Music retailers gird for one last spin

By Rita Savard -- Lowell Sun (Massachusetts)

Spinning carbon black.

When the needle hits the record it takes Mike Dreese back. Back to 1978. Back to flipping burgers at McDonald's and hawking at comic book conventions. Back to the birth of punk rock and the birth of an independent record/comic store on Newbury Street in Boston.

Dreese, the co-founder of Newbury Comics, prefers listening to records. It takes more time than scanning tracks on an iPod. It reminds him to slow down and think of the world around him.

"It's a different experience," he says. "A difference in the quality of sound, and in the way you hear the music."

But a lot has changed in music retail since Dreese opened his first store in a converted studio apartment more than 30 years ago. Sales of recorded music continued to fall sharply in 2008 as more consumers turned to digital downloads, according to data from Nielsen SoundScan, a service that tracks point-of-purchase music sales.

Gone are the days of audiophiles gathering to mine bins of music for hidden gems. Now they mine the Internet for a la carte downloads.

Virgin. Musicland. Sam Goody. Strawberries. All relics of the past, swallowed up by the age of the iPod. Newbury Comics' 28 stores, along with retailer FYE, remain one of the last music retailers.

"Music retail has largely ceased to exist already" Dreese says. "I'd say there's probably no more than two to three years left because of the way demand has changed."

In 2008, total album sales in the United States, including CDs and full-album downloads, were 428 million, a 14 percent drop from 2007, reports SoundScan. Since the industry's peak in 2000, album sales have declined 45 percent, while digital purchases grow rapidly.

More than one billion songs were downloaded last year, a 27 percent increase from 2007. Some record companies say they are finally beginning to turn significant profits from music on Web sites like YouTube and MySpace.

So how does the owner of a music store stay in business when "most people younger than 25 have little interest in buying albums?"

Just walk into your local Newbury Comics in Nashua or Burlington and look at the walls. They're loaded with pop-culture for sale. Everything from Barack Obama action figures and T-shirts, to lunch boxes and talking key chains. Kitsch sells and kids are buying. Need a plastic yard penguin or a leg lamp night light? Look no farther.

In recent years, the sales of pop culture merchandise has commanded better margins than music sales, and Newbury's Web operation is fully profitable. But even for a business mogul like Dreese, the flip side of the times forecasts inevitable trouble down the road.

Industry experts project that the steady decline in in-store sales will lead to inventory reductions at retail stores. Big-box stores like Wal-Mart and Best Buy account for up to 65 percent of all retail purchases, and many of those stores are sharply reducing the floor space allotted to music.

"There's no doubt we'll eventually be closing stores too," Dreese said.

Although, he isn't singing a swan song just yet. Last summer, Newbury Comics opened two stores, one in Faneuil Hall, a larger space to replace the former store in Boston's Government Center, and a Norwood superstore in a former Boch Kia dealership, complete with a coffee bar, movable stage and Wi-Fi.

CD releases are no longer driving teens -- the biggest consumers of music -- into the store on a Tuesday, but Dreese believes superstore model is one for the future.

"The consumer still has a thirst for this stuff, so they will drive to a destination store if it's worth their while," Dreese said.

The comeback of vinyl has helped.

Last year, 1.88 million vinyl albums were purchased, more than in any other year since SoundScan began tracking LP -- that's long playing record -- sales in 1991. In contrast, CD sales plummeted over the past three years, from 553.4 million in 2006 to 360.6 million in 2008. MP3 sales grew from 32.6 million to 65.8 million during the same time period.

"Records are just a cool thing to collect," said Joshua Birch, 16, of Nashua, who was eyeing Radio Head's In Rainbows on vinyl. "And they sound way better than an MP3."

The uptick in vinyl is music to Dreese's ears, because a world where the brick-and-mortar music store ceases to exist sounds a bit empty.

"It's a social experience for kids to interact with people that may not be like them," Dreese said. "When you walk into a music store, you're hearing things that you don't get to choose. Maybe that causes you to think a little bit more about the world around you."

(Material from the Associated Press was used in this report)

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