Internet killed the media store

Soundwave CDs’ closure may cue a new tune, a dirge for hard-copy music

Tower Records is one of a number of stores hard pressed by the heavy  weight of advancing   technology.

Tower Records is one of a number of stores hard pressed by the heavy weight of advancing technology.

Photo By David Robert

Soundwave CDs closed Wednesday. On May 10, with days left to go, the store is already mostly empty, and half a dozen customers browse through the now picked-over selection of CDs. Perhaps feeling slightly vulture-ish, the customers keep their voices at a respectfully low level, but the mood is hardly funereal. Owner Tim Schafer, in fact, seems to be in a surprisingly good mood.

“Better to get out now, while we’re still having a few laughs,” he says of the decision to close.

Everything here is on sale. Everything, including shelf hardware and display racks. Thirty bucks will get you a convex security mirror. Why is the store selling off everything you can put your hands on? Because Schafer and store manager Richard Jackson believe music will not come in a format you can put your hands on for much longer.

In other words, “The CD’s days are numbered,” says Schafer.

It would be tempting to blame the store’s demise simply on over-saturation of the market. Soundwave had been competing with Borders, Barnes & Noble, Target, Best Buy, Circuit City, Tower Records, multiple Wal-Marts and online retailers. In the last several years, Reno has seen the closure of numerous music outlets. But Soundwave managed to survive the competition with a long string of independent stores (Mirabelli’s, the CD Store, Insurrection, Resurrection and Music Castle, among others), and it even outlasted a few chain stores (Wherehouse, Sam Goody’s). Richard Jackson, Soundwave’s manager, points to a noticeable drop in sales since the popularization of iPods and MP3 players. He places the blame for Soundwave’s demise squarely on downloading music from the Internet.

“We’ve weathered the storm of your Wal-Marts,, all of that, Best Buy, Circuit City. Everybody’s taken their chunk of CDs … but with downloading—America in general is lazy—why even leave your house to get your music? Why pay $12 for a product you can get online for $8 or free?” asks Jackson.

Some 45-50 million iPods, the most popular (but hardly the only) digital music player, have already been sold. Sales of the devices dipped recently, from 14 million in the first quarter—which included holiday sales—to 8.5 million in the second quarter of this year. Yet even this lower number represents millions of music listeners who may no longer be buying discs. Fifteen states and the District of Columbia currently tax downloads, with New Jersey considering legislation. Nielsen now has charts for downloaded songs. Artists as prominent as Bruce Springsteen, the Red Hot Chili Peppers and Neil Young are releasing tracks exclusively as downloads or pre-releasing album tracks as downloads. With even major chains like Tower Records struggling (the giant retailer filed Chapter 11 bankruptcy in 2004), Soundwave decided the writing was on the wall, and rather than sign another five-year lease, they closed their doors.

“We’ve talked to our reps from all the major record labels and our distributors when we were talking about closing, and most of them said we’d be foolish to do a five-year lease. They don’t think their jobs are going to be around in five years. It’s scary, but that’s how quickly this is moving,” says Jackson, who also says that even large chains are making significant cuts in the CD departments.

Marco Bissio Jr., media supervisor at the Reno Best Buy, insists that the CD sales department won’t be changing at his store any time soon. Although he is unable to confirm or deny reports that some new Best Buy locations will not stock CDs, it’s been reported that the change has already happened in some markets.

“As far as us getting any news of things changing, absolutely not. We’re still getting the shipments in, we’re still selling them, and that’s it,” he says. “We have a continuous customer base coming in to buy CDs.”

However, the rosy picture of CD sales at the Reno location contrasts with the turbulent relationship Best Buy, on the corporate level, has had toward retail music in recent years.

In 2001 Best Buy purchased Musicland, owner of Sam Goody and Suncoast stores, and by 2003 had shut down 90 Sam Goody stores. Best Buy then essentially gave the still-unprofitable Musicland away, along with its enormous debt, to Sun Capital Partners of Boca Raton.

Musicland’s troubles continued after being cut loose by Best Buy. In February of this year, Musicland declared Chapter 11 bankruptcy and received court approval for a plan to sell the company to Trans World Entertainment and close 341 stores. Trans World is the parent company of multiple music retailers, including Wherehouse, which once held locations in both Reno and Sparks. Both of these locations have gone out of business.

Sugar, we’re goin’ down
What is going on is more than just a slump for music retailers. Previously the biggest opponents of downloading, major record labels have gotten more than used to the idea.

“The industry’s pushing people towards the Internet now,” says Jackson. “They’re going to try to push their product no matter what, whether it’s this way"—he indicated a CD—"or online.”

Marco Bissio Jr. says his store is sticking with CDs, but Best Buys may be whistling past the graveyard.

