Sunday, January 27, 2008

(Twenty Years) Part 9: The Downward Spiral

A theme park ride and the people aboard it is shown as a metaphor for the Record Den chain in 1997. No employees of the chain are visible in this photograph. We swear.November 30, 2007 marked 20 years to the day since I started at Record Den, which has inspired some thought and reminiscing on the person I was then, what the job was like as the years went by, and what has kept me around until now ...

OK, I realize that I left things off on a bit of a cliffhanger note in my last "Twenty Years" installment, but I figured this might be a pretty good time to discuss the long, slow, agonizing disintegration of the Record Den chain and keep you all in suspense as to What Happened Next for a little while longer. Mua ha haaaaa.

From the time of its incorporation circa 1970 until the middle of the 1980s, the success of the Record Den more or less mirrored that of the music business as a whole. While the purse strings were ultimately controlled by the company offices in downtown Cleveland, the individual stores were managed by crews of enthusiastic, knowledgeable personnel who were passionate about music and knew how to attract others of their stripe. A sizable percentage of the managers of these stores had been hired or trained by Greg at the old Great Lakes Mall location, and it was largely this group (or "cult of personality" as the main office might have viewed them) that had been the most directly responsible for the stature Record Den once attained around the Cleveland area.

By 1985, with the industry emerging confidently from the post-disco crash and riding the building wave of the CD/MTV era, the chain had been expanding beyond metro-Cleveland and into outlying areas of Ohio (Dayton, Bowling Green, Niles) and neighboring states (Indiana, Pennsylvania, Michigan). It was also around this time that the owner of the company (we'll refer to him from now on as "Deak") dropped the news to everyone that he intended to purchase a warehouse space on the east side of Cleveland and move to centralize buying operations through the main office.

The stated intent of this change in the way the chain did business was to save money, mostly by combining all of the little shipments of product moving in dribs and drabs from the distributors to each individual store into "box lot" amounts sent straight to the warehouse loading docks in order to the incur the volume discounts offered by labels to accounts who buy things by the box instead of by the handful. Problem is, the costs of distributing the product from the warehouse to all of the outlying stores (whether by company driver or UPS) tended to eradicate whatever meager amount that was saved by buying centrally. That's before we even consider the greatly-increased costs of renting the warehouse space, hiring and maintaining a staff to pull, shelve, ship and receive orders, and paying a full-time product buyer (a task once handled individually by all of the managers for no additional cost). With all of these new costs factored in the equation, the sum is, at best, a break-even proposition for a chain of maybe a dozen stores, which is exactly what Record Den was at the time.

A warehouse, somewhere.A stab in the general direction of thrift may have been Deak's stated intention, but there was almost certainly a matter of pride behind his new warehouse as well. While he had greatly benefited from jumping into the music business at exactly the right time and letting the people who knew what they were doing guide the direction of the company for 15 years, Deak yearned to play on the same level (and thus be awarded the same respect) as locally-based major leaguers Camelot and The Record Exchange. This new warehouse was to be our notice to the industry that we intended to swim with the big fish in the little pool, and the line to start puckering up and kissing our ass starts riiiight over here, thankyouverymuch.

From the day Deak informed him of his idea, Greg was against the plan and tried to get across to Deak the simple concept "if it ain't broke, don't fix it." But Deak's biggest flaw (and believe me, he has a few) was that he was a proud man who didn't take criticism for his own ideas very well, especially from people who worked for him. In the end, being the founder and owner of the company, it was Deak's call to make and he wasn't about to be talked out of his pipe dream but something so mundane and boring as realistic expectations. So it was that the warehouse was soon opened for business, and that decision was the start of the long downward spiral into which Record Den fell over the next decade.

The next step taken by Deak (referred to in an earlier post in the series), was the computerization of the company's inventory on a store-by-store basis. As each store was brought online, a buying program Deak had commissioned was implemented to automate the business of (re)stocking inventory. I'm not sure when this buying program was originally written or for what kind of music, but it was often set almost completely at odds with the way any sane record store would buy their product, particularly in the way it multiplied ordered copies based on sales. Let's say a new Rush album was being released this week and we ordered 100 copies right off the bat, knowing that Rush fans show up early and in force to obtain their long-awaited new album. Once that wave has hit, the game is up, and you can sell 75 copies of that new album in a week and then maybe 25 over the next year. Unfortunately, the buying program used by the warehouse didn't think that way, and unless you could short-circuit the process, you'd sell 75 copies of that Rush album in a week and then get shipped about 100 more the following Monday. With experienced managers, this program tic would be a minor irritation, but with the crop of inexperienced managers hired over the next few years following the transition, it often resulted in stores being choked with dozens of copies of hit albums they didn't need in the first place.

This buying problem gets further compounded when you then factor in returns: the major labels cut off unlimited product returns after they were nearly snowed under during the post-disco crash, and one-stops generally function on a "you can return 1 piece for every 10 you buy" rule, so if Record Den was buying too much product to return quickly, we had to kinda "swish it around" the system for a while. Attempts at controlling buying costs a few years later resulted in comical amounts of dead inventory being shunted around from new store to new store in order to fill these locations up with anything that was handy in the hopes that some of that nonreturnable merchandise would sell off before it was boxed up and sent abroad once again.

Lots of CDs, probably more saleable than the ones our idiot indie buyer was jumping all over.Things were shaky enough with one buyer (an expatriate from NRM) and an outmoded restocking system, but the addition of a full-time indie buyer in 1994 might have been Deak's worst idea during my tenure with the company. I believe the reasoning here was that our main buyer was too overwhelmed dealing with the major labels to divert attention to all of the small fry doing business underneath the radar, and with these labels suddenly a hot item in the wake of breakthrough independent albums by The Offspring, Rancid, Morphine, and Liz Phair, (not to mention sundry pre-Pearl Jam/early Nirvana projects), it was decided someone should be delegated to man the pump in that area alone.

