Digital Music News is reporting that in the wake of increased demand for digital music, another music store has bitten the dust. The Portland-based music retailer Music Millennium is closing one of its locations rather than facing continued lost profits. According to the article, “the result is not isolated, and stems from heavy decreases in consumer demand for physical forms of music.”
I question the validity of this argument. While there is no disagreeing with the fact that online sales of digital music and physical discs is on the rise, I think that the high price retailers have to pay to stock product has a lot to do with it too. Last month I wrote about the how much a CD really costs a place like Best Buy (read here). I think the problem lies within the distribution process.
Have you ever payed full price for a CD at a place like Tower Records, or Newbury Comics or Sam Goody? Hell no! CDs cost anywhere from $14.99-$19.99. And when they go on sale the price isn’t much better, usually $11.99, maybe $12.99 with the occasional $9.99 offering. This is because their wholesales cost is much higher than the big box stores, Best Buy, Walmart and Circuit City. If you recall, Best Buy doesn’t pay a hell of a lot for their CDs, sometimes getting them for free or getting paid to carry the CD. Smaller regional and local chains aren’t likely to get this kind of deal because of the small quantity of discs they will be buying wholesale. They are paying upwards of $10-11 wholesale, this in turn keeps prices high forcing the $14.99-19.99 retail price. Because of the low wholesale cost Best Buy can sell a CD from 11.99-14.99 retail and on sale for 7.99-11.99.
Now, where would you rather buy your music, the higher priced place? Not me. I don’t pay more than 10 bucks for any CD. Well, except for maybe the Cure and the Cult. With the big box stores succeeding and the smaller stores going out of business I’m afraid we have a bigger issue to deal with: the continuing homogenization of our culture. There is only so much room on the shelves to stock CDs, and the big boxes are going to stock what is guaranteed to sell. They are not going to take chances with unknown bands, buzz bands, and the many great bands that never graduate from college radio rotation.