Photo By David Robert

But the shift toward downloading cuts both ways. And the record companies’ ambivalence toward downloading suggests they know this better than anyone.

To understand their nervousness, we need to answer the question: What exactly do record companies do, anyway?

There was a time when record companies actually recorded music. The companies ran their own studios. Recording equipment was big, expensive and difficult to operate. The service record companies provided musicians was the opportunity to make professional quality recordings.

Now it is more common for record companies to simply front the money for recording time at independent studios. The artists then have to repay the recording costs (along with any advances) out of the money from record sales. This arrangement has led to the following scenario becoming fairly common: a band signs to a major-label, makes a poorly selling record, and finds that instead of becoming wealthy superstars, they are still unknown, though now with the distinction of being massively in debt to a record company.

Digital recording technology has advanced to the point where, with the investment of a few thousand dollars (more or less, depending on your needs), anyone can buy the equipment to do professional quality recordings at home, further reducing the shine of the major-label deal brass ring.

The advantage of major labels has been the ability to distribute. They will (if you are an artist they care about) get your CDs into stores all over the world. However, if people stop buying music in a hard format, this advantage becomes irrelevant. Anyone can post music on iTunes. It now takes only a few minutes to make your music available to the world.

“I think that the Internet and MySpace and those kind of avenues will help independent artists, and they’ll flourish, and they’ll make more money. Which is a good thing,” says Jackson.

So if record companies are no longer necessary to produce or distribute music, their role is reduced to that of publicist. Their job becomes convincing people what music they should be purchasing.

The Recording Industry Association of America Web site features an item explaining where the money goes when a CD is purchased. Manufacturing and recording costs are mentioned before the article continues, with surprising frankness: “Then come marketing and promotion costs—perhaps the most expensive part of the music business today. They include increasingly expensive video clips, public relations, tour support, marketing campaigns and promotion to get the songs played on the radio.”

The major labels will no doubt continue to thrive as enormous publicity machines. But in terms of actually producing music, you could say that record companies are obsolete.

“It’s a very positive thing that the Internet is going to cut out a lot of the major label money. But they will figure out a way to make that money,” says Jackson.

And these record companies, “the greediest people in the world,” according to Jackson, have been possibly too aggressive in ensuring their financial interests in this new media landscape. In March, the Justice Department initiated an investigation into whether EMI, Sony, Vivendi Universal and Warner Music Group were engaging in anti-competitive practices in their setting of download prices.

A recent court ruling hasn’t helped matters. As reported in the Wall Street Journal, “Judge Marilyn Hall Patel, of the U.S. District Court in San Francisco, found that two of the four big music companies, Vivendi Universal SA’s Universal Music Group and EMI Group PLC, deliberately misled federal investigators by obscuring the degree to which they sought—and gained—information about their competitors’ pricing agreements with online music services.”

This is such a pity
Record companies are still attempting (with questionable legality, apparently) to control downloads, but they have accepted downloading isn’t going away.

“If you look at Universal Records and some of the bigger hitters, the major labels, they would rather have you buy it off iTunes or other sites rather than have you buy a hard product because that way it saves them making this packaging,” says Jackson.

In spite of manufacturing costs (and jewel cases are a petroleum product), the hard product still has a greater profit margin than downloads. But more changes may be on the way.

Richard Jackson of Soundwave says the market’s going to take its own course, whether into stores or online.

Photo By David Robert

“I know Apple is making plans to put kiosks in malls and universities so you can just put your iPod right there and start downloading. … So if you don’t have a computer at home you can still buy an iPod and download,” says Jackson

So are the large chain stores preparing to equip themselves with these download kiosks, or something similar?

“There’s been talk for years about it, but—nothing spectacular [has developed],” says Bissio.

Similarly, James Brown, manager of Tower Records, has no revelations of upcoming plans to sell music sans CD.

“We might in the future. … Do I know anything about it? No,” he says.

Tower, in fact, has bought into a digital kiosk company called TouchMedia. Installed at dozens of Tower records, including the Reno location, their kiosks (among their other features) offer free downloads of single tracks off a limited selection of albums. In their current application, these kiosks aren’t selling downloads; they are a tool to help sell CDs.

But the TouchMedia Web site claims their kiosks offer “affordable upgrade paths into the sale of digital products via digital downloading and CD burning options.” Translating the business-ese, that appears to mean the kiosks could someday (but not today) be used to directly sells downloads. For now, they are really just upscale listening stations. To use Bissio’s words, this is “nothing spectacular.”

Not to be left out, Trans World purchased a controlling interest in a kiosk company called Mix & Burn. As the name indicates, these kiosks allow customers to choose the songs for and burn their own mixed CDs. In the midst of a supposed download revolution, investing in machines that make mixed CDs seems ridiculously quaint.

Steady as she goes
The future isn’t here just yet.