To virtually no-one's surprise, the woman Deak selected for this task was in way over her head and had absolutely no idea what in the hell she was doing, and within months we were becoming bogged down in no-name garage-rock, techno, low-fi pop and punk records that did little but collect dust. Six months to a year later, the stores cleared these records out from their inventory to make room for newer product and all of these unsold independently-distributed titles wound up back in the warehouse from whence they came. A year or so after the indie boom came the inevitable shake-out, and while some of the more popular minor labels quietly consolidated back-door deals with the majors, a bunch of operations simply went out of business and disappeared into the night, sticking us with skids of unsaleable (and, more importantly, nonreturnable) CDs that damn near capsized the company.

If there is one thing Greg and Deak have in common, it is a stubborn streak, and their opposing ideas as to how to run the stores often resulted in arguments where neither side would easily back down. By sheer force of will, Greg had largely managed to shield the Great Lakes Mall store from Deak's worst transgressions of taste and logic, and he had also developed over time a way of "handling" edicts from corporate that managed to both soothe Deak's ego and keep his own sanity intact. Among the initiatives we successfully ducked during those years:

* A pointless, profit-free alliance with Ticketmaster. The money for the tickets being sold went nearly entirely to Ticketmaster while we were awarded the "privilege" of selling their ducats (and a single-digit slice of the pie). As to whether our slice was ever big enough to make up for additional employees being scheduled to handle a long line of people whenever Wrestlemania was announced, you'd have to ask Deak, but I get the distinct idea it wasn't.

* Those "frequent buyer cards" that promised a "free CD" after every 20 purchases. This was a direct rip from the Camelot playbook and, funnily enough, we still get asked about reinstating the program to this day, which only underlines the fact that very few people ever figured out how these things really work. You see, any store accepting these cards could only place x amount of items on sale (say, 20 or so). With everything else basically at (or close to) full list price, chances were that you, the customer, were actually paying more for each CD you purchased on that program than you normally would if most of the stock was on sale instead (which is the way we've always preferred to run it). Ergo, by the time you were finally rewarded with your "free CD," you had, in effect, already paid for it (and then some).

* Deak had a bizarre fascination with coin-op machines, whether they dispensed gum balls, M&Ms, lottery numbers or your goddamned horoscope. We were constantly under siege to have these things installed in our store and Greg always found inventive ways to keep them out.

There were also a few battles we couldn't win, such as being forced to hire Deak's daughter to work alongside us, which at least beat having to hire his son, I suppose (we barely managed to keep him out). Worse, Deak also had some interminable hard-on for kiddie fads all throughout the 1990s, and we were constantly getting boxes of stuffed animals and other silly shit to feature at the front counter. What prompted our sudden leap into Disneyland is beyond me, but I'd wager that Deak Elmo hits those difficult early-twenties experienced by nearly all child actorswas getting hammered by phone vendors to keep up with the whole hacky sack/Beanie Baby/Tickle-Me-Elmo/slap bracelet thing ("I just sold 100,000 to Camelot Records, you know!!"). It was bad enough that Deak was apparently a sucker for this crap, but he also fussed over the merchandising of these products to a near-obsessive degree (likely because he had been talked into purchasing hundreds of the fucking things and needed to blow them out ASAP). In an act of inspired vengeance, Greg "performed surgery" on one of Deak's insanely annoying Talking Elmo dolls, removing the original pressure-triggered voice box and replacing it with "The Final Word" from Spencer's. Thus, instead of saying "Elmo love you!" and "Let's play!," our specially modified Muppet would drop such bon mots as "You're an asshole!" "Fuck you!" and "Eat shit!"

While we waged our little battles with Deak, the decline of the chain continued inexorably onward and eventually became noticeable to those on the outside. With so much money tied up in junk and maintaining an increasingly unprofitable warehouse/office suite, costs had to be cut quickly and the easiest way to gain a few spare bucks is to restrict buying (or in our case, buying and paying). While returns were restricted, labels would still sell you as much as you were allowed to buy and then bill you for it in 30-60 days. If no payment was made after that point, you were shut off until at least some money came down the pike, and it was here that the Record Den name became infamous in wholesale as office employees would beg and plead for leniency over the phone with credit departments, staving off payments for as long as possible. During any given week in the mid 90s, we were usually on credit hold with at least one of the Big Six (as they were back then), and often more.

The biggest danger to this practice of always being on hold was missing out on new releases, and to make sure we cleared that hurdle, we would buy from one-stops (industry parlance for "middle men") to land the hot stuff until we came off hold with whatever company it was that was mad at us that particular week. Over time, as credit holds got longer in duration and spread across multiple companies, the one-stops began to shoulder a significant burden of our business and, as you can probably guess, we eventually started getting into trouble with them as well over erratic (or skipped) payments.

It's never a good sign when a chain is on hold with the majors, but when said business can't even afford to keep up with the one-stops (who are then opting to conduct further business C.O.D. rather than risk accepting a rubber check), that is the surest sign to everyone that there is blood in the water. Even Deak (who had been continually distracted by a long and messy divorce) knew things were looking pretty bad for the company, and he finally came to the realization that desperate times called for desperate measures ...

