There’s unlimited supply
And there is no reason why
I tell you it was all a frame
They only did it ’cause of fame (—The Sex Pistols, “EMI”)
BY STEPHEN JUDGE
Ed. Note: Stephen Judge, who owns BLURT, also owns Schoolkids Records, a small chain of North Carolina-based record stores; yours truly worked with him in one of those stores from 2012-15, and during that time we got to experience firsthand the latter-day vinyl explosion. From the groundswell of new releases, both major label and indie, that previously would have only been offered on CD, and the deluge of catalog reissues on vinyl; to the steadily-growing used vinyl business, and the broadening of the customer demographic to include every age group, including pre-teens just discovering vinyl for the first time as well as older music fans catching the bug again and finding a reason to return to their neighborhood record stores; it was by all measures a period of unprecedented growth for that sector of the music industry, one which saw the market share of vinyl growing by significant percentages practically every quarter. (You would’ve had to be living in a cave not to spot at least one hyperventilating “Vinyl is back!” report in the national and international media during that time as well, to the point that such reports started become hilariously redundant.)
Now, however, with the escalating price of new vinyl—for both new releases and reissues—hitting what some are calling dangerous levels from a consumer point of view, media coverage has gradually been turning negative, in some instances even prematurely sounding the death knell for vinyl. Last year there was a cautionary story published at Stereogum titled “Have We Reached Peak Vinyl?” which discussed, among other things, those rising prices, the problems small labels were having getting their records pressed with a limited number of actual pressing plants, and the perception among a lot of collectors that the annual Record Store Day—which arguably kick-started the whole latter-day vinyl revival—had become co-opted by the major labels and ultimately rendered near-meaningless. (That’s what a limited edition Justin Bieber record will do, eh?)
Then last week Stereogum published a follow-up story, “We’ve Passed Peak Vinyl—Here Comes the Collapse” in which writer Michael Nelson addressed all this, and more. Lively discussions about the Nelson article quickly followed across the interwebs, including one that Stephen and I found ourselves knee-deep in—we’re both extremely passionate about these matters, to say the least, and feel it’s a dialogue that needs to be ongoing. Plus, make no mistake, Stephen’s take (and mine too, even though I am no longer in Raleigh and working at Schoolkids) is that despite all the current issues, vinyl is decidedly NOT on the verge of extinction. There will always be collectors of and devotees to the analog format. Perhaps the headlines should instead read something along the lines of, “Hi, My Name is Vinyl: The Rumors of My Impending Death Have Been Greatly Exaggerated.” What follows below, then, is his recap of our side of the conversation, plus elaboration, stemming from his experiences as a record store owner and as a well-known figure within the national independent record store community, both as a member of the Coalition of Independent Music Stores and a board member for the Music Biz Association (formerly NARM). Readers are encouraged to post their comments and reactions. Got all that? Okay, let’s rock. – FM
The Michael Nelson-penned Stereogum report referenced above may be viewed by some as “just another person belly-aching about the record industry and its mistakes.” However, from my perspective as a record store owner—I operate three Schoolkids Records businesses, in Raleigh, Durham, and Chapel Hill—it is all 100% accurate and an honest take on where things stand. (The comments that Stereogum readers posted following the piece are honest, too; they are all spot on.) Regular customers who shop at stores know. This is fluid and serious. Now, more than ever, support your local stores—they need you.
Furthermore, if people blow this off as just another person just complaining about the industry, major labels, etc., you are really missing the point. I am all for major labels, all for vinyl selling in chains, and am not an elitist and someone who never promotes or looks for negativity ever. But these statements Nelson is making are correct, minus the parts about Billy Fields, who I know personally and is 100% a champion of vinyl and record stores, one of our biggest cheerleaders and advocates in the industry. Everything Billy says in the story about Record Store Day and the industry itself is true as well: Yes, WEA recently announced they would stop selling to anyone who doesn’t meet a certain threshold of sales on an annual basis, but as much as I know that doesn’t help (and that it does hurt some small retailers), also realize that a lot of people were also taking advantage of the system, buying direct from WEA just so they could participate in Record Store Day while not buying and carrying vinyl year-round—which defeats the purpose. However, it is a policy that has been in place with WEA for years but was not enforced. And it is a concern, as it will hurt a lot of small, low volume stores and make it more difficult.