Besides the economic effects, downloading will likely lead to artist changes in the recording industry. The LP album in all its various media—vinyl records, tape, CD—has been the dominant format for about 50 years. At least since Frank Sinatra, who revolutionized the LP in the early ‘50s with his concept albums, the LP idea has been this: It is a collection of songs related in theme, tone and/or mood. The songs are arranged so that when the LP is listened to from start to finish, it provides a coherent listening experience similar to a live performance.

“Younger generations would rather buy a single—listen to Eminem and pay 90 cents for that rather than get gouged anywhere from $12-18 for an album they only like two or three songs from,” says Jackson.

The evidence supports Jackson’s claim. Though downloads of both singles and full albums continue to grow, downloads of singles significantly outpace albums.

This change back to singles listening has its pros and cons. On the pro side, a single has to be strong enough to stand on its own. Many LPs consist of only a few good songs and a lot of filler. By purchasing songs individually, we can avoid having to wade through (and pay for) a lot of mediocre material that exists only to get a record to the 45-minute mark.

On the con side, a record should be an experience. Songs can be arranged so they comment on and reinforce each other. Great records have an arc and a momentum to them beyond the individual tracks. And if we have some patience and an attention span longer than three and a half minutes, we may discover, between the singles, some great songs that just didn’t happen to grab us on the first listening.

But the belief that pop records actually warrant this kind of attentiveness may be waning.

“I grew up in the ‘70s and ‘80s—we’d always buy our records and sit there and listen to them and look at the packaging and read the lyrics. Learn who the band was, suck it in, absorb it. And now kids … just don’t seem to care about that very much,” says Eric Jacobson, manager of Recycled Records.

To aficionados of vinyl, Paul Doege and Eric Jacobson at Recycled Records are doing God’s work. Jacobson says he’s not expecting to leave business anytime soon.

Photo By David Robert

“When I bought a new album, it was like—aw man, here’s the new Such & Such and boy, I’ve been dying to get this. It was an event in your life. Now it’s an afterthought. Click, click, and while this is downloading I’ll play a game of solitaire on the computer,” says Paul Doege, Recycled Records owner.

But both are quick to point out a counter-trend they’ve noticed.

“On the other hand, there are definitely a lot of young kids—all the way down to 8, 9, 10 years old—that come in here and rifle through the Led Zeppelin, and Beatles, and the Doors, and Janis Joplin, and Hendrix and all that classic stuff. I’ve never seen young people buying so many records. Never. And I’ve been here a long time, almost 20 years,” says Jacobson.

Stay with you
It may be premature to pronounce hard media dead.

“There is still some appeal to having the actual piece. I mean, when you have a record, you have a piece of artwork there in front of you. You don’t have some little postcard … you’ve got something tangible,” says Doege.

As the owner of a store that earns its livelihood selling what he refers to as “dead formats” (besides CDs, Recycled Records sells cassette tapes, vinyl and even some 8-tracks), Doege is not frightened by the talk of “the death of the CD.” But even he is considering offering a download service.

“I think CDs are always going to be around. I think cassettes will probably drop off eventually. But we’ll still be able to sell all that stuff because there will always be a segment of the population that didn’t buy into a computer or doesn’t know how to download.”

And in fact, there are signs that the drop in CD sales may be leveling off. Sales continued to drop in the first quarter of 2006, but the rate of decline fell, down 5.5 percent, as opposed to 8 percent in 2005. When viewed with the slowing of sales of iPods, we might conclude that we are not witnessing the demise of the disc. We are just seeing its market contract as it transitions from being the way to buy music to being one format among many.

“I read all those same articles—'it’s over’ ‘death of the CD,'” says Brown. “I beg to differ.”

His optimism for the future of hard media is based on his solid faith in the ancient human desire to possess physical objects, which Brown refers to simply as “stuff.”

“People aren’t done with stuff,” he says.

Brown is hardly the only one to express this sentiment.

"[There is] a huge number of people who just go out and get it,” Eric Jacobson at Recycled Records says. “They want the packaging. They want to own it. They want to file it in their collection.”

Whether this impulse for collecting will triumph over the advantages offered by digital downloads—greater convenience, lower prices—is yet to be seen. Two decades have passed since the last great music format—the vinyl LP—was pronounced dead. Those reports proved to be exaggerated. Record companies tried their best to kill vinyl, but succeeded only in severely wounding it. It never really recovered, but it continues to limp around.

So we won’t make the same mistake and prematurely write the CD’s obituary. We will merely announce it is heading for its deathbed. But who knows? It may yet rally.

As Brown put it, “It ain’t over yet. That’s for sure.”

However, if the CD’s days are numbered, you could at least say it had a good run. As did Soundwave.

“We had a lot of fun here,” says Schafer.