Sunday, January 20, 2008

Record Den Top 100 Sellers Of 2007

1. TRAVELING WILBURYS Traveling Wilburys Collection
4. THE RASPBERRIES Live On Sunset Strip
5. RUSH Snakes & Arrows
6. LINKIN PARK Minutes To Midnight
7. MICHAEL STANLEY Soft Addictions
8. LED ZEPPELIN Mothership
9. PAUL McCARTNEY Memory Almost Full
10. NEIL YOUNG Live At Massey Hall
11. THE SHINS Wincing The Night Away
14. OZZY OSBOURNE Black Rain
15. EAGLES Long Road Out Of Eden
17. DAVID GILMOUR On An Island
18. WILCO Sky Blue Sky
19. FOO FIGHTERS Echoes, Silence, Patience & Grace
20. ARCADE FIRE Neon Bible

21. GENESIS A Trick Of The Tail
22. PINK FLOYD Piper At The Gates Of Dawn
23. BONE THUGS 'N HARMONY Strength & Loyalty
24. LED ZEPPELIN Led Zeppelin IV
25. AMY WINEHOUSE Back To Black
26. FALL OUT BOY Infinity On High
27. LED ZEPPELIN Led Zeppelin II
30. TWIZTID Independent's Day
31. PINK FLOYD The Dark Side Of The Moon
32. GENESIS Live Over Europe
33. NEIL YOUNG Chrome Dreams II
34. KANYE WEST Graduation
35. DREAM THEATER Systematic Chaos
36. BLACK SABBATH The Dio Years
37. NICKELBACK All The Right Reasons
38. LED ZEPPELIN The Song Remains The Same
39. SPOON Ga Ga Ga Ga Ga
41. HELLYEAH Hellyeah
43. THE DOORS The Best Of The Doors
44. INTERPOL Our Love To Admire
45. NEIL YOUNG Greatest Hits
46. GENESIS Wind & Wuthering
47. LED ZEPPELIN Houses Of The Holy
48. U2 The Joshua Tree
49. KORN Untitled
50. MARILYN MANSON Eat Me, Drink Me
51. MODEST MOUSE We Were Dead Before The Ship Even Sank
53. SERJ TANKIAN Elect The Dead
54. RINGO STARR Photograph: The Very Best Of Ringo Starr
55. PORCUPINE TREE Fear Of A Blank Planet
56. GENESIS And Then There Were Three
57. TODD RUNDGREN A Wizard, A True Star
58. T.I. T.I. Vs. T.I.P.
59. MEGADETH United Abominations
61. GENESIS Duke
62. JOHN FOGERTY Revival
63. GENESIS 1976-1982
64. BLOC PARTY Weekend In The City
65. GENESIS Genesis
66. EDDIE VEDDER Into The Wild
67. TYPE O NEGATIVE Dead Again
68. THE JAMES GANG Rides Again
70. KID ROCK Rock N Roll Jesus
71. STARZ Come Out At Night: Live In Ohio
72. AVRIL LAVIGNE Best Damn Thing
73. PETER, BJORN & JOHN Writer's Block
74. FERGIE Dutchess
75. MUSHROOMHEAD Savior Sorrow
78. DOWN Over The Under
80. MAROON 5 It Won't Be Soon Before Long
81. DAUGHTRY Daughtry
82. THE BLACK KEYS Magic Potion
83. LED ZEPPELIN Presence
84. DEEP PURPLE Machine Head
85. THE BEATLES Abbey Road
86. THE BEATLES Sgt. Pepper's Lonely Hearts Club Band
87. 50 CENT Curtis
88. GENESIS Turn It On Again: The Tour Edition
89. PRINCE Planet Earth
90. BJORK Volta
91. BRIGHT EYES Cassadaga
92. NORAH JONES Not Too Late
93. AKON Konvicted
94. RED HOT CHILI PEPPERS Stadium Arcadium
95. FUNKADELIC Maggot Brain
96. HINDER Extreme Behavior
97. GENESIS Abacab
98. GENESIS Foxtrot
99. THE TUBES The Tubes
100. STEPHEN STILLS Just Roll Tape - April 26th 1968

Sunday, January 13, 2008

(Twenty Years) Part 8: The Fog Of War

Some CDs. Dunno which ones.November 30, 2007 marked 20 years to the day since I started at Record Den, which has inspired some thought and reminiscing on the person I was then, what the job was like as the years went by, and what has kept me around until now ...

From the time I started until the end of 1994, unfriendly competition was rare in our little neck of the woods. There were dozens of record stores of varying shapes, sizes and ownerships scattered around the area, from the monoliths (Camelot Music, HMV) and mid-sized chains (Coconuts, Record Exchange, Repeat The Beat, Record Den) to little niche indie shops (My Generation, Chris' Warped Records, Ultrasound, Shattered Records, Record Revolution, Music Vault), yet there was enough business around for everyone to eke out their own slice of the pie.

While the occasional new release "scoop," midnight sale, or in-store appearance (Lita Ford at Camelot, Michael Stanley at our "grand re-opening") might drive some fickle shoppers from one location to another, no one was really at each other's throats back then. At the Den, we had been friendly with most of the employees in both of our competitors stores for years, even going so far as hiring a couple of ex-Camelot workers (namely Dale and Nate) on occasion. In the 80s, when Record Carnival was still around and a few doors down the mall from our old Newberry's location, we would often do trades with them when we needed something they had in bulk (or vice versa). As for NRM, well, I'd been harboring a bit of a crush on the manager of the location down the mall from us, but alas, she was married, and I wound up instead in an intense, yet disconnected dalliance with a younger clerk (who had ostensibly been going to set me up with her boss) as a kind of consolation prize.

