labels will either be priced out of national co-op plans or be forced to find new avenues to drive retail traffic.

"If anything, cooperative advertising pricing has gone up," says Bruce Iglauer, owner of blues label Alligator. "A huge number of programs are simply priced over our head."

Redeye Distribution and its Yep Roc label no longer buy into cooperative advertising programs. "The rate cards just don't make sense," says Tor Hansen, head of marketing and sales for the Chapel Hill, N.C.-based company.

AFFORDABLE PROGRAMS

Yet independent labels with the money to spend are finding big-box retailers suddenly opening their doors for releases by lesser-known artists—at least when it comes to regional or theme-driven programs.

"Retail has been offering some great programs recently," says Missi Callazzo, VP of New York-based Megaforce Records. The big-box stores have been very responsive to the indies, and some accounts have even customized programs for the label, she reports.

Kill Rock Stars' Moon agrees. He cites themed programs, such as the one that provoked Monaghan's ire, as well as a girls-in-rock promotion at Best Buy, in which he placed punk act the Gossip.

"If you want to go whole hog and do a nationwide, store-wide sale, the price has gone up," Moon says. "But [the big chains] have more cool, price-conscious options for indies. It feels to me like there's more affordable options to do targeted retail than there were for us 10 years ago."

But if the affordable options have increased, so has the competition for limited space.

"We get very frustrated with Barnes & Noble because we think they hit our adult demos," one indie-label executive says. "We believe in them as a retailer. But we have been turned down quite a bit for their programs, which we can afford."

Dealing with the larger chains can also backfire on an indie. To invest in such programs a label must be confident its releases will ultimately sell through. If not, the label soon will be eating returns.

And if the big boxes decide independent music is no longer cool, the labels will again be dependent on a weakened indie store universe.

"The chain stores will focus on what's bringing in business, and they'll try to go the extra mile," Sub Pop's Jasper says. "If and when the day comes when independent records like Death Cab for Cutie are slowing down and another genre emerges, the independent stores will continue servicing this audience."

Indie labels still like to work with Tower Records, Virgin Megastore, Borders and Barnes & Noble—chains that carry catalog and have long supported indies—as well as the indie retail community, particularly the store coalitions.

"We love the indie coalitions," Kill Rock Stars' Moon says. He also cites indie retailers Amoeba, Other Music and Newbury Comics as "our cornerstones."

But finding space at the coalitions is just as competitive as the chains. Independent retail has to be selective: Levin says the AIMS coalition usually gets upwards of 70 submissions for about 30 listening-station slots. Likewise, Don VanCleave, who heads up the Coalition of Independent Music Stores, says, "We are getting more than we can use." He says CIMS programs such as the metal listening booth and its DVD stations sell out every month.

CIMS' listening kiosk program runs $3,300; its top program is $8,000. At AIMS, the listening post costs $1,600. The Monitor This program at Music Monitor Network, another coalition, runs $4,750.

CIMS and AIMS rely on a vote among their respective stores to determine which albums will win the opportunity to pay for space.

THE INTERNET THREAT

The Internet also plays a role in the marketing dynamic, sometimes supplementing and sometimes replacing cooperative programs.

Sub Pop's Jasper notes that on the rare occasion that the coalitions reject a Sub Pop artist, she can promote the artist online for almost nothing.

"That's the beauty of amazon.com," Jasper says. "When you go online, there are more options to actually have your CD release visible. There are so many more options that just don't require physical space."

Indeed, as Jasper notes, the fan base for Sub Pop act the Postal Service was built largely via the Internet.

In fact, many label executives cite iTunes as a bigger threat to independent retail than anything Best Buy will do. Like CIMS, they say, iTunes has won over an indie audience by snaring exclusive content for independent artists, including online-only EPs and add-ons to album purchases.

"There's another group of kids, even larger than the kids who bought the Postal Service at independent stores, who bought that album online," Jasper says. "They're going to Amazon and iTunes. There's a huge obligation we have to continue the health of independent stores. At the same time, we would be fools not to support the business of these companies. It's a constant question, and it's hard to predict where it will end up."

