It’s Not the Same Old Song at Retail Anymore

Discussion
Nov 08, 2007

By George Anderson

Exclusive brands are becoming increasingly important in retailers’ ability to differentiate and grow sales. And now, as it turns out, exclusive bands are doing much the same for retailers.

According to a Bloomberg report, the Eagles’ Long Road Out of Eden CD sold more units than any other new album in the U.S. Because the CD was being sold exclusively in Wal-Mart stores and the band’s website, however, it was not originally included in Billboard’s chart of top sellers, until the publication made a reversal in its policy yesterday, installing the album as number one.

Based on Wal-Mart’s numbers, the first studio recording from the band sold 700,000 copies in its first week of sales. By comparison, the top-selling record on the Billboard charts, Britney Spears’ Blackout moved approximately 350,000 units its first week in distribution.

The Eagles and others including Madonna and Radiohead are increasingly bypassing record companies to take sales directly to consumers. The Spice Girls are debuting their new Greatest Hits record at Victoria’s Secret next week. Paul McCartney released Memory Almost Full through Starbucks’ Hear Music label back in June.

Recently, Radiohead has gotten a lot of press for its unusual approach to selling its latest recording. The company eschewed working with retailers and instead chose to sell directly to consumers through its website, according to The Associated Press.

Interestingly, Radiohead chose to leave the purchase price of downloading In Rainbows up to consumers. According to research by comScore, 62 percent chose to spend nothing at all. The remaining 38 percent, however, spent an average of $6 for the album. All told, 1.2 million people visited the Radiohead site between Oct. 1 and 29.

Discussion Question: What are the changes you see taking place in the music and entertainment industry and what will it mean for retailers? For example, recording and concert sales of acts suggest that older consumers are driving much of what happens in music. How does this impact what is being sold and how it is presented to consumers?

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13 Comments on "It’s Not the Same Old Song at Retail Anymore"


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Mark Burr
Guest
14 years 6 months ago
It’s interesting to note that the Eagles did perform on the CMA Awards last night. Yet, consider who did this last year for Wal-Mart at Christmas; he’s doing it again this year. What’s his name? Oh yeah, that irrelevant guy to everyone but himself and Wal-Mart. I know I am totally wrong on this one, based on trends. But personally, I think music is headed in a totally wrong direction by limiting access and audience. In particular, limiting it to Wal-Mart, especially Wal-Mart. Don’t get me wrong, I’m a big Eagles fan, always have been. The problem is, I wouldn’t pay $200 to see them and I won’t buy their album from Wal-Mart. They’ve decided they no longer want me as a fan. What can I say to that? It’s their choice. Others will make the same decision. They will write me off as a customer. But hey, Scanner’s a pretty irrelevant guy too. Seven hundred thousand people and more by the minute disagree with me. I did say I was wrong, didn’t I? Of… Read more »
Ted Hurlbut
Guest
Ted Hurlbut
14 years 6 months ago

The issue in the music business is that the labels were essentially distributors, between the manufacturer (the artists) and retailers. Once the middleman failed to add value to the equation, the middleman became obsolete. Technology drove a portion of this change, but not all of it. Once the artist has recorded his music, the CD itself becomes a highly identifiable branded commodity, and mass merchants who chose to use the commodity as a traffic generating loss leader drove the margin out.

The business model in the music business is in the middle of a radical transformation, the parameters of which are still barely discernible. But from a retail perspective, it seems clear that the business will be confined to a relatively few (in the hundreds) “hit” titles, and that retailers will either use it as a loss leader or as an “exclusive” destination item to drive traffic. In neither case is their likely to be significant, sustainable profits to be made.

Bill Kennedy
Guest
Bill Kennedy
14 years 6 months ago

With all this talk of branding, perhaps that is the main reason not to choose Wal-Mart as your exclusive retailer. Wal-Mart is simply a ‘love them or hate them’ company. And they are a ‘Low cost provider’, which is just a polite label for bottom-feeding.

There has been quite a bit of griping on chat boards about the Eagles “selling out.” This album probably would have been #1 anyway. It is doubtful that they gained much from the relationship. And it may harm their image in the future.

Doesn’t seem logical to me to limit your exposure.

Alison Chaltas
Guest
Alison Chaltas
14 years 6 months ago

Custom relationships and products by major retailers are trends that will skyrocket over the coming years. Think of it as private label on steroids. We see new examples every day, in categories ranging from magazines to sporting goods, to electronics, to telecom, to domestics…and so on. Why should music be any different? Today’s leading retailers want unique solutions. The challenge for manufacturers will be maintaining branding control while balancing the channel mix.