Oh sure, this chain may not exist just yet, but give it time.Eventually, the low-key, eased relations between our stores began to change when "big boxes" began to arrive in the area under the names of Wal-Mart, Best Buy, Target, Media Play, and Circuit City. Wal-Mart was the first of these new outlets to arrive (1991, if memory serves), but had very little impact on anyone's music business due to a company-wide policy of refusing to sell any "stickered" (parental advisory) product. The mass-merchant did present a bit more of a problem when it came to competition on the growing country music market, of course, but this was a genre we had never considered a cornerstone of our business and we were willing to cede that area to them and concentrate on the alternative and classic rock market (where we were doing very well indeed) instead. Thus, there was a peaceful, if tense, co-existence possible between us and Wal-Mart as long as it was only them we had to deal with. Sadly, it wasn't that way for very long.

When Best Buy appeared on the scene, things started to get a little bit hairy. The big blue box's first area location appeared in Mayfield at the end of 1994, and we started feeling the shock waves of that landing very soon after. Even though it had opened over 10 miles away, the chain's much-ballyhooed new-release pricing policies, the enormous amount of floorspace dedicated to CDs, and simple human curiosity to check out the new kid in town quickly shifted some of our local clientèle their way.

The mark of the beast.It didn't help matters much that Best Buy's weekly circulars advertising the forthcoming week's bargains ran in the Plain Dealer, whose circulation covered the entire suburban Cleveland area and thus served as a powerful lure for anyone outside of Mayfield to head on over and join the jamboree. Worse, the customers who didn't feel like hiking to Mayfield in order to land a cheap copy of the new Cranberries or R.E.M. albums started wanting us to match Best Buy's prices anyway, and they didn't seem too sympathetic when you tried to explain that if we started selling new release CDs for $9.99 a pop just because someone in another freaking county was doing so, we weren't going to last very long in a mall that was charging us five figures a month for rent.

The above got even harder to explain about two weeks later when NRM decided to take a different approach on how to handle this intrusion into their customer base by flipping into panic mode and matching all prices quoted in Best Buy's circulars. This, of course, forced our hand to follow suit, and eventually Camelot stepped in and started slashing prices as well. It was sheer business insanity ("why continue selling CDs at a nice clip for a decent profit when you can sell a lot more and make absolutely jack shit on them?"): an emerging electronics chain that at the time averaged about 8 locations per state had precipitated a full-on Christmas price war that had swept up the entire music retail base. For us, the ridiculousness of trying to compete head-on with a store about three cities away was obvious, and this silliness had to stop. With hotly-anticipated albums by Nirvana, The Eagles and Tom Petty coming to market and no one making a flippin' cent on them, eventually our assistant manager headed over to NRM to tell them, in effect, to calm the hell down and get a hold of themselves. I'm not sure if her words or a dispatch from corporate talked some sense into NRM as they backed off selling their whole inventory at cost, though the price war itself didn't exactly abate so much as head into a temporary cease-fire mode that would wane off and on over the next three years as our new competition continued to spread their wings.

Despite the critical damage being done to the perceived value of music following the 1994 price war, the industry refused to back down from front-lining new and hot releases at a list price of $18.98 and record stores found their margins beginning to shrink as they were being forced to sell their hottest stock at little or no profit and relying on aging catalog to take up the slack, if possible. This was new territory for a many stores as they had been able for a decade before this point to sell CDs at almost any price they wished without customers accusing them of being ripoff artists (unlike your average clothing store or friendly neighborhood Starbucks).

List prices are, of course, only "suggested" by the labels, and stores are free to price them however they see fit, but there is a floor to this practice as most of these new CDs were sold directly to accounts by the labels for about $11 and change (with stores that dealt with middle-man "one-stops" paying an additional $1-$1.50 per unit), which made them profitable from about $14 and up after covering operating costs and payroll. Being forced to sell huge amounts of these same titles for $11.99 (or even lower, as became custom at the big boxes by the end of the decade), would eventually have serious consequences on the rest of the retail base.

When Camelot closed their old location, it looked an awful lot like this...We had never had a particularly hard time beating Camelot and NRM at the pricing game and we had never tried to consciously undermine their sales strategies since the idea back then was that Best Buy was going to be our common enemy and we were a united front (or something like that). However, once Camelot closed their old store in 1995 and moved down the mall into a spiffy, lifestyle-themed, cacaphonous "superstore" sized location (which, ironically, happened to be the very slot abandoned by J.J. Newberry's 3 years earlier) and then started regularly and aggressively trying to steal Best Buy's thunder by offering new CDs at highly discounted rates, and then entered our territory by carrying imported CDs and music magazines, the gloves started to come off at last.

Camelot was also starting to come after us on other fronts, the most risky of which for us by far was the area of bootleg CDs. These weren't the kind of bootlegs you see being sold on city street corners (basically inferior copies of contemporary hit albums) but instead live recordings of illicit origin, and often dubious sound quality, that had become a sizable portion of our profit over the years as they were often sold for nearly two to three times their cost. In 1994, we were selling these "import live CDs from Italy" (as we obliquely referred to them) hand over fist as the market for these recordings seemed to explode in conjunction with the rise of alternative rock (though boots by classic rock artists remained a major attraction as well). In time, though, these titles became high-risk for us as trade laws were being amended in late 1994, effectively changing these items from "gray area" product to something a little more unpleasantly black-and-white. Suppliers such as Oxygen, Vigotone, The Swingin' Pig, Condor, Pyramid, KTS, and Great Dane began to regularly go in and out of business as each country they were based in (Italy, Germany, Australia, Japan) began aggressively going after bootleggers to bring themselves in line with the refurbished GATT treaty.

