Instead Of Nasty Lawsuit Against Counterfeiter... Why Not Look At Partnership Opportunities?

EMI Stops Selling CDs To Indie Record Stores

from the you're-on-your-own dept

Tue, Jul 14th 2009 12:39am — Mike Masnick

Apparently, EMI has had enough of independent record stores. Via Digg come reports that EMI has been calling various smaller independent record stores and telling them that it won't sell them product directly any more. Instead, they'll have to source it from third parties -- meaning that it will be more expensive. Basically, this means most of those stores will carry fewer EMI CDs. Of course, some might argue that this won't really mean much, since independent record stores are smaller (and don't always sell as much major label product), but it still seems like an odd choice by EMI. You would think the company would be working overtime to keep the few retail channels pushing its product happy.

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Filed Under: cds, indie record stores

31 Comments

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Robin, 14 Jul 2009 @ 1:44am

Could it be that due to EMI's massive debt, it just can't handle distribution costs to outlets that can't guarantee enough sales?
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Paul G, 14 Jul 2009 @ 4:27am

The death throws begin?
Is this the beginning of the end we are all longing for?
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MBraedley (profile), 14 Jul 2009 @ 4:49am

Re:
Except that it costs virtually nothing for a store to have a CD just sitting on the shelf. Why does EMI care if that CD sells in a week or a year, especially when they've already been paid! The only effect that not having guaranteed sales is that the store orders fewer CDs in the future. This has little effect on EMI anyways because the unit cost increase from removing a single item from an order (even one that isn't big) is fairly small.
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Workingindust, 14 Jul 2009 @ 5:04am

Does this mean
we can tell them to shove off when they start whining about how they're not making any money from CD sales again?
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James (profile), 14 Jul 2009 @ 5:18am

Orobably pressure from big box retailers that use CDs as a loss leader. When I go to Best buy to purchase a cheaper CD, I don't buy anything else and I use a credit card. I love making Best Buy lose money like that.
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Thomas, 14 Jul 2009 @ 5:44am

Re: Does this mean
I think they will use it to champion more draconian DRM by saying that CD sales keep dropping due to piracy. (And hope that no one points out they are reducing number of retailers selling their CDs.)
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Marcel de Jong (profile), 14 Jul 2009 @ 5:47am

That makes sense
Of course, you sell more discs by narrowing the market... very smart, EMI

I thought EMI was going to do things differently?
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Anonymous Coward, 14 Jul 2009 @ 5:48am

Re: Re:
... you've never worked in retail... shelf space costs a lot.

in most retailers, vendors pay the retailer to get premium space -- that means end-caps, high-traffic areas, near other high-traffic items, etc., and they pay a lot. ever notice why coke and pepsi products dominate almost a whole aisle in every grocery store? that's because they pay a lot to keep it that way.
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Ima Fish (profile), 14 Jul 2009 @ 5:50am

The labels have been trying to kill the small independent music stores for decades. I worked in a small chain of independents in the midwest in the 80s and 90s. About 1993 we noticed that Best Buy was selling CDs for less than we could buy them wholesale. Our manager called and tried to get a similar deal (we had nine stores throughout Michigan) and they laughed.

At that point we knew we were dead, which is ironic as none of us could have known about Napster coming about several years later. For those readers with brains who figured this out, yes.

The internet did not kill off the music store. The labels did.
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Osno (profile), 14 Jul 2009 @ 5:51am

This is entirely consistent with the "content is important, distribution is not" mentality of the record labels anyway...
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Ima Fish (profile), 14 Jul 2009 @ 5:51am

Re: That makes sense
"you sell more discs by narrowing the market"

The Spinal Tap school of marketing!
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TPBer, 14 Jul 2009 @ 5:58am

Who buys CDs
Does anyone even buy these antiques? What a waste of money, might as well just light it on fire.
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Evostick, 14 Jul 2009 @ 6:37am

Sale or Return
Could it be because of Sale or Return.

EMI don't want the cost of having to keep track of small volumes of discs across large number of shops. They want to count these as a sale.
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chris (profile), 14 Jul 2009 @ 6:50am

Re: The death throws begin?
Is this the beginning of the end we are all longing for?

if you go by the "too big to fail" approach, the american auto industry went bad in the 70's and it took 30+ years for the corpse to stop kicking.

media companies went bad in the late 90's, so it could still be a few years before they finally bleed out.
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Anonymous Coward, 14 Jul 2009 @ 7:14am

Re: Who buys CDs
Buying CDs is a great way to get decent quality recordings. Sorry, low bit rate MP3s sound crappy and if you pay for them they cost as much as the music on CDs. Why not get the higher quality recording for the same price? You can still make your MP3s, probably at a better bit rate than you can buy them. Turns out there is still a market for used CDs and they are cheap.
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Anonymous Coward, 14 Jul 2009 @ 7:25am