But the economics of the Internet may soon provide the answer. With retail space at such a premium, many fear it is only a matter of time before such Web stores as iTunes follow in the footsteps of traditional retailers and begin charging for marketing programs.

Leslie Ransom, head of sales for Chicago-based indie Touch & Go, says, "Brick-and-mortar retail is obviously supporting their bottom line through ad programs, so I don't see why the Internet wouldn't start doing that at some point."

This too will change the equation for labels and retailers. No label is looking forward to the time when co-op dollars must be balanced among the Internet, independent retail and the Best Buys of the world.

"The importance is remembering why you need to do right by each organization," Jasper says. "The independent stores are the heart and soul, and if you forget that, you lose the reason you even took a job at a label in the first point."

Permission granted by copyright holder for this express use only.



Article List

November 21, 2013 - New York Times - Records Are Dying? Not Here

March 27, 2013 - Glendale News-Press - It's a matter of record: Burbank's Atomic Records and Backside

December 30, 2012 - Detroit News - As one record shop closes, vinyl music plays on in another

April 20, 2012 - Boston.com - New vinyl album releases give record stores a kick

November 20, 2011 - Salon.com - In an iTunes age, do we need the record store?

June 9, 2011 - NJ.com - Curmudgeon Records closes its doors for good

April 16, 2011 - Wall Street Journal - One-Day Record-Store Revival

February 1, 2011 - Charlottesville News & Arts - Plan 9 Changes Location

August 13, 2010 - The Tennesean - Anita Wadhwani: Nashville indie record stores' sales spin in right direction

January 3, 2010 - Delaware News Journal - Delaware music shops get creative to compete with downloads, chain music stores

September 24, 2009 - Los Angeles Times - L.A. independent record shop is still in a groove

August 20, 2009 - CNN Money - You can make money off online music

June 14, 2009 - New York Times - Retailing Era Closes With Music Megastore

May 13, 2009 - Medill Reports - Resurgence in vinyl helps record store in recession

April 26, 2009 - Los Angeles Times - In a digital age, vinyl albums are making a comeback

April 18, 2009 - Charlotte Observer - Record stores band together

April 17, 2009 - Detroit News - Record Store Day spins profits and good beats at Metro Detroit shops

April 17, 2009 - Associated Press - Record Store Day celebrates indie retailers

April 10, 2009 - Detroit News - Street Corner Music moving to Oak Park plaza

April 10, 2009 - Toledo Free Press - New record store shakes up Adams Street

January 8, 2009 - OC Register - Closing date for Virgin Megastore at The Block

October 28, 2008 - Reuters - AC/DC back in "Black" with global smash

September 23, 2008 - Chicago Daily Herald - Independent music stores haven't yet disappeared from suburbia

June 23, 2008 - New York Times - For Tom Petty Fans, the True Sound of Vinyl, Also Captured on a CD

April 19, 2008 - Lafayette Journal Courier - For some, record stores live on

April 19, 2008 - New Jersey Star Ledger - It's Record Store Day. Play it again, Sam!

April 18, 2008 - New York Times - Record Stores Fight to Be Long-Playing

April 18, 2008 - Dallas Morning News - Retailers hope Record Store Day turns up volume at mom-and-pop shops

April 16, 2008 - Timeout New York - Platter Up

December 27, 2007 - Los Angeles Times - Virgin Megastore to close shop

December 16, 2007 - New York Times - For a "Dinosaur," an Exuberant Second Life (Looney Tunes Reopens)

December 3, 2007 - Detroit Free Press - The same old song: Music store closing

November 7, 2007 - Washington Post - Eagles soar past Britney to top of charts

November 4, 2007 - The Ledger - Two Young Entrepreneurs Unafraid of Risk of Going on Records

August 20, 2007 - Billboard - Almighty Taps Hans As VP

June 29, 2007 - ABC News - Long Live the Record Store

June 28, 2007 - Orange County Weekly - Locals Only

June 13, 2007 - Reuters - McCartney's Starbucks album heats up U.S. charts

June 9, 2007 - Billboard - Commentary: Retail Recovery

May 9, 2007 - Columbia Free Times - High Fidelity

March 22, 2007 - NARM Awards - Almighty Retail Named NARM Related Supplier Finalist For Third Consecutive Year

March 16, 2007 - Chortler - Shout! Factory Has Revamped Its Website

March 9, 2007 - PhillyBurbs.com - Internet killed the record store?