A particularly well-known Pink Floyd bootleg from way back when.Even to this day, I still haven't gotten over the fact that we not only carried these CDs for years, but also sold truckloads of them in a freaking suburban shopping mall. These were usually the kind of thing you'd expect to come across in a fanzine mail-order form, the back room of a mom and pop store located next to the adult book shop, or from some shady character at a record swap. Yet, here we were, in effect giving these boots their own display area at the rear of the store by filing them in with our import section (I'd wager the boots outnumbered the legit imports by a 7-1 margin at their peak).

Incredibly, these recordings survived the Great Lakes Mall era of Record Den, though seem to I recall a few of our outlying locations running into problems carrying and selling these discs from time to time, largely due to other stores narcing on them to whomever would listen. With Camelot sending their district people over to us every single time they were in town (we had a couple of sales reps giving us heads-ups whenever this was imminent), we had to be on our toes in order to keep our little operation away from prying eyes. I'm sure most of the reason our boots survived as long as they did was that we were always in a constant state of paranoia whenever someone in a business suit started poking around the imports section, and we would often resort to silly diversionary tactics like blocking off the section with a ladder so we could "repair a light fixture" or throwing down a heap of t-shirts across the bin and faking an inventory check if we suspected that we were being scoped out. There were, I'm sure, several occasions when we were mistaken about our visitor's intentions, but I'm also confident we managed to duck a bullet a few times as well.

Another skirmish in the hostilities breaking out between us and Camelot was our increasingly frequent violations of street dates on new releases, which was a gambit to not only undercut Camelot's sales on Tuesday, but to also make a little extra money on our own as we could usually get a little more dosh for a hot album release if it was being sold early. While we tended to play this game quietly most of the time, there were instances once in a while where we decided to flaunt it a bit, which would seriously piss off Camelot's then-manager (who looked a bit like a dyspeptic Chris Elliott), especially when the Bone Thugs-N-Harmony album The Art Of War arrived in late July 1997 and we'd plowed through dozens of it over the weekend before street date, including a copy sold to one of his employees (whoops!). A few minutes after that Sunday morning transaction occurred, the manager stormed down to our front counter in a righteous fury, with a copy of the CD in his hand and dramatically read us the riot act:

Camelot Manager: (angrily) "I called down here a few minutes ago and you said you didn't have this album for sale yet!"

Me: "Yes?" (I'd had a pretty good idea that phone call had been from another store and was a little amused that I was being confronted over this.)

This actually looks a lot like that Camelot manager during this conversation.Camelot Manager: (incredulous) "Why did you lie to me?"

Me: (A tight smile) "I didn't think you were really interested."

Camelot Manager: (ominous tone) "Do you have any idea what can happen to this store for doing this? Or your job?"

Me: "Yup." I knew perfectly well what could and would happen: nothing.

Incensed, the manager stormed out and apparently made a phone call later that day to his District Manager, who then called the local Sony branch first thing Monday morning. The call was then routed directly to their Sony salesman, who was also our Sony salesman, and who also happened to be a friend of Greg's for twenty years. "Hello, Sony Music! What? Record Den was selling the Bone album early? Well, I'll get right on it! Thanks for the call!" Ha ha haaaa...

Our little turf war with Camelot continued until Chris Elliott was shown the door a few months later, and the new manager seemed a bit more amenable to leaving us alone and concentrating on his own business. By then, we all had our hands full with more pressing concerns: Best Buy and Circuit City had both arrived in Mentor during the spring of that year. Worse, they had both opened directly across Plaza Boulevard from the Great Lakes Mall ... in fact, if you walked out the emergency exit in the back room of our store and then walked out into the shipping dock five feet to your left, you could actually see their front doors and that big crooked sign of theirs looming in the distance. Tweaking Camelot's nose was just a little pissing contest in the grand scheme of things: the real war was just now getting started.

Anthology 1From the industry's figures-obsessed standpoint, Best Buy morphed from a fearless agent provocateur into a true power player at the end of 1995. Armed with the first new song released by the group in 25 years, the first volume of the The Beatles' Anthology series was released during the Thanksgiving week kickoff to the Christmas season and sold an eye-popping 800,000-plus copies in five days, with over a quarter of those sales coming from Best Boy stores alone. The key to this powerhouse performance was an exclusive deal struck by the chain with Capitol Records to offer customers a little something extra (in this case, an interview CD containing new photos and the like) that could not be had by shopping at any other chain. From there, simply factor in the baby boomer drawing power of the biggest band of all time, and a tie-in with the biggest multimedia event of the year, price low, have the labels pay for the ads, mix well and serve.

The Anthology debut was an astounding flexing of muscle from what was then a 300-store chain, and the industry quickly began to institute new sales and advertising policies designed to cater to this emerging titan and grant Best Buy and its peers V.I.P. status in regards to certain key releases, ensuring that this handful of accounts would set the pace for sales and marketing over the rest of the decade. Over the next few years, Best Buy, Circuit City and Wal-Mart began to regularly feature "exclusive" bonus content with key releases as they were increasingly feted for their power to blow these new albums right out the door. In a business completely in thrall to who was #1 on any given week (or owned the biggest market share each quarter), this was all that mattered, any long-term effects be damned.

The problem with this thinking, of course, was that the music industry was making a classic mistake of placing all of its eggs in one basket. Contrary to popular belief, "big boxes" are not record stores, and the only reason they carried as many CDs as they did in the middle of the 1990s is because that's where the sales were. Blinded by greed, the major distributors were only too happy to keep these titans supplied with cheap music until a point was reached somewhere around 2002 when it wasn't really apparent anymore exactly which party was calling the shots. By then, the sales picture was changing rapidly, with the big boxes were slowly beginning to back away from CDs and looking into DVDs, cell phones, mp3 players, and video games instead, and the increasingly worried record labels being forced, in effect, to pay the big boxes to carry their music.