Re:
James, have you heard of the law of averages? I don't think Best Buy really cares about one individual ONLY buying a CD (at a loss???).
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Anonymous Coward, 14 Jul 2009 @ 8:03am

Re: Re: Re:
That is correct....in a super market. This could be partially true in a big-box type music store to a degree but I seriously doubt that labels are buying a lot of advertising in independent music stores. A music label may pay to have an extra display in the store but when it comes down to it the music is organized by genre and then alphabetically. If you walk into a music store and see 10,000 copies of a CD on a shelf the store itself decided to purchase those CDs and sell them...they aren't getting paid by the label to have them on the shelf.
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tubes, 14 Jul 2009 @ 9:07am

Re: Re: Who buys CDs
There you said it low bit rate MP3's but if you rip @ a higher bit rate you cannot tell the difference between a CD. I personally would never buy an mp3 through any online distribution (Waaayyy too expensive). But you are also wrong sometimes when you buy a CD there are DRM's on the CD that stop you from ripping your own mp3's. I actually bought a CD a little while ago (used I will never buy new) as soon as I put it in my computer it asked to install some bullshit software of course I said no & then I wasn't able to access the CD through my computer at all without installing the software.
So I will only download high quality mp3's (192 & above) for now on & I will not support anymore labels but I do support the artists by going to the concerts & maybe buying a shirt or something. Screw the major labels they are killing themselves & a lot quicker than I originally thought.
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Anonymous Poster, 14 Jul 2009 @ 9:16am

Re: The death throws begin?
A. It's "throes".
B. This is hardly the beginning of the end. When one of the major labels goes into bankruptcy/bailout/"we're too big to fail!" mode, THEN you can say that.

The major labels will look up and shout "we're too big to fail!", and the world will whisper back, "the hell you are".
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BullJustin (profile), 14 Jul 2009 @ 9:24am

You're forgetting the distributors
A big market in any product chain is the actual distribution segment - those who move product from the factory to the retail store. (This is one of the reasons Walmart is so cheap as they own the distribution channels.) With physical goods, these companies control the main bottleneck and therefore can extract a premium for their "service". One reason you see a MSRP on goods is so that these distribution channels don't price a manufacturer's goods out of competition.

Since this was the major source of revenue for record labels in the past, they monopolized it internally. Since the majority of their money came from this they began to believe (or at least act like they believe) that they were in the music distribution business. While this is a revenue generator it requires large companies, in this case EMI, to be concerned with small ones, here the independent record stores. It requires building and maintaining good relationships with the customers, and when they serviced the entire retail music business, they had a lot of independent music stores to relate to. That gets time consuming and expensive so they sought ways to stop doing it. As Ima Fish said, they killed the independent record store to cut down on their customers and thus their cost.

However, outsourcing gained popularity and distribution companies came into the picture. The labels could then sell all their product to a very limited number of customers. The money saved by not having to invest as much time in smaller companies and not having the same staff costs became more attractive than the money made by doing it all themselves. Since there was a smaller piece of the price to take, these distribution companies put less effort into marketing to small businesses, gave less incentives to small business, and pretty much let small businesses languish in favor of larger, higher volume customers.

One of the side effects of the labels removing themselves from contact with the independent store is that they lost contact with the independents stores' customers. These are the customers who drive the new music development (once someone is big enough to get into a big box store like Best Buy they are already in heavy radio rotation). If you wanted to see where music was headed up through the 90's, you went to an independent store. If you wanted to find the next big thing you went to an independent store. If you wanted to find a band before they sold out, you pretty much had to go to an independent music store.

EMI, by cutting themselves off from indies completely, is truly signing its own death warrant. Given how long the labels have tried to kill the independents (after all, most independents never really pushed the cash-cow-of-the-month-pop-idol) is it really any wonder they would be so far removed from the will of their ultimate clientele? They believe their customer is either the big box store of the the distributor rather than the end consumer. Everything they are doing makes total sense as trying to protect their perceived customer base from threats to their perceived customer base.

I know this is a very simplified and macro view of the situation. There are many other bits and pieces that fit in and play a role, but the all the major labels have lost sight of who their true customer is and what business they are actually in. Unless and until they realize where they need to focus to make money now, they are doomed and this boneheaded moves proves it.
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Anonymous Coward, 14 Jul 2009 @ 9:25am

Re:
please don't link to blogspam. that guy basically copied almost the entire NYT article. just link to the NYT article.
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Steve (profile), 14 Jul 2009 @ 9:28am

Who Buys CDs
I always laugh when I read comments from people who steal an artists' music and pretend to support them by buying their merch and concert tickets. The music is the whole point and is why artists spend countless hours recording and perfecting their art. The last thing they care about is the stupid shirt. As far as buying their concert tickets go, the income doesn't even begin to cover the cost of being on the road. The only person gettting rich off tickets is Ticketmaster. Being on the road is the reason so many of artists die young or get hooked on drugs and booze. By all means go see you favorite artist but don't think you are helping them out much.