One thing I get really tired of is people blaming Record Store Day, such as in THIS article published earlier this year at TheVinylFactory.com about stores opting to drop out of RSD participation. To me, that’s the same short-mindedness as saying, “I don’t shop at a store that carries Led Zeppelin because that’s too mainstream…” Get over yourselves. Vanity is not a virtue that will yield long-term success in this business. Fields’ comments on RSD in the report are accurate. While it’s not untrue that the major labels have essentially taken over, as most of us know, it’s still a good day overall, sales-wise, and in terms of spreading awareness of indie record stores—which was the whole point of RSD in the first place.
I have been on many panels with Record Store Day co-founder Carrie Colliton seen the venom coming her way, as if she has something to do with the onslaught of releases coming and the prices—as if she alone can 100% control it. The RSD folks do everything they can; they are a non-profit tiny operation where the day to day administrative aspects and policing of policies is run by one person. Yes, one. What’s corporate about that? What people fail to realize, is that some companies out there will do whatever they want: They defy our rules, our criteria, hell, even our way of life, and they will do it with someone else (like Amazon or Barnes & Noble) if we say no. They are already doing this. In Dublin, where I am at now writing this, local friends/colleagues were telling me about Tesco (UK company), a grocery store that is the third largest retailer in the world for Father’s Day, selling rare, limited edition colored vinyl from bands such as The Jam and The Clash.
Seriously? Do the labels not understand what they are doing to the format by doing promotions with large chains like this? Not to mention what this does to small indie record stores? It’s an insult to all of the work we stores have done; it’s now in the hands of those who do not respect what it is and will do anything to make an extra buck.
In addition to that, I also know, since she works in our Raleigh store every single year to help us with crowd control on RSD, what Carrie deals with on an annual basis. This includes record stores themselves breaking the explicit rules set up by RSD, such as gouging fans by putting limited LPs on eBay. Some things I will not mention here as it would create havoc for her, but let’s just say that there are some greedy people out there, and they are not all at labels—they are at stores as well.
Then where does that leave the stores that helped create this phenomenon and curated the format? Who never stopped selling vinyl for over 40 years? We build something up, make it work, make it successful, and then it leaves us to go elsewhere? Hello, LeBron James! They will just take “their talents elsewhere.”
Well, it’s time for the flirtations to end, time to take a pay cut and take one for the team, and time for you to do the right thing—and come home. If LeBron can do it (who was once the most hated athlete in the world for leaving Cleveland to go to Miami), why can’t you? You can win in Cleveland; you just have to assemble the right team.
Make no mistake: Vinyl is not dead, so don’t believe any headlines to that effect. It’s not in any danger of disappearing. But the pricing structure is deeply problematic. The real issue RSD has presented, and something that was not mentioned in the Stereogum article, is that because of its success, stores have become a line-item on the Income Statement for major labels, instead of just being in the “Misc” column. That is, RSD has made a significant enough impact (as vinyl sales have, overall, but this is largely led by RSD) industry-wide to prompt the “black-and-white/I-have-no-idea-why-people-buy-records” accountants working in the industry to start to dissect those line items. Those accountants then come to the conclusion that the labels are “not making enough margins” on their products. THIS is the reason for the price increases that Nelson outlined in his Stereogum report. It’s based on the generic analytics that accountants use to study what something should be priced, which incorporate manufacturing issues, volume, and the ridiculous overhead they have, what with the large buildings, offices, and expenses incurred for the elite few in an industry that is only a fraction of what it was before, during the peak years for the CD, volume- and cash flow-wise.
The latter point is worth restating, and I have said it before. It makes no sense for the majors to have these large offices in NYC or in extremely expensive real estate markets, when you can work from just about anywhere (depending on your actual job). You can save tremendous amounts of money having satellite offices and/or in cheaper markets. There are tons of empty buildings, for example, in Atlantic City from casinos that went out of business. In 2016, normal human beings are moving away from overpriced large cities like New York to more reasonably-price areas like Raleigh-Durham (my hometown). But the music industry, for some reason, feels it has to “keep up appearances” and stay in ridiculous situations. They therefore make the “business of music” almost impossible for these large corporations—the ones that waste money on such things—to have a realistic grasp of the “business” in terms of the prices that normal people are actually willing to pay and what this industry realistically can make in 2016 and into the foreseeable future. It all goes back to those margins, which become the problem, which in turn is due to the inflated overhead and unrealistic expectations.
In a sense, independent stores were better off when we did not show up on those accountants’ radars. RSD did generate press and hype; those large RSD sales figures and vinyl sales in general got noticed by the industry, and the numbers were then played with. And here we are: accountants in NYC making decisions that might work on paper in a short-term sense, but make no sense for the long-term life of the business. Anyone in the trenches or who actually buys records can tell you this; it is obvious. However, this is nothing new, that those decisions are being made by people who haven’t bought a record (or even music, for that matter) in years or decades and answer monthly to shareholders and look at everything as just “widgets.”
