HITS Daily Double
2010 didn’t look much different from 2009. Oh, hold on. Yes it did. It looked worse.


HITS’ Own Fearless Retail Editor Mark Pearson Surveys the Wreckage
2010 didn’t look much different from 2009. Oh, hold on. Yes it did. It looked worse.

The year started out with an unprecedented January, featuring four #1 debuts in a row. Are more companies going to start finding the month, a former graveyard for new releases, to be a hot spot for debuts?

However, at physical retail, it was more of the same in terms of the big boxes serving notice that they would be decreasing sku counts once again in the face of the withering demand for physical product and the continuing onslaught of iTunes domination. This news came as a surprise to no one, but it still put a damper on the post-holiday mood.

Of course, the product category most affected was once again catalog. Since Tower’s downfall, finding a home for catalog has been a real uphill struggle for all of the suppliers, whether they are a major or an indie, and this just made it harder than ever to make available to consumers, a self-fulfilling prophecy. People can’t buy what they can’t find. Amazon now stands pretty much alone in carrying deep catalog selection, but they can’t pick up all of the slack.

In May, Best Buy implemented a massive reduction of end cap space. They cut their Powerwall facings by a whopping 50%, replacing the lost space with Napster and iTunes point-of-sale cards. They also, in a bold pro-Velocity program stance (more on that later), told suppliers that their coveted M1 end cap would be reserved for titles under $10. Then, later in the year, new draconian measures also hit front-line current releases as well.

Forecasting what new releases are going to sell first week is, at best, an imprecise science, but there were a number of records that fell so short of those forecasts that retailers nationwide were left holding the bag on what turned out to be untenable over-buys on new releases.

Best Buy told the industry that they would be cutting all new-release buys by up to 20% and it didn’t take a week for Wal Mart to say that they would be doing the same.

“Not to whine,” said one exasperated music exec, “but it really is getting frustrating. Labels certainly need to take more responsibility/ accountability, but I think everyone does try to make grounded forecasts.” He went on to wonder if Best Buy, Wal Mart and Target should do some soul searching of their own concerning their merchandising presentation.

UMGD honcho Jim Urie (never one to shy away from a bold move) reacted to the woes of physical product with his Velocity pricing program, boasting a $7.50 wholesale price and a $10 MSRP on the product spine. JumpStart, you may remember, was decried by every retailer in the nation when it was first rolled out, but at the end of the day, retail completely embraced the new pricing policy and Urie was deemed a visionary.

While Velocity was very warmly received by the big boxes, which had for years been begging for cheaper CDs, the indie sector was up in arms about the lower margin (and the price point on the CD itself). Although the program’s price point still exists (mostly being utilized for developing artists), in the end, it was never fully implemented with superstar releases such as Mary J. Blige, Drake and Eminem opting out.

Still, you have to admire Urie’s courage to not just sit on the sidelines when the going gets tough. And that was never more evident than when he accepted NARM’s prestigious Presidents Award for Sustained Achievement. At the confab’s final night awards banquet, what started out as a heartfelt thank you turned quickly into a fiery tirade at the industry at large for doing nothing to stem the bleeding due to illegal file-sharing.

“I remember this room when there used to be over 2,000 people in it,” Urie told the crowd. “When Tower was still here and Musicland had a 10% marketshare. It doesn’t have to be this way. Every one of us knows that peer-to-peer has decimated our business.” He made the point that countries such as South Korea, Sweden and France had implemented legislation and were seeing huge increases in music sales. Although the RIAA has been working to no avail on the issue, that speech sparked a nationwide campaign called Music Rights Now and ultimately brought a bill introduced into Congress by Patrick Leahy (D-VT) and Orrin Hatch (R-UT). Pretty impressive stuff.

Some big surprises during the year included long-time EMI distribution maven Darren Stupak moving over for a similar job at Sony Music, replacing outgoing (and former Best Buy exec) J.J