Vinyl Sales Help Homer’s Buck Industry Trend

After spending the last two weeks writing about the current state and predicted future of the music industry, it’s time for a dose of reality in the form of the 2013 Nielsen SoundScan numbers.

Billboard Magazine reported last week that album sales suffered an 8.4 percent decline in 2013, CD sales declined 14.5 percent, even digital music sales declined last year for the first time since the iTunes store swung wide its online doors in 2003. Digital track sales fell 5.7 percent, while digital album sales fell 0.1 percent, all according to SoundScan.

The Billboard story said industry executives concede that “ad-supported and paid subscription services were indeed cannibalizing digital sales.” Call it the Spotify effect. Those same execs went on to say growth in streaming revenue offset the decline in digital sales.

But what about brick-and-mortar? That’s where Mike Fratt comes in. Fratt is the General Manager and buyer at independent record store Homer’s Music, 1210 Howard St. In the face of all the doom and gloom, Fratt said 2013 was a good year for Homer’s.

“Sales were up 10 percent, vinyl was again a big driver, up 40 percent for the year,” Fratt said. “DVDs, gift, accessory and lifestyle sales were also up.” It's a trend that began in 2010. But it wasn’t all good news for Homer’s. Fratt said CDs saw their first sales decline at his store since 2009, slipping 3 percent.

So is it time to go all-in with vinyl? Not so fast. According to SoundScan, vinyl sales indeed rose from 4.55 million in 2012 to 6 million last year, but that’s only enough to make vinyl 2 percent of all U.S. album sales. CDs are still king of the mountain commanding a whopping 57.2 percent of the market, while digital albums sales comprised 40.6 percent.

Still, Fratt says Homer’s business plan is to continue to focus on vinyl and lifestyle/gift items. “We embarked on a project to replace all our vinyl browsers in 2013 to increase space efficiency and improve merchandising of 7-inch singles,” Fratt said.

In addition, Homers will continue to broaden its CD selection. “We have been adding new distributors that stock imports, budget and rarities,” Fratt said. “Despite potential declining sales (in CDs), customers will still expect a large selection.”

Fratt said streaming services such as Spotify and Pandora actually have driven his sales numbers. Customers often come into his store asking to buy an album that’s streaming on their phone.

He said overall, consumers’ buying habits are shifting. “As mall music stores have disappeared and mass merchants (Target, Walmart, Best Buy) reduce selection to below 1,000 different titles, music buyers are forced online to buy CDs,” he said. “This has also helped the indies.” Billboard reported that indie merchants as a whole saw a nearly 12 percent decline in album sales last year. Fratt said that number was wrong, and closer to a 5 percent decline.

“Right now, SoundScan only pulls sales data from about 60 indies nationwide and attempts to determine total national sales for indies,” he said. “Record Store Day website lists 1,000 stores in the U.S.” Fratt thinks vinyl sales were probably closer to 10 million last year. We won’t know the real numbers until a new media company begins tracking physical and digital sales this year.

I told Fratt I noticed another shift in consumer buying. More and more, record buyers are following a model similar to comic book collectors -- they're buying vinyl and limited edition hard product based on collect-ability (and maybe investment).

I speak from personal experience, as both a record and comic book collector. There is certain vinyl I collect just because I want to own it -- Factory Records stuff, early copies of Smiths albums with unique cover art, for example. These are albums I probably will only listen to once, but will display in my house or just want to have. If I want to listen to the actual music, I listen to a digital version.

The amazingly successful Record Store Day in some ways supports my idea -- it's a great way for collectors to find and buy cool collectible limited-edition pieces. But I wonder how many people who buy rare or limited edition stuff actually play the recordings, especially if the music is already available online via Spotify?

The old arguments about purchasing physical seem to be dying away. The "need for a back-up" argument will disappear when people become familiar/comfortable with cloud computing. The "inferior audio quality" argument will eventually fade when technology provides a better, flawless audio file type (which is inevitable). Spotify gives access to nearly everything now, and if you're a paying user (as I am) you can even listen when you're away from a wi-fi/cellular connection.

So why buy hard assets like vinyl? Because you want to own it. You collect it. It's finite. It's physical in a world where fewer and fewer entertainment options involve physical things. If the above is true, than records stores will become like comic shops. Maybe they already are?

“Collectors certainly make up a strong customer group for us and play a large roll in RSD, but vinyl has become so big, it draws all kinds of customers, both casual and hard-core collector, young and old,” Fratt replied.

He said cloud computing, streaming and cars with internet will impact how people collect and access music, but early adopters (like me) remain a minority. “Over the last few years I've read that CD is dead, is dying and will be gone. Yet it is still 60 percent of album sales. So, a lot of people are still buying CDs to listen to and load onto their phone or PC.

“Vinyl is a fad,” Fratt added. “Yet, even a recent iPhone commercial started with the image of a record spinning on a turntable only to have an iPhone set down next to it. It's 10 million new (vinyl albums) being bought (per year) and another 30 million used trading hands. Somebody's playing this stuff, not just collecting.

“Collecting occurs in so many categories anymore. What you're saying is not untrue. I think only a small minority sees it the way you do. Right now. We'll see how that evolves. Ask me again next year.” I'm sure I will.


Over The Edge is a weekly column by Reader senior contributing writer Tim McMahan focused on culture, society, music, the media and the arts. Email Tim at tim.mcmahan@gmail.com.

posted at 03:48 pm
on Tuesday, January 07th, 2014

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