They simply do not understand the landscape and the customers—what they actually want, what their consumer habits are like, and what they are willing to pay for the products they buy. However black and white that is, it lacks complete common sense. As my late father, who was a highly respected CPA, used to say, “You can teach someone the numbers and the books, but you can’t teach someone common sense.” In this day and age, where people walk around like the zombie apocalypse playing a video game on their phone, is it any wonder why the stereotypical starched, white-collar accountant can’t look up from his desk for five minutes and see what is really going on? Of course not, but we all need to look up as we are missing a really beautiful world around us, all the while getting stuck in a fantasy world with numbers that don’t add up.
The indie labels understand this—most of them do try to keep their prices down, relatively speaking—but the majors control way too much catalog and therefore need to lead here. But the direction they are leading us in is down to the edge of a cliff once again, when people actually need to see the whole picture of what is happening. Success—the type that RSD did foster— shouldn’t necessarily be a problem. If managed properly, growth and success can work, but not if the people making the decisions don’t understand what exactly they are selling and who they are selling to and the basic common sense of it all.
At any rate, I have been saying for a year now that vinyl has reached a milestone and a peak, mainly because of the price and over-saturation of the marketplace, versus the demand and supply. The only reason vinyl sales are even up nationwide is because some places are only just now coming to the party, so it’s a false increase. I call it the “Bugs Bunny Effect,” when someone gets hit over the head with a hammer while running and they keep running for many frames until they realize someone hit them over the head and the big bump rises on the top of their head and it goes “ouch!” There is always a delayed reaction in the marketplace. It was the same when vinyl was going up; we saw it first at indie retail, and now we’re seeing the opposite.
With stores closing, prices staying high, too many sub-par reissues coming out, labels’ continued policies of vinyl being sold one-way/NON-returnable (unlike CDs, and unlike vinyl in decades’ past, once you buy a new LP for your store, it’s yours, and if it’s a stiff like the latest, and high-priced, Lana Del Rey album, you’ve essentially eaten your cost and can only pray you recoup after you’ve reduced the price and dumped it in your “sale” bins), and stores struggling to keep cash flow up for the traffic and turnover, this will ultimately start to trend downward. More stores will inevitably close, many will survive just like 15 years ago (when piracy had taken a huge toll on the independent store sector), but many markets will not be able to support a store, or multiple stores, especially if you are vinyl only.
At this rate and change we have seen over the last 12 months, there is going to be another purge. This is also inevitable, as everything is cyclical; but it could have been another 5-10 years before we saw this (and could have been more gradual) if the industry would just be more patient, let things build organically, and not overprice and make the same mistakes made in the ‘90s with the CD. (Remember when you’d pay an $18.98 for a single CD, not even a deluxe version, just to get the couple of songs you wanted?)
The stores with the higher rent are going first, which is why you are seeing it in NYC, where we all know rent is an issue. It will continue to trickle down into other markets unless the industry makes some major changes such as (1) moving street date from the current Friday back to Tuesday; (2) lowering the price of vinyl back to what the market can bear; and (3) also not allowing streaming services to have a record online and streaming on street date. The film industry doesn’t allow 99% of its movies to be rented concurrent with them opening in theaters, so why does the music industry allow new releases to be streaming—which is very analogous to renting— the same day they appear in stores? It makes no sense.
At my stores, I have seen double digit growth over the last four to five years—until last year, May 2015, when it just completely stopped. This trend started when the majors increased vinyl costs and list prices. Blurt editor Fred Mills was sitting right next to me, around April 2015 in my Raleigh store, when I opened the email from two of the major labels announcing the price hike. My immediate reaction was, “What are you idiots doing?!? You are making the same mistake you made in the ‘90s with high list prices for CDs, which directly fueled the downloading and piracy problem.”
Then the industry compounded matters with street dates changing to Friday, which has been an utter disaster and effectively killed weekday sales; weekends were already when customers were more likely to be out and shopping, so having Tuesday at a street date was a great way to get them into the stores during the week.
Many other factors were at play, too, but those were two huge ones. For example, we started off the first four months of 2015 up 22% from the same period in the year before, and we were on pace to have our best year in 10 years. Once those changes outlined above took place, however, the bottom fell out, and we finished down for the year.
