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Chain Retailers Taking Biggest Hit as Customers Take to Web

The Music Piracy Riddle

Chain Retailers Taking Biggest Hit as Customers Take to Web


Contributing Reporter

Shortly before 10 o’clock on a Monday evening, there were but a handful of shoppers browsing the aisles at Tower Records in West Hollywood. Dozens of copies of Mariah Carey’s album “Charmbracelet” cram one rack. At the front of the store, the cashier leaned on his elbows beside an idle register.

On the Internet later that same night, a search on peer-to-peer music swapping service Kazaa for “Charmbracelet” yields more than 50 MP3 files containing the hit single “Through the Rain.” Other songs from the album are available, too.

With a highspeed connection such as DSL or a cable modem, the download of each track might take as little as two minutes. In less than an hour, the entire album could be burned onto a blank CD for free.

Such piracy, claim those determined to halt the free distribution of copyrighted material, is pile-driving the music business, and the retail sector is taking the hardest beating.

Sales of CDs peaked at 942.5 million units in 2000, a year after the MP3 file-swapping service Napster appeared on the Web, and then declined to 881.9 million in 2001. Through the first six months of 2002, the most recent data available, 369.1 million CDs were sold, down from 397.9 million in the year-earlier period, according to the Recording Industry Association of America, the trade group representing the labels.

While consumers, ISPs and hardware makers benefit from the effectively lawless domain of the World Wide Web, the businesses that create and sell the songs say unauthorized distribution has cost the industry $5 billion since Napster’s debut.

Chain stores are leading the decline. In its recent (and second) filing for Chapter 11 bankruptcy protection, Torrance-based Wherehouse Entertainment cited illicit music sharing as one of the reasons for the company’s failure.

“The cost of CDs to the consumer is too expensive and the quality of what is being released is not there,” said Jay Smith, general manager of Tower’s West Hollywood store. “It’s a generational thing, too. If a new Eminem record comes out, it’s just as cool to burn it off the Internet as it is to go out and buy it.”

It’s not just bricks-and-mortar stores that are hurting.

Online music retailers were down 39 percent for the third quarter of 2002 from the like period the previous year, according to comScore Networks, an Internet research firm.

Online CD sales already accounted for less than 4 percent of the total CD market during the first half of 2002, according to research firm Nielsen SoundScan. Now, e-tailers such as CD Universe and Music.com are struggling against mega-retailer Amazon.com for a tiny slice of a tiny pie as fewer consumers are willing to purchase a CD online only to wait days for the product to arrive.

Big-name complaints

Many major recording artists have been outspoken critics of online music trading since the early days of Napster, decrying the loss of millions of dollars in royalties. (The RIAA first sued Napster within months of its debut.)

Adding to the woes of performers, however, is the discord within their own ranks over the issue of free music. While acts such as Metallica and No Doubt have participated in well-publicized lawsuits or spearheaded other efforts to stem the tide of copyright infringement, some have quietly remained on the sideline or even flouted the industry.

British pop star Robbie Williams infuriated industry executives with his pro-piracy statements at a press conference last week, saying “I think it’s great, really I do. There’s nothing anyone can do about it.”

Hip-hop impresario Sean “P. Diddy” Combs has been offered only a fraction of the $100 million he is seeking from the next company to host his Bad Boy Entertainment label, The New York Times reported. Online piracy cutting into CD sales was cited as a factor.

But most professional musicians earn less in a lifetime than Williams and P. Diddy do in a month, and many are glad for the added exposure that free distribution inevitably brings.

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