Daniel Abreu
Guest
Daniel Abreu
14 years 6 months ago

The move towards DRM-free music is going to become a greater factor in all music purchases going forward. There is an increasing array of portable devices and endless options for playback and it’s not just about iPods anymore. It would be interesting to see how sales of the Eagles album broke down between physical and download. But at the end of the day, price is the determining factor. This is a two CD set and can be downloaded at 256 kbps (good quality), DRM -free for $10.88. Compare that to the $17 – $20 that most retailers get for new release CDs today and we can see how the traditional retail model is doomed. Record labels have refused to see what is clearly in front of their face and are now at a crossroads. Their “promotional” services don’t have the value that they used to in today’s connected world. It will be interesting to see how this pans out over the next couple of years.

Len Lewis
Guest
Len Lewis
14 years 6 months ago

Bypassing the record companies could mean that margins might improve. Similar to many CPG companies, record companies spend a lot of money on advertising, promotion, marketing, and other expenses. Cut them out and you may come up with stronger profits for some retailers and the ability to reduce the exorbitant prices charged for CDs.

Michael Tesler
Guest
Michael Tesler
14 years 6 months ago

Artists are brands and are learning what that means (so are we, as it evolves) and they now have the ability to control the marketing and merchandising of their brand without going through traditional channels (music companies, music stores, CDs in bookstores, etc.). Technology (downloaded music, iPod, etc) has made old methods of retailing music obsolete. Changes are coming so fast that that no one can get their arms around exactly how to be in this business long-term and it seems like more are running away from this business (and fast) then trying to get in to it.

Roger Selbert, Ph.D.
Guest
Roger Selbert, Ph.D.
14 years 6 months ago

What might be of more interest to retailers is the research demonstrating that the right in-store music can dramatically increase spending. The numbers are astounding. I bet the same is true with the right web site music. Ditto for the right scent. Quite dramatic results.

Anne Howe
Guest
14 years 6 months ago

I support brand relationships with retailers that are grounded in pleasing shoppers. I also understand how differentiation drives trips, and that trip triggers are so often the key to retailer success.

The Eagles’ deal with Wal-Mart triggered a trip for my household, where Wal-Mart is off the beaten path, and not a retailer we shop very often, but did not result in any other impulse purchases. That trip is defined as man on a mission for wife 🙂

But, retailers have many success stories to show how brand differentiation drives trips, increased basket rings and profits. So I say ROCK ON and let the shoppers decide. Change happens, cheese moves and consumers will go where they need to go to get what they want. As in many cases, a strong, relevant brand that meets/exceeds expectations is a powerful thing.

PS: love the CD.

Tom McGoldrick
Guest
Tom McGoldrick
14 years 6 months ago

Small bands have been going straight to the consumer since the cassette tape was invented. Selling music through their own website is a natural extension of this practice. Both of my daughters love buying music straight from artists’ sites, primarily because it often comes unprotected so is easy to move between all of our computers and mp3 players.

They both have large music collections and since they started purchasing their own music, neither of them has ever bought a CD. I can see a market for Wal-Mart to make deals with well known baby boomer bands like the Eagles but no long term future for this sales channel.

Edward Herrera
Guest
Edward Herrera
14 years 6 months ago

Retailers can do a couple of things, like provide in-store kiosks directly to performers’ web sites, and form partnerships among mid-size retailers who can exclude the big retailers. I think any additional customer traffic opportunities are important to retailers.

As for the state of music/entertainment, I believe it will take the same road as athletics. An agent, media exposure, and a marketing team will make, not find, tomorrow’s recording stars.

Camille P. Schuster, Ph.D.
Guest
14 years 6 months ago

With more consumers using different media for information and shopping and with the industry trying new delivery mechanisms there is going to be a lot of experimentation which is good. In the end there will be a combination of delivery methods that are successful. With the fragmented consumer audience there will no longer be one media vehicle for information for any age group. There will be no one delivery mechanism that everyone in a group will use. Consumers want it “their way.”

Mark Lilien
Guest
14 years 6 months ago

Most retailers will ignore the CD music business. Retailers prefer growing businesses with decent margins, not declining businesses with poor margins. Wal-Mart and Starbucks can afford to make deals for exclusive CDs. Mid-size retailers can’t. As far as the concert business goes, the ticket prices are so high, and the scalping so pervasive, it’s amazing that many college and high school students can afford live music performed by the nationally famous.

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