I am seeing this nationwide. I deal with it every single day in my stores, as do the retail coalitions mentioned in the Stereogum article. I am a proud member of the Coalition of Independent Music Stores (CIMS) and also a board member for Music Biz (formerly NARM), so I am hearing stories from all over the country. Some are seeing it worse than others, but the common denominator is, everyone agrees, that we have a really serious problem.
I noticed things dropping off a few months after Record Store Day 2015, by the time August rolled around, I knew something was seriously wrong and this was not just a lull and/or a slow summer. I have voiced my issues to my colleagues, and there have been some heated discussions. There are many higher-ups in the industry who are furious about this and are pushing every day for solutions, but it typically falls upon deaf ears among those people who should understand but cannot seem to do anything, as well as people who just don’t care. So I am back in my corner, building up my reserves as best I can for the winter and the freeze. It’s been a perfect storm of problems, and here we are.
Another point worth mentioning here is that there are too many places selling vinyl for the number of people actually buying. To restate what I said about about the UK grocery store Tesco selling vinyl, with the boom we also have chains such as Guitar Center, Barnes & Noble, Urban Outfitters and even some Whole Foods locations selling the wax. If you look at the statistics and sales numbers, they are not large enough to justify this amount of growth in the market place it’s all hyped-up fashion that has been sold to them by those who benefit from it, and it’s not healthy to the business in the long run—you don’t want to blow your wad before you have the romance, so to speak. Think of your retail partners, people. Think of the long-term effects of this. Can we really afford to not let this grow organically? Do you seriously not see the ramification of going to the altar too soon?
Many of these challenges were bound to happen, but in this day and age of social media, things change quickly. When we had a little bit of “good news” in the industry during the last ten years, such as all the “Vinyl Is Back!” stories in the media, well, of course everyone jumped on board. But it was too fast, too soon, too broad, too expensive.
Now those businesses that are more efficient, can manage their cash flow and inventory, have reasonable landlords and rent and good locations, experience a stable market, and diversify themselves enough to make higher margins off other items (such as online sales, second-hand vinyl, and accessories) are the ones most likely to survive. Lately I’ve been working more with shirts, books, and other items that have better margins, additionally trying to stockpile as much second-hand product as I can get my hands on, whatever the format.
When nearby stores do close, those stores that remain will certainly pick up some of the customers, but it’s all short-lived gains. Don’t forget that competition is good and more product in the marketplace is good—as long as it’s priced right and fits the market demand. This is the same thing that happened in the early 2000s, when stores were closing left and right. It’s about to happen again, and it’s sad because it could be different if it was managed better.
I am particularly worried about the small stores that are vinyl only and don’t have any room for error. Two of my stores are 50/50 CDs-to-vinyl, which is healthy. Another was 70% vinyl, but that is gradually starting to change now. Stores that sell only vinyl, that is a really tough thing to manage, and unlike my stores, they don’t necessarily have a 40+ year history of selling CDs and all genres. This gives us an advantage, not just in the shop itself but especially on-line, where secondhand sales do really well for us with CDs and LPs alike.
Regarding stores located in areas of high rent, they are the most vulnerable right now. As mentioned, I have three stores and I have a lot to fall back on. We are adjusting to these industry changes. It’s what I do and analyze every single day.
I also have an accounting degree and business management degree, and thanks to having smart store managers, I am not bogged down daily with running the stores. That frees me to spend all of my time running reports, analyzing sales, trends, and inventory levels. (Having a robust point-of-sale system that can manage inventory and cut down on the administrative labor is critical for a retail business, and that’s the best investment I’ve made in the last 6-12 months.) I also am constantly looking for more things to increase our business and to make us different—like having a bar and selling craft beer at my Raleigh location, for example—and to increase our brand, not just within NC but nationally and in Europe as well.
But many others do not have this luxury, and it’s those stores I worry about. Clearly the conversation about all this is now happening among the general public, and with customers, too, who are seeing it happen every day.
The question is, will they do anything to fix this? The record industry, that is. I am not counting on it. But I plan to survive regardless. Vinyl’s not dead; it’s a music format that has endured for longer than most of us have been alive, in fact. As a retailer, I certainly don’t plan to go down without a bloody fight—which makes it worth reminding you that in 2013, major label EMI was broken up as part of its acquisition by Universal. This renders those defiant, confrontational Sex Pistols lyrics quoted at the top of this article all the more timely, and meaningful:
With an unlimited supply
That was the only reason
We all had to say goodbye.
Above: Stephen Judge