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Tower Records, MP3s, and You

Tower Records, the music chain that once toted 171 stores and annual sales of over $1 billion, has now filed for Chapter 11 bankruptcy. And according to both them and the media, you are to blame.

You, that is, if you’ve ever downloaded music. Tower Records “succumbed to the newest phenomenon in music, Internet downloading,” according to the reports.

This is just what the corporate music world has been waiting for. A martyr. “One who makes a great show of suffering in order to arouse sympathy.” And now they’ve got one, in the form of Tower Records — a company going down with the ship, and willing to point the finger at evil music downloaders on the way.

In the early 1960’s, Tower Records invented the “music megastore”. The “music megastore”, in my town and towns all across America, is responsible for the death of the independent music store. In Yukon, Oklahoma, a city with a population of around 25,000, you can buy music in one of the following places: Wal-Mart, and Hastings. Branch out into the city, and there are many more megastores competing for your cash: Blockbuster Music, Camelot Music, and of course, Tower Records. Sure, there are still some independent shops around town, shops like Shadowplay Records, Rainbow Records, Happy Days Records and Size Records, but I’ll bet even combined, they didn’t make a billion dollars last year.

I’ve been in to a few of those megastores. They’ve got televisions in every corner, sometimes walls of them. Spotlights dance to the musical thump-thump-thump that’s being pumped into the multimedia chamber of happiness. Want to listen to an album? No problem, grab one off the shelf and head over to the listening area! About the time you think to yourself, “how can they afford this?” you see the price tag. $14, $16, even $18 for a CD. DVDs aren’t any better, usually one and a half to two times higher than anyone else in town.

The Oklahoma City market isn’t about the megastore. It’s about the used CD store. CD Trader. CD Warehouse. CD Outlet. Plus let’s not forget all the independent music stores I talked about (Shadowplay, Rainbow, Happy Days, Size), and the hundred(s) of pawn shops around town, which also sell used CDs.

Now let’s think for a minute — how did all those used CDs end up at all those used CD stores? A few of them were probably overstock from other stores that closed down, but the majority of them came from people like you and me, who sold their old CDs to them. And why do people sell CDs? The CDs I have (or should) get rid of are albums that have one hit song.

I said two years ago that the solution to the great CD dilemia is for stores to lower the price of their music. Both the latest Primus and the Rob Zombie albums included videos on DVD packaged with them, and retailed for $9.99. I bought them of both at Best Buy, and I’m pretty sure these are the first two new CDs I’ve bought in the 2000’s. As a consumer, I spoke. Essentially, I said, “Hey! Music industry! I haven’t bought a new CD in five years and I just bought these two at $9.99!” Their answer? Primus’ Animals Should Not Try To Act Like People now lists for $15.99 at Best Buy.

CDs don’t have the mystique that LP had. Albums were cool. Big, thick, black, flat disks which somehow held music within its little grooves, and big, huge artwork and booklets that you could read and hold. More importantly, I never met anyone who could make a vinyl album with their home computer, whereas my Grandmother burns CDs with her computer (which also came from Best Buy). We’ve all bought blank CDs and we all know what they cost. Normal prices are about a quarter each for blanks, less if you buy them in bulk. Even with professional duplicating you can have CDs made for about a buck each; actually it’s closer to .50 for the big companies who do it in bulk. People don’t want to pay $15 for something that essentially cost fifty cents to make. Oh, let’s not forget about the artist. He or she gets about a buck per unit sold too, so now we’re up to a buck-fifty. That’s a whole lot of money left padded into that $15-$20 price tag. A lot of it goes to the record company who signed, promoted and recorded the act. And a lot of it goes to places like Tower Records.

I used to own AC/DC’s Back in Black on vinyl. Later, I bought it on cassette, and again on CD. The last time I pulled the CD out, it was really scratched up. I can only assume after a few more listenings, it won’t even play. Who knows, maybe it was from all the bumps on the “Highway to Hell”. If you figure I paid $10 for the album, $10 for the tape, and $15 for the CD, I’ve got $35 invested into Back in Black. And now my options are to either buy it new (again) from places like Tower Records for $15, buy it used for $5 from one of the used CD places around town, or I can download it and burn a copy of it for a quarter.

So in a nutshell, that’s it. Consumers now have three options: buy it new, buy it used for a fraction of the cost, or download it for free.

When you download music for free, neither the artist nor the record label makes any money. In fact, they claim they lose that money, a gripe I don’t agree with. I’ve downloaded plenty of albums I would never buy. Would I listen to Kelly Clarkson’s CD once for free out of curiosity’s sake? Sure. Would I pay $15+ for it? Never. They didn’t lose any money from me — they weren’t getting it from me in the first place. Are there people out there who might possibly have bought it otherwise? Sure — but from where? Tower Records, or CD Trader?