As far as CDs go... for people who actually do support - artists buying CDs or vinyl is the way to go. You get the artist's true vision of the art form they have created and after you pay for it is yours to keep. Downloads are for chumps.
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vastrightwing, 14 Jul 2009 @ 9:49am

Re: Re: That makes sense
Actually this makes perfect sense. Consider the business model they are really in. They don't sell CDs anymore anyway. They are in the litigation market: they litigate and settle lawsuits. Banks are not in the money lending business, they are in the overdraft fee business. American auto industry is in the stock price business, etc. The point is that the music industry gets it: they are not in the CD business. They are partially protecting their biggest customers: box stores and actually increasing their litigation business by encouraging people to download. I'm not making a joke. I actually believe this is their business model.
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lavi d (profile), 14 Jul 2009 @ 9:53am

Shouting in the Wilderness
I'm going to say it again, just because I like repeating myself.

If new CDs cost $3.99-5.99, I would buy a dozen every month

The problems with the recording industry is a testament to how delusional people can become once they've enjoyed monopoly power - they seemingly cannot come to grips with market fundamentals after that.
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MBraedley (profile), 14 Jul 2009 @ 10:11am

Re: Re: Re:
The cost of shelf space in supermarkets is so high partly because of very high turn-over rates. Many products will only stay the shelf for between a day and a week. Sure, this is true of high volume items in record stores, which is why those items are displayed prominently, but for lower volume items, a record store might sell one every month. It actually pays to have those lower volume items not only in stock, but in the customer area, because if a customer can't find it, they usually won't buy it. There's also a supply and demand aspect here as well. Supermarkets try to keep their shelves highly stocked, whereas a record store doesn't care as much. Having items in their low volume section stocked to the brim will usually mean lower sales of those items for the aforementioned reason that customers can't find what they're looking for. Therefore, record stores usually have an excess supply of shelf space (thus lowering the cost).
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Fiercedeity (profile), 14 Jul 2009 @ 11:41am

Re: Who Buys CDs
Yeah, maybe 30 years ago. It's alright, I'll get off your lawn now.
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tubes, 14 Jul 2009 @ 3:04pm

Re: Who Buys CDs
Steve, I assume you are talking to me. I'm not sure how much you really know about the industry but you need to get your facts straight. I'm no expert either but even the artists say this.
The average group will make about $1/album sale. Yes they make $1 for a $12-$16 CD. Then they divide that $1 between the other members of the band. All the CD/recorded music is now is an advertisement tool!! Don't get me wrong I will buy the physical CD (if its good) but I will not buy it new I will always buy used.
Yes, they make most of their money from touring & merchandise. Why do you think the band tours a lot longer than they used to & produce less new music then they used to. Music bands used to produce an album a year sometimes even two. I know they don't care about a shirt but they do get a bigger percentage from the shirt/merchandise sale then they do from each CD sold. That is the only reason I will spend $20-$25 for a stupid t-shirt.
Another thing if you go straight to the venue you avoid paying Ticketmaster fees so no I don't support Ticketmaster either but that's even hard to because they pretty much own most of the venues in my area now.

If buying the CD makes you feel better than buy it but it is the labels that are killing themselves. That is the only person making money off of the CD sales.
Music will always be here it's the old fashioned labels that will be gone.
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athe (profile), 14 Jul 2009 @ 3:50pm

Re: Who Buys CDs
Artist's true vision?! Most music these days is mastered and compressed to hell, removing all the dynamic range that SHOULD be there, usually against the artist's wishes... At least with a live concert, while it's not "perfected", it's sure to be more true to the artist's vision.
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geesherman (profile), 15 Jul 2009 @ 12:44pm

Wayne Rosso's story is NOT accurate see link
http://digg.com/music/Stark_Online_A_Quick_Moment_To_Respond_to_Wayne_Rosso
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donny, 15 Jul 2009 @ 12:51pm

EMI works with lots of independent retailers.
EMI works with lots of independent retailers. They’re still pressing vinyl out of the Capitol Studios for indie retail and have a huge vinyl re-issue program. But more to the point, they — like all the majors — have expanded the number of physical accounts they work with. Isn’t that the way the market’s going?
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ben (profile), 21 Jul 2009 @ 1:59pm

Last Shop Standing exposes even worse...
It appears to me that EMI no longer care about record shops.
They would prefer to ship to fewer accounts on a misguided money saving exercise. They seem to forget that it is independent record shops that champion new bands and local artists. Who is going to do this in the future? Anybody interested in this subject should check out the book Last Shop Standing which gives a real insight into how all the record companies have let down record shops and contributed to thousands closing. I read it last week and have since been in shock at the horrific corruption of the music industry.
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