Consumer Thoughts

Hi. I'm back.

I've been contacted by the very thoughtful and unfailingly polite Mairead Case over at Pitchfork and they're thinking about running a small news item on this whole mess next week sometime. In response to some questions from him, and with some prodding from elsewhere, I put down some additional thoughts about all of this that might be more applicable to music fans and consumers and not just industry geeks like most of us participating in this dialog. Here's the text of what I wrote for them, with many thanks to Mairead and Phil for their questions that helped me focus myself on this from a slightly different angle.

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The 2 open letters that I originally wrote to the labels involved in the Best Buy co-op ad were not really written to music fans, but to music business folks-label, distribution and retail people in the music business who already had some idea what I was talking about. From email that we received, comments that appeared, and links to our blog, it quickly became clear that people outside of this industry group were making their way to our discussion, and that they weren't exactly sure what some of this stuff even meant, so I did my best to try to be a little more explicit in what we're talking about here. And I guess some of them were interested enough to actually think and talk about it amongst themselves, which was somewhat surprising to me. And though a lot of the peripheral discussions were along the lines of "I can't remember the last record I bought at Best Buy or anywhere because I burn all of my music," there were others from folks who were more thoughtful about all of it and concerned enough to think about some of the possible ramifications.

For music fans, outside of the morbid curiosity of watching an industry flame war like that car crash on the side of the road from which you can't look away, I think that it probably boils down to two salient points:

First, I don't see really any way you can put the blame on the customer here. I might have felt a little differently at an earlier time, but hell, what decision is a consumer supposed to make, assuming that they actually WANT to pay for their music, when faced with a $7.99 vs. $13.99 CD? I mean, I think that you can ask for and expect a little indie loyalty if the difference is $1-2 per disc, but 1/2 off means you get to buy an extra CD for the same money. I can't imagine too many people expecting anybody to pass that up. I'll speak only for myself here and say that I don't. I also don't think you can blame Best Buy. It's what they do and you can't shame the sociopath, so what good does it do to try? In my humble opinion, the blame here falls on the labels and bands who are participating in this co-op advertisement deal with a company that has historically used music as a loss leader and has used co-op ad dollars from the labels to help make up that loss. By doing this advertising deal, the labels have given the stamp of approval for all of us to buy their stuff at Best Buy at bargain prices, so who can cast blame on the consumer for spending their music dollars wisely? Most likely they should be praised for spending their dollars on music in the first place instead of stealing it.

• As an aside, I got quite a few emails from blog readers asking what a co-op deal is. It is an advertising program run by a store, where the label buys into the program and for this ad buy, they are given "price and positioning"-prime, high visibility positioning in the store (usually on an end-cap at the end of a row), a sale price, and advertising of some sort, in this case, the Best Buy flyer and web page ad. In return, the store will do a "buy in" where they agree to purchase X amount of units of the CD (and as gross as it sounds, we are talking "units" at this level-might as well be headphones or CDR spindles or Monster speaker cable by the foot) so that they have available stock for consumer purchase because of the added sales they will supposedly gain from the ad. Sometimes a listening post is also part of the deal. Not the case at Best Buy that I am aware of.
• What frequently happens is that a few more sales happen and a load of the extra buy-in that was supposed to offset the ad buy goes back to the label/distributor in returns and the store pockets the difference. Loads of stores, not just Best Buy, play the co-op game. Money from co-op advertising has helped a lot of stores stay afloat in the current atmosphere. The difference with Best Buy is that they have a 10+ year history of using music as a loss leader to get people in the door and sell them other stuff. The difference between a $10 or $11.98 sale price on a $14.98 list price CD and BB's $7.99 sale price on a $14.98 list price. And it appears from the outside that what the co-op ad buy-in from the labels is actually paying for is for the difference in the sale price and the regular price. The labels are helping to cover the loss on Best Buy's loss-leader and helping them absorb that hit. In reality, they're paying for Best Buy to undercut their core retail base.

So the second thing music consumers can probably take from this mess is that it appears to me that it is possible that if this program expands, and if as I have heard through the grapevine BB is really going to commit to independent music (see also the BB/CD Baby partnership which is a different issue altogether but could be a harbinger of further expansion into this market), which to me means buying in a lot more than the few titles that were on sale recently, then I can see these labels helping to lay the seeds of their own destruction. Indie retail is no doubt in a rough spot right now for a multitude of reasons, but BB is a big enough presence to do to music retail what Wal-Mart has done to just about everything else. Best Buy's first go round at this 10 years ago helped kill a lot of independent retail shops and a second round could finish many of the rest. It would not necessarily be their intent, but it could be a happy enough bonus result for them. If there is no indie retail to help build new bands, we are left with MySpace and the unfiltered internet and ad/tv/movie placement to introduce people to new bands. Retail would be left to the BB/Starbuck's axis. That's not too appealing of a scenario to me and I'm sure not to your readers either. It is easy enough to dismiss indie retail and if you already don't pay for your music, then why not and there's probably not much hope for those people to care about this in the first place, but if indie retail disappears completely where are the baby bands going to develop into the bands large enough to appear at BB or to sell a song to an ad or The OC? Where do the hip kids who devour Pitchfork and Punk Planet and Venus looking for their next cool band find that band if nothing exists to support smaller bands in the first place? Under that scenario, who will find and nurture and shout from the rooftops about the next Devendra Banhart or Death Cab or BSS or Deerhoof or Animal Collective or Clap Your Hands and Say Yeah? I can't answer that question. Maybe somebody else can or will, but I don't know.

Even two years ago I would have said that this scenario was far-fetched and that I couldn't honestly see the possible end of the physical distribution system from where I was standing at the time, even while others were saying that retial would be gone in 5 years time. But now I feel like I can see a possible end and it's pretty sad, and not just because it's the business that I'm in, or because I'm nostalgic for some golden era of indie retail that sort of used to exist, but because it could mean that loads of albums by loads of bands that needed discovering and nurturing and promoting will not come out and the hip kids won't find them and the non-music buying public won't have them to download instead of buy because they won't be there to download and if they were they wouldn't know about them anyway because they'd most likely be on the band's website and nobody would notice. This is my fear and this is why your readers might care.

It is not a straight line from one indie label group co-op ad with BB to the death of indie retail and the evaporation of the nursery for small, quality bands and their albums. However, because of BB's past history when exactly this kind of thing did happen, and it did happen, the line is straight enough that I feel like I can see one possible, heinous path move from possible to probable without too much trouble. And it scares me and saddens me for kids who could and should be buying records long after I've decided to move on to reading history books on the sun porch with a cup of herbal tea.