By Stephen Young
By Stephen Young
By Stephen Young
By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
"If they would just raise their prices to reasonable amounts, it would be better for everybody. I mean, they have put a lot of retailers out of business. They may have created a monster they can't get rid of. And I don't think we've seen the last of it. It's like the gas wars of the 1970s. With their competition with Circuit City, I can see it getting worse before it gets better."
Russ Solomon, chairman of Sacramento, California-based Tower Records, sympathizes with his fellow retailers. He thinks mass merchants have created an unlivable situation for the entire retail music business.
But he is hopeful for the future.
"In all honesty, it's been difficult, and that's not just me talking. That's everybody in retail," he says. "There's no way you can stay in business with a 15-percent profit. But things seem to be turning around. The bloom is off the sage, so to speak.
"They [Circuit City and Best Buy] fucked it up. It's getting a little better. They finally realized they need to make at least a little profit off entertainment software."
Record companies may prove to be the saving grace for embattled music-only stores. Already, they are exploring ways to bring about a cease-fire in the price war between Best Buy and Circuit City.
Major labels such as Sony and Warner Brothers are beginning to insist that retailers stick to Minimum Advertised Price (M.A.P.) policies, which force retailers to pay for their own advertising if they cut prices too far. One label, PolyGram, has even said it will refuse to sell to any retailers who sell below cost.
Advertising money is the heaviest hammer record labels can wield in shoring up prices for their CDs.
One reason Best Buy and Circuit City can sell CDs so cheaply is that they, like most other national music retailers, don't have to pay for all CD advertising. Record labels pay for in-store displays and, in the case of Best Buy, national TV and color print advertising.
If the retail stores sell too cheaply, the labels can cut off the flow of advertising dollars, meaning the superstores would have to foot the bill for advertising themselves.
"With the new policies in place by the labels, it will almost be illegal for us to price CDs the way we do. We probably will have to raise our prices a little bit," says Best Buy's Arnold.
The labels may be making the right noises, but Pagan says he is worried that discussions of the stricter M.A.P. policies may be a smoke screen by record labels.
"The labels have tried to come up with a way to make retailers share the profits for a long time," he says. "That [M.A.P. policies] is all horseshit. It's window dressing, done to pacify their old accounts, people they have been doing business with forever.
"To think that they are selling at $2 below my cost is bad enough. But the fact that they are doing it with full-color ads and commercials paid for by the label is unreal."
Burnett thinks that Best Buy is too big for record labels to fight.
"I read in Billboard a year or so ago that Best Buy accounted for 9 percent of total CD sales in the country," Burnett says. "9 percent. That's a lot for one company. So when Best Buy speaks, the record labels are going to listen."
Clearly, Best Buy isn't upping its prices yet.
But the prospects for music buyers in Dallas are not entirely grim.
It appears that the Tower Records music chain is coming to Texas, eyeing potential Dallas sites in Deep Ellum and near the Galleria.
"We're looking at a couple of different locations in Dallas," confirms Kevin Cassidy, head of Tower's Southwest Record Retail Operations regional office. "Nothing has been finalized. We'd like to get things done and open up there in late summer or fall of '97.
"We're looking to come in at a neighborhood of 20,000 to 25,000 square feet...open up a big superstore there, like we did with our most recent store in Denver." Tower is one of the few chains in the discount-store era that has stuck to its guns as far as prices are concerned.
But the hard-core fans know a chain like Tower cannot replace true independent stores such as the ones Dallas has lost.
Don Kulak of the Independent Music Association says the death of independent record stores means the death of the music industry. "The consumers really lose out," he says. "Because it's the indie stores that really take a chance. They're the ones who break the new artists. Without them, the record industry will stagnate."
As he packs it in at VVV Records, Neal Caldwell feels the same way.
"Music is art, and they [Best Buy and the other chains] have taken all the art out of it," he says. "They've made it faceless, and nameless--even meatless. A music store is a work of art. Granted, it's retail, but it is art, and independent music stores have to bring that back to the public.