March 4, 2007 - Sacramento Bee - New groove for Solomon

February 28, 2007 - USA Today - Exclusives aim to pull music fans into stores

February 28, 2007 - New York Newsday - Latin record shops thrive despite changes in music business

February 23, 2007 - Montpelier Bridge - Buch Spieler Sails On Despite a Music Industry Decline

November 20, 2006 - Austin 360 - In Austin, Niche Indies Rule

October 20, 2006 - Sacramento Bee - Tower brand could survive

October 15, 2006 - Pittsburgh Tribune-Review - Tables have turned on record stores

October 14, 2006 - Sacramento Bee - Small labels lose valuable ally in Tower

October 6, 2006 - Desert Sun - Record Alley remodels

September 27, 2006 - Music & Copyright - Niche Marketing of CD albums continues to rise in the US and Physical Sales overall decline

September 22, 2006 - CNN.com - Indie stores confront a new era

September 19, 2006 - New York Newsday - 34 years, and that's not all, folks

August 18, 2006 - The Roanoke Times - Plan 9 Music puts new spin on 5 Record Exchange stores

August 3, 2006 - The Hollywood Reporter - Nervous music retailers face hazy digital future

July 16, 2006 - New York Times - The Graying of the Record Store

July 13, 2006 - Rolling Stone - The iTunes Holdouts

July 11, 2006 - Roanoke Times - Record store's "last dance"

July 5, 2006 - Port Townsend and Jefferson County Leader - Quimper Sound moves, expands to change with times

June 6, 2006 - Billboard - NARM Nominations Announced

May 10, 2006 - Detroit MetroTimes - Out of the Groove

March 18, 2006 - Billboard - Indies in a bind

January 16, 2006 - Los Angeles Business Journal - Slipped Discs

January 6, 2006 - Los Angeles Times - Indie record stores doing slow fade out

December 26, 2005 - Los Angeles Times - The Music Stops for Indie Shop

December 1, 2005 - Rolling Stone - Fall Sales Dry Up

October 13, 2005 - Desert Sun - Music snobs rejoice: Independent record stores still thrive in desert

September 12, 2005 - Salt Lake Tribune - Twilight for Starbound Records

August 18, 2005 - New York Post - Oldies are now singing a new tune - Music stores go digital

July 2005 - Rolling Stone - Record Biz Still Sinking

June 18, 2005 - Billboard - NARM Noms Announced

March 21, 2005 - CMJ - Hart of the Matter

February 16, 2005 - MSN - Genius Loves Company

October 12, 2004 - Rolling Stone - Wal-Mart wants $10 CDs

July 10, 2004 - Billboard - Almighty Institute To The Rescue

January 14, 2004 - Creative Loafing Charlotte - Manifest Destiny

December 29, 2003 - New York Times - on the rise of mass marketers

November 13, 2003 - Rolling Stone - Best Buy snags rights to band's new DVD

October 9, 2003 - USA Today - Best Buy wins sales rights to Rolling Stones DVD box set

October 6, 2003 - Reuters - Stones Paint It Black For Retailers

May 31, 2003 - Billboard - Retail Track

May 9, 2003 - Hits - Rerap





Almighty on TV:

•Almighty founder Clark Benson on ABC News

•Almighty founder Clark Benson on CNN

(Quicktime required for below files)

KTLA-TV Los Angeles - Low Bandwidth
KTLA-TV Los Angeles - High Bandwidth