The record companies have been screwing up the record business big-time

Spinning Into Oblivion
By TONY SACHS and SAL NUNZIATO /NY Times

DESPITE the major record labels’ best efforts to kill it, the single, according to recent reports, is back. Sort of.

You’ll still have a hard time finding vinyl 45s or their modern counterpart, CD singles, in record stores. For that matter, you’ll have a tough time finding record stores. Today’s single is an individual track downloaded online from legal sites like iTunes or eMusic, or the multiple illegal sites that cater to less scrupulous music lovers. The album, or collection of songs — the de facto way to buy pop music for the last 40 years — is suddenly looking old-fashioned. And the record store itself is going the way of the shoehorn.

This is a far cry from the musical landscape that existed when we opened an independent CD shop on the Upper West Side of Manhattan in 1993. At the time, we figured that as far as business ventures went, ours was relatively safe. People would always go to stores to buy music. Right? Of course, back then there were also only two ringtones to choose from — “riiiiinnng” and “ring-ring.”

Our intention was to offer a haven for all kinds of music lovers and obsessives, a shop that catered not only to the casual record buyer (“Do you have the new Sarah McLachlan and ... uh ... is there a Beatles greatest hits CD?”) but to the fan and oft-maligned serious collector (“Can you get the Japanese pressing of ‘Kinda Kinks’? I believe they used the rare mono mixes”). Fourteen years later, it’s clear just how wrong our assumptions were. Our little shop closed its doors at the end of 2005.

The sad thing is that CDs and downloads could have coexisted peacefully and profitably. The current state of affairs is largely the result of shortsightedness and boneheadedness by the major record labels and the Recording Industry Association of America, who managed to achieve the opposite of everything they wanted in trying to keep the music business prospering. The association is like a gardener who tried to rid his lawn of weeds and wound up killing the trees instead.

In the late ’90s, our business, and the music retail business in general, was booming. Enter Napster, the granddaddy of illegal download sites. How did the major record labels react? By continuing their campaign to eliminate the comparatively unprofitable CD single, raising list prices on album-length CDs to $18 or $19 and promoting artists like the Backstreet Boys and Britney Spears — whose strength was single songs, not albums. The result was a lot of unhappy customers, who blamed retailers like us for the dearth of singles and the high prices.

The recording industry association saw the threat that illegal downloads would pose to CD sales. But rather than working with Napster, it tried to sue the company out of existence — which was like thinking you’ve killed all the roaches in your apartment because you squashed the one you saw in the kitchen. More illegal download sites cropped up faster than the association’s lawyers could say “cease and desist.”

By 2002, it was clear that downloading was affecting music retail stores like ours. Our regulars weren’t coming in as often, and when they did, they weren’t buying as much. Our impulse-buy weekend customers were staying away altogether. And it wasn’t just the independent stores; even big chains like Tower and Musicland were struggling.

Something had to be done to save the record store, a place where hard-core music fans worked, shopped and kibitzed — and, not incidentally, kept the music business’s engine chugging in good times and in lean. Who but these loyalists was going to buy the umpteenth Elton John hits compilation that the major labels were foisting upon them?

But instead, those labels delivered the death blow to the record store as we know it by getting in bed with soulless chain stores like Best Buy and Wal-Mart. These “big boxes” were given exclusive tracks to put on new CDs and, to add insult to injury, they could sell them for less than our wholesale cost. They didn’t care if they didn’t make any money on CD sales. Because, ideally, the person who came in to get the new Eagles release with exclusive bonus material would also decide to pick up a high-speed blender that frappéed.

The jig was up. It didn’t matter that even a store as small as ours carried hundreds of titles you’d never see at Best Buy and was staffed by people who actually knew who Van Morrison was, or that Tower Records had the entire history of recorded music under one roof while Costco didn’t carry much more than the current hits. A year after our shop closed, Tower went out of business — something that would have been unthinkable just a few years earlier. The customers who had grudgingly come to trust our opinions made the move to online shopping or lost interest in buying music altogether. Some of the most loyal fans had been soured into denying themselves the music they loved.

Meanwhile, the recording industry association continues to give the impression that it’s doing something by occasionally threatening to sue college students who share their record collections online. But apart from scaring the dickens out of a few dozen kids, that’s just an amusing sideshow. They’re not fighting a war any more than the folks who put on Civil War regalia and re-enact the Battle of Gettysburg are.

The major labels wanted to kill the single. Instead they killed the album. The association wanted to kill Napster. Instead it killed the compact disc. And today it’s not just record stores that are in trouble, but the labels themselves, now belatedly embracing the Internet revolution without having quite figured out how to make it pay.

At this point, it may be too late to win back disgruntled music lovers no matter what they do. As one music industry lawyer, Ken Hertz, said recently, “The consumer’s conscience, which is all we had left, that’s gone, too.”

It’s tempting for us to gloat. By worrying more about quarterly profits than the bigger picture, by protecting their short-term interests without thinking about how to survive and prosper in the long run, record-industry bigwigs have got what was coming to them. It’s a disaster they brought upon themselves.

We would be gloating, but for the fact that the occupation we planned on spending our working lives at is rapidly becoming obsolete. And that loss hits us hard — not just as music retailers, but as music fans.

(Tony Sachs and Sal Nunziato own an online music retail business.)