When you buy music in used CD stores, neither the artist nor the record label makes any money either. Again, you could argue either way whether or not artists and record labels are losing money. “They” would say that you bought an album that you would have normally bought at a new store, so they lost that income. “I” would say that while I was willing to drop .99 cents on The Fat Boys Greatest Hits and Air Guitar Classics, those probably aren’t titles I would have paid full price for. And while I don’t feel guilty that the recording industry doesn’t make a dime off of these sales, I do feel bad that the artist doesn’t. So why isn’t the music industry going after used CD retailers? They are. In 2002, the music industry propsed that all used CD retailers should pay royalties back to the original label for each CD sold — kind of like when television shows go into syndication. In my opinion, the only reason this hasn’t happened to date is because the recording industry has been spending all their time and energy chasing (and suing) music downloads. If MP3s are ever “done away” with, used CD outlets will be the music industry’s next target.

As we already know, when you buy new music, everybody makes money (although as I mentioned, not equally; the record label makes approximately 10-15 times what the artist makes). And, as we now know from Tower Records, people aren’t buying new music anymore, or at least not as much as they used to. Or are they?

I kind of lied when I said there were only two places to buy CDs from in Yukon, Oklahoma. Actually there’s a third, and it’s called the Internet. From the comfort of my own home I can now buy CDs from a multitude of places — big monsters like Amazon, smaller, independent shops, or occasionally directly from the artists themselves.

But the dilemia remains. How will musicians make any money when they don’t make anything from music downloads or used CD sales, and the megastores are shutting their doors?

Well, I’ve got a plan.

Musicians will tell you they don’t make much off of new music sales. Remember they only get about a buck per unit sold, right? Here’s a simple solution. Add a $1 tax to all music downloads and used CDs.

So now when I buy a used CD for $5, the price tag can say “$5 + $1 Artist Tax”. That’s fine, I’d pay $6 instead of $5. What else does this mean? We would be able to download any album for $1. Not $1 per track, $1 per album. And that $1 goes right to the artist. They make the same amount either way.

And either way, I think Tower Records would still be filing for bankruptcy.

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3 comments to Tower Records, MP3s, and You

  • Colton

    Great article. All true. Another problem with music CDs is the issue of “CD rot” (also known as “CD bronzing”) which is occuring more frequently to disc that are no older than four years. Imagine that! Music companies buy cheap discs that have problems with the aluminum in the disc corroding due to a certain lacquer used in the label. I’ve yet to see a LP rot. Times are a’changin’ and it’s time for RIAA to accept that consumers are tired of the high price of music CDs. I recall when CDs first came out that they were just as expensive and were boxed in a long narrow cardbord container that served no real purpose. Then there were promises that the price for music CDs would come down after doing away with the useless cardboard insert. Never happened. The cost actually rose and small frills like booklets with lyrics and photos were sacrificed as well. I don’t feel sorry for the music industry.

  • DeWayne Duff

    You make a lot of very valid points. I’ve worked on CD projects where I pushed out a finished product, to include the CD, printing on the CD, CD sleeve inserts, full-size jewel cases, mailer envelopes, and advertising, and still spent far less than $2 a CD. In Europe, they used to sell cars by letting you walk into a little shack, look at a catalogue, and pick the car you wanted to buy without ever seeing one or test driving one. The cons were that you might be too tall, too fat, or too stupid to get into it and drive it. The pros were that you weren’t paying a dealer $1,000 or more for filling out a few forms, vacuuming out a new car, and wasting four hours of your time trying to con you into a monthly payment you can afford but a total price that you hopefully don’t notice until the next month or so. The guy in the shack made about $100. And you didn’t just pay for the popularity of the car, you paid for the real cost of producing it, less a govt tax that was probably a bit exorbant (but still far less than dealer markups in the US). So using this model, why would I want to go pay a dealer more than he’s going to spend on a bad suit? Some industries bet their future on the laziness or just limited ignorance (of the inner workings of the industry) of their target market. I think your solution would actually be more popular with artists, but I don’t think you’ll get their support unless you up their profit by it. If they have no more potential profit to gain, they’d be giving away free commercials to endorse the idea. On the other hand, if you look at Billy Joel, the artist formerly known as Prinze (ignore if misspelled) or any of the Motown victims of Smokey Robinson, you may be able to find hoards of artists that have been burned bad enough to want to prevent others from being robbed in the same way. Anyway, good article!

  • Rob

    Commenting turned off on this post, due to it being essentially a giant spam magnet.