Music
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The death of music retail as we know it?
Confronted by an apocalyptic mix of blank CDs and Napster, the record shop faces extinction -- in 12 months.

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By Eric Boehlert

May 30, 2000 | Last August, Brett Wickard, owner of Bull Moose, a nine-store record chain in Maine, found himself trying to figure out why his CD-R business had suddenly caught on fire.

CD-Rs -- in case you don't know (and many people still don't) -- are those blank compact discs made by the likes of TDK and Memorex that once belonged exclusively to techies or audiophiles.

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"The first place I noticed it was Lewiston, which surprised me 'cause it's an old mill town," Wickard recalls. After nosing around a little, the retailer discovered what was really going on: Lewiston's local university, Bates College, had just installed a new high-speed Internet pipeline on campus. Digital copying fever had come to rural Maine.

"The minute everybody hit the Web," Wickand says, "CD-R sales went through the roof." By late 1999, Bull Moose's blank-disc business was up 1,000 percent. This year, blank CD sales have increased another 400 percent.

This is not an isolated incident. Music retailers across the country -- in particular, independent store owners and small chains that cater to download-savvy college crowds -- are reporting runaway CD-R business.

"Our sales are growing exponentially," reports Bob Lee, who runs Face The Music on the University of Oregon campus. In 25 years as music-retail veteran, Lee has never seen such astounding figures. "I can't think of anything that compares to this phenomenon," he says, citing his own 1,000 percent uptick in sales.

Boston's Newbury Comics has logged astonishing CD-R growth numbers, too. In April '98, the 21-store chain sold 151 blank CD-Rs. Last April, it moved 1,824 discs. This April that figure had climbed to 18,000. Owner Mike Dreese predicts his 2001 sales will probably be in the 60,000 discs-per-month range. Compare that to 1999, when Dreese sold approximately 39,000 blank CDs for the entire year. The 2001 annual blank CD take could be more than a million. By comparison, prerecorded CDs will likely sell just over 4 million.

These figures do not make Dreese happy.

Like most retailers he pockets about 30 cents for each CD-R sold. He'd rather be selling pre-recorded CDs, which earn him roughly $2.15 per sale. But he doesn't have much choice in the matter. "I don't even want to be in this business," he says. "We were pulled into it by our customers."

Like Dreese, scores of music merchants are growing increasingly anxious about the blank CD-R. According to David Lange, who runs the 11-store Compact Disc World chain in New Jersey, the CD-R surge arrives with a troubling new shopper mindset. "There is an attitude among young consumers that music should be free," he says. "If that goes unchecked, the long-term effects could be quite serious to the music industry."

"I think it's going to be catastrophic," adds Dreese. His company recently commissioned a focus group report that resulted in the following conclusion: "Disc Burning=Death."

And what wrought this destruction? Napster, of course, the music-swapping software that arrived on campuses last fall (the exact moment retailers saw CD-R sales skyrocket), which makes it laughably easy to find an endless supply of MP3 files -- regardless of whether or not they were authorized by artists.

Mix CD-R and Napster, and you've got a deadly formula.

Armed with blank CDs and Napster, users can now create their own MP3 albums or compilation libraries and burn them in the privacy of their own dorm. Factor in the falling prices of a computer CD burner ($200) and blank CD-Rs (less than a buck for standard data discs), and you've got an instant paradigm shift.

As one anonymous shopper who took part in a focus group convened by Newbury Comics explained: "With Napster you can pretty much get what you want." Added another: "I just finished burning the David Bowie catalog. I can get 50 packs of CD-Rs and go through them so quickly. It's really easy and it's really cheap."

Ouch.

Retailers are suffering a one-two CD-R punch: consumers are downloading free music off the Web and onto discs; others are making physical copies of pre-recorded CDs courtesy of Phillips.

It's been a busy two years since the Dutch home electronics giant tenuously introduced the first dual-deck CD-R machine in 1998. Today, roughly 3 million blank CD-Rs are now sold every month, and that figure could hit 6 million per month by December. According to the Consumer Electronics Association, 3.6 million CD-R recording components will have been sold by the end of the year, with projections calling for 10 million new machines in U.S. homes by 2004.

That sort of penetration usually brings mainstream access. Best Buy recently ran a TV commercial for CD-Rs in which a father has a prom-night heart-to-heart with his son about the "need to be prepared." Instead of doling out a pack of condoms, Dad produces a CD-R jazz disc he burned himself for Junior's big night.

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