Rethink model, repel pirates

Video killed the radio star, but digital downloads may soon knock off the music store.

The mix of increased digital buying and tougher economic times have taken a heavy toll on music retailers across the country as people shun bricks-and-mortar singles in favour of online tracks.

But Australians still buy most of their albums over the counter, and some niche outlets say business is booming as they rebrand themselves as vendors of culture, not just music.

About 25 per cent of the music retailers that were around a decade ago have closed for good. There may be as few as 800 left nationwide, the Australian Music Retailers Association says.

Executive director Ian Harveysays digital downloads are behind the closures. He says while some retailers have toyed with establishing “kiosks” to integrate digital selling, they have not yet hit on a profitable model.

“Record companies in the past were selling most albums for between $25 to $30 but now so much of what is being sold is single songs on iTunes for $1.69 … We’ve moved from an album, a complete body of work, into single-song environment,” he says.

The total number of CDs, cassettes, vinyls and DVDs sold last year was down 26 per cent from 2006 to 44.5 million, figures from the Australian Recording Industry Association show.

By contrast, digital music volumes have boomed over the same period, with digital sales of single tracks, albums, music videos and ring tones jumping 44 per cent to 270 million.

Australians still overwhelmingly prefer to buy albums from retailers than online, and more than 90 per cent of albums sales were made over the counter last year.

But digital downloads of single tracks have all but obliterated the physical market, falling 90 per cent since 2006. While the digital download surge is good news for recording artists, it does not bode well for retailers who rely on in-store sales for survival.

Adding to the pain for retailers is the fact that CD sales were buoyed last year by big name releases from Robbie Williams, Powderfinger, Pearl Jam, Madonna and Susan Boyle, which are unlikely to pump out more big sellers this year.

Leading Edge Group says its 160 music stores still turn a profit, but admits they face tough business conditions.

Executive director Gavin Ward says the group has lost about 25 music stores in the past 20 months, which he puts down to “attrition” in the sector, adding that few entrepreneurs want to enter the business.

“Retail for small business wasn’t buoyant in December, it hasn’t been in January and February, and on top of that we’ve got compression in the music industry in terms of physical sales,” he says.

“If you’re a music retailer, it’s a bit like being a rabbit in the headlights. Everyone’s like, ‘Aren’t you dead yet?’.”

Overseas the outlook for music retailers is even more uncertain. Earlier this decade big department stores in the United States and United Kingdom moved to widespread music retailing, taking up to 20 per cent of the market.

But they have been steadily cutting back their space for CDs as digital downloading gained momentum. British retailer Woolworths and other UK chains cut more than 1000 music outlets in 2008.

The owner of independent retailer Music Film Books, Steve Kulak, says the solution for retailers is to add value to the in-store consumer experience and put a wider range of products on the shelves.

Kulak, who already owns stores in Sydney, Adelaide and Melbourne, and has plans to open an outlet in Brisbane later this year, calls stand-alone CD stores a “dead model” and says music retailers must “get with the times”.

Kulak’s stores have moved into a diverse array of cultural stock – in the same way that big retailer JB Hi-Fi has.

“We support film, music, books, even a line of fashion but it all works in the same sphere,” he says.

“You can talk to a rock star and they’ll reference [the novelist Jack] Kerouac or reference back to the movie, that’s the kind of model we use and it’s the kind I think can succeed.”

If retailers do hit on a sustainable business model they will still face the threat of piracy.

Music Industry Piracy Investigations, an organisation that investigates music piracy in Australia, blames the practice for the 30 per cent overall global market decline since 2001.

BRW

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