Best Buy. Really.Perhaps the most glaring sign of the power the big boxes wielded over the music industry came during the third quarter of 2003, when Universal was readying its JumpStart pricing campaign. Increasingly alarmed at the mushrooming downloading problem and mindful of widespread customer complaints of corporate price gouging, Universal took the unprecedented step of dropping list prices across the board on most of its best selling catalog. Retailers may not have been exactly thrilled with this idea since it actually ended up squeezing their margins (the list prices dropped downwards, sure, but the vendor costs didn't move very far), but they had also been screaming for years for a level playing field with which to compete with the big boxes, and this appeared to be exactly what they were looking for. Thus, reaction to JumpStart was nearly unanimously positive ... until it emerged that the only way Best Buy and Wal-Mart would participate in this campaign would be for Universal to offer them an additional discount on their product, or else they weren't interested. Initially, Universal held firm on the idea that no one would get special discounts anymore, but the big boxes were playing hardball now, and it was suddenly apparent just how much the tables had been turned against the record companies by the very accounts they had built up over the previous ten years. It was a giant game of chicken, but in the end Universal had to capitulate or potentially lose not only a huge amount of business, but eventually a sizable chunk of their roster: artist managers would almost certainly waste no time seeking to extract their clients from their contracts and spirit them to a distributor that would sell to the big boys. To say this was a disheartening development would be an understatement, but it was certainly no surprise, either.

Back to 1997: customers voted with their feet for lower prices instead of service and selection, and the rest of the music retail base slowly began to disintegrate. This slow attrition of record stores was noticeable at first in the malls, which (due to their high rents) generally forced these locations to sport the highest CD prices of all. Almost weekly, new closings and "reorganizations" were reported in Hits and Billboard, but very few people running the labels seemed to give a shit since these stores, individually, were mere blips on the radar when it came to a quarterly earnings report. So it was that when Best Buy waltzed into our backyard at last, we knew then that it was "do or die" time and the odds were stacked in their favor.

What we didn't know then was that we were about to be completely blindsided by some earth-shattering news, yet that awful development would turn out to be the best thing that could have ever happened to us.

Sunday, January 06, 2008

(Twenty Years) Part 7: Shuffling Towards Babylon

November 30, 2007 marked 20 years to the day since I started at Record Den, which has inspired some thought and reminiscing on the person I was then, what the job was like as the years went by, and what has kept me around until now ...

A record company exec, most likely Universal, though it doesn't really matter.For the executives at the wheel of the monolithic corporations that made up 90% of the modern music industry, the tail end of the 1990s must have felt like the scene in Rocky IV where the once-broken hearted Italian Stallion reaches that crucial point in his training reigimen where he has regained the eye of the tiger, the killer instinct, the feeling of absolute power and ability. Flush with the realization of that he is at last fully ready to absolutely clobber his opponent, Rocky clambers up what must be the tallest peak in all of Siberia and bellows "DRAGOOOOOOOOOO!!!" at the top of his lungs. After thirty years of mergers, buy-outs, disco booms and MiniDisc busts, the big labels was kicking ass and taking no prisoners as CD sales soared to an altitude only hinted at during the format's explosive early growth of the 1980s. In addition to the rosy picture at retail, the long-term cultural effects of MTV (along with the labels' relentless marketing expansion and licensing into satellite markets) pushed contemporary music into people's faces during almost every waking hour of existence. If it wasn't enough that you heard music pumping forth from TV shows, talk radio and movie screens, most Muzak systems had moved on from the omnipresent "beautiful music" versions of pop songs to playing the actual hit versions instead (you haven't really lived until you've heard Wall Of Voodoo pumping forth from supermarket speakers at 2 A.M.). Nearly every facet of the business from distribution to publishing was growing at a breathtaking pace, and it was all the labels could do to keep the pipelines full of fresh new product. Sure, it might have been increasingly safe and calculated product, but people were buying this music like it was going out of style, so why mess with the formula?

Following years of burgeoning, cult-level success just out reach of the mainstream, hip hop and so-called alternative rock exploded to the forefront of popular culture over the course of the 1990s in much the same way that synth pop and hair metal had done so during the previous decade, though these new genres had a far more polarizing effect on the mainstream listening audience. Partially as a result of that polarization, large numbers of aging music fans jumped ship and turned away from modern rock and towards the slicker, more-pop friendly incarnation of country music that had exploded at about the same time alternative rock had arrived, while their kids discovered the joys of youthful pop idols breaking out of the Disney Channel.

While many can argue that the surges in country and teen-pop in particular merely serve to illustrate the cyclical nature of the business, there was something else to this exponential leap in popularity that had rarely been the case before: enormous album sales. Until the 1990s, pop and rock tended to lead the pack in the blockbuster category, with only rare incursions into this rarefied air from country or show tunes. Teen-pop, which had historically been dominated by one-hit flash in the pans, also rarely produced mega sellers, yet by the end of the decade, there were several acts roaming the savannas sporting record sales at or above the eight-figure mark.

What happened to cause this massive commercial gold rush? The root causes of this period of incredible success were two key changes in the way the industry marketed their wares at the very beginning of the decade: the move away from commercially available singles and the advent of computerized record charts.

The first instance of a label deliberately withholding a hit single from the Top 40 market happened in the spring of 1990. Capitol Records was about to release M.C Hammer's Please Hammer Don't Hurt 'Em, which had already begun to accumulate a scary amount of early momentum thanks to the song "U Can't Touch This." Capitol was so sure it had a smash on its hands that they attempted the unheard-of strategy of not releasing "U Can't Touch This" to retail as a cassette single, instead servicing only a vinyl 12" version (a format which by then was nearly exclusively aimed at DJs). The gambit worked: Please Hammer Don't Hurt 'Em was a monster throughout the summer of 1990, powered entirely by a song that could not be purchased on its own unless you had five bucks and a working record player.

A few months later, a similar stunt was successfully pulled off with another crossover rap monster: Vanilla Ice's "Ice Ice Baby." With the song going nuclear all over the country, SBK Records (a subsidiary of EMI, the same distributor that housed Capitol Records) chose to delete the cassette single just as it was reaching the Top 10 at the onset of the Christmas season. Again, the lack of a single steered customers towards the full album, in this case Ice's To The Extreme. Total combined sales of the MC Hammer and Vanilla Ice albums were an astronomical 17,000,000 copies, and a daring precedent had been set: a technique would come into play often in the future, especially once the old machinery of record promotion had been upended by the arrival of SoundScan.

Until May of 1991, all record charts that ran in Billboard magazine were totted up the old fashioned way: a whole lotta people manning phones, calling retail outlets and distributors, and creating a sales picture based on the reports provided by each. It probably goes without saying that this system was inherently flawed and these reports (if not the reporters themselves) were a cinch to manipulate (and they very often were), but that was simply the way the industry approached record charts for decades until the idea of a truly accurate survey derived entirely from Point-Of-Sale systems (the contraptions in stores that read and tot up bar codes) became a workable concept.

Suddenly, a true picture could finally be made available of the best selling music in America, and when that first SoundScan chart hit the stands, it was absolute mayhem in promotion departments as country albums suddenly flooded the upper half of the album charts as if a dam had burst (and it had: unlike store reporters who tended to read off their "pop/rock" albums to the people totting up the "pop/rock" charts, SoundScan drew no lines between genres). In the space of a week, many "pet projects" that had been artificially worked up by label promotional departments to a false level of success in order to gain attention and create a buzz were utterly wiped out. In a couple of months, the Top Pop Albums chart had to be re-named The Billboard 200 so that people would quit asking the magazine's editors "why are there so many country/rap/soundrack albums on the pop chart?"

One thing that took a lot of getting used to was that these new album charts moved fast: the way an album lived out its chart life in Billboard finally matched the true pace of record sales in the real world. Having become familiar with the old system for a few years before I started at Record Den, it was quite startling to witness new releases exploding out of the box like there was no tomorrow at work and then watch them take their sweet old time climbing the lists in Billboard. With SoundScan, all of that had changed: albums now regularly debuted at or near the top of the charts and plummeted rapidly down the ladder in successive weeks (instead of entering low and climbing upwards as they always had before), with only a handful of titles managing to keep their heads regularly above water on an ongoing basis. While the initial shock of the new sales system made for a fascinating learning experience over those first few months, it was only a matter of time before the industry started devising ways to make this brave new world of POS charts work for them, and that is where the fun (and, eventually, the problems) really started.

Looking back from this point in time, the most harmful effect of the SoundScan era on the record business has been a seismic shift in the perception of a record's success. It was once common to wait out an album's first few weeks before declaring the project a success or failure, but after a couple years of SoundScan, that perception was winnowed down to a few days (the same dangerous shift in perception that became common around Hollywood as box office reports became widely publicized in the 1980s). Eventually, albums that failed to knock the socks off of industry observers in their debut weeks were written off as "duds" almost immediately, while those that entered high were hailed as smash hits, regardless of how long they failed to hang around afterwards. Gaining that lofty first-week debut was of paramount importance to record companies, and the best way to engineer an immediate No. 1 album was do what the movie business had been doing for years: hype release dates to the point that not only would everyone know when a hot release was coming but they also would feel the overwhelming compulsion be one of the first to own it ... and the surest way to prime that pump was to take singles out of the picture.

These priceless fossilized cassette singles, unearthed in Montana by Robert Bakker in the late 1990s, are now on display at the Carnegie Museum in Pittsburgh.As I wrote in a previous post in the series, singles sales were once a crucial step in the creation of a long-term music consumer. By the early 1990s, however, emboldened by the success of the MC Hammer and Vanilla Ice albums, labels were beginning to see singles as a zero-gain irritant. In the wake of additional deleted (or never available) radio hits by the likes of Bryan Adams, The Offspring, Live, and Van Halen, it had been proven conclusively that it was possible to withdraw from sale even the hottest songs in the country and still get people to pony up for a full-length album instead (especially when said song was in the rap or rock genre). Elated by the results of their new strategy, labels carried out a charade of acting like the format still mattered for a few more years while systematically cutting the legs out from underneath it.

During this time, Billboard attempted to keep labels honest by insisting that any song not available at retail would therefore not be allowed on the singles chart, which was still collated by a combination of sales and airplay. In response, record companies worked out a cute runaround to this rule by "flash releasing" a song for a week or two to gain chart eligibility and then immediately deleting said single so as not to damage sales of its parent album. By the beginning of 1997, however, CD sales were so hot that the labels didn't really give a shit anymore if Garbage wasn't eligible for the Hot 1oo since the soundtrack to Romeo & Juliet was selling like proverbial hotcakes (largely thanks to there being no available single for "#1 Crush"). With fewer massive radio hits available to retail, the labels managed to force Billboard's hand at last as the magazine, seeking to remain the most accurate arbiter of the music industry's fortunes, changed their own rules and allowed unavailable "radio hits" to compete alongside actual physical singles for the first time.

For singles, the game was up, yet album sales incredibly continued to track upwards through the end of 1999, despite growing consumer complaints concerning the lack of singles in the marketplace and the substandard artistic quality of the CDs they were being forced to buy instead. Once it became apparent that only one hit single was really needed for an album to sell 5-10 million copies (instead of 3 or more as was usually the case prior to this decade), the quality of most albums began to nose-dive. The entire "art" of creating a listenable, balanced record album was being lost, and in a society that was increasingly moving in fast-forward, that didn't seem to make much of a difference to anyone.

At the dawn of the 21st century, with selected new albums now capable of selling into the seven-figures in their opening week, the music industry appeared invulnerable (the operative word here being "appeared"). While the major labels crowed over the amazing wave of success they were riding into the year 2000, hardly anyone realized that the stone-faced corporate, quarterly-profits-first frame of mind which had been running the record biz for years was about to suddenly become a major liability. While the decisions arrived at by the numerous bean-counters and lawyers who had come to dominate the executive level during the 90s mostly "worked" in the sense that they created immense short-term windfalls and drove the overall sales performances of each megacorporation higher, these same decisions would also turn out to have terrible repercussions on nearly every single corner of the industry in the near future. Imagine if you will a game of Jenga, with the initial construction completed at the start of the decade, and with pieces being systematically moved and arranged on top throughout the following ten years. The tower becomes taller and taller, but also begins to lose structural integrity as the whole structure imperceptibly weakens. After a certain point, all it takes is one event (or move, if you will) to start a catastrophic collapse.

Another record industry executive, possibly from SonyBMG (?)Granted, there were a lot of bad moves being made during the 1990s that ruthlessly exploited the good will of the average customer to the breaking point, but none of them turned out to be as catastrophic in the long run as the death of the commercially available single. More so than any other callous, wrong-headed policy change from that decade (the tilting of the playing field to the "big boxes," the continual raising of CD list prices, the elimination of defective returns, etc.) the forced removal of an affordable one-song format for people to buy was the first domino of many to fall, and it was the specific void in the marketplace left by singles that P2P networks filled the instant they appeared.

Who knows, perhaps it was inevitable that all of this would happen, but I have a difficult time believing that this business would have degenerated so quickly if a low-cost method to "getting that one song I like" had still been around in the middle of 1999. Instead, millions of irate customers reveled in their chance to give greedy music execs the bird and went on a downloading free-for-all.

For the major labels, the best option they could think of when they finally started to get an idea just how much of a world of shit they were in about a year later was not to adapt and perhaps make the situation work to their advantage, but to sue everyone in sight while committing the PR disaster of mobilizing a few asshole multimillionaire rock stars to appear on the steps of a courthouse, wagging their fingers importantly while crying poverty. Worse, the labels blamed everyone and everything but themselves for the predicament they were in. How dare these people try to screw us back the way we've screwed them all these years, they raged, utterly ignorant of the raging contempt for them (earned or otherwise) that had been simmering in the minds of the record buying public.

The face of the enemy.Meanwhile, the old retail base of actual music-oriented record stores (which were once the financial backbone for major labels whenever a bigger account floundered or declared bankruptcy) continues to disappear, store by store, chain by chain. Most of these closings are due to the lethal combination of runaway downloading by their old customer base and the predatory pricing policies of such 800 lb. gorillas as Wal-Mart, Target, and Best Buy. These policies, by the way, are only made possible by massive advertising kickbacks, generous returns allotments and "20% free goods" shipping policies instigated by ... you guessed it, the major labels.

Faced with this knowledge, and yet still being badgered by these same record companies to buy the same titles being given away by the big boxes at a higher wholesale price doesn't exactly fill what's left of the music retail base with sympathy for their beleaguered suppliers. In fact, I'm quite willing to wager that many of the remaining record stores are secretly looking forward to the day when the "big boxes" finally decide that music simply isn't worth their floor space anymore. When that happens, the major labels will only be able to watch in horror as over two-thirds of their business suddenly vanishes from their balance sheets. A little while later, with no viable account base to fall back on, the Big Four will quickly shrivel up and blow away like a pile of dead leaves, leaving the indies with the chance to start it up all over again, if such a thing will be possible by then.

Tuesday, January 01, 2008

Enter 2008

Happy 2008, everyone!Though it ended as well and as peacefully as could be expected, 2007 started off with me in the hospital with kidney stones for the second time in seven months. This was certainly not the way one wants to start any year, really, but what seemed then like a harbinger for a truly terrible year was really just an isolated affair.

I suppose it goes without saying that 2007 could have been a lot better (having a few grand in the bank and still being delirious over an Indians world championship would have been really nice, for starters) and it also could have been a lot worse than it wound up becoming (that settlement from Hillcrest really saved my ass, considering the cash I'd be dealing out a few months down the road). The truly bad news for the year would be the bill coming due for not visiting a dentist's office for the better part of two decades, yet on the other side of the coin, I have now been literally stone-free and smoke-free for exactly a year as I write this. The money saved from that sacrifice alone (4 bucks a day times 365) doesn't quite make up for the expenditures to keep myself with a mouthful of choppers for the foreseeable future, but it definitely helped.

With all of that now officially in the past, here's to a great 2008 for everyone. This is not going to be a cakewalk by any means; I still have some work cut out for me in the tooth department (nowhere near as nasty as this year's ordeals, but still to the probable tune of 2-3 grand), and I'd very much like to get enough money put aside to get a new (used) car sometime in early 2009. With a little bit of luck, these will be the only big hurdles to jump over the next 12 months.

Oh, and maybe I can lose a few of these twenty "stop smoking" pounds I've put on since last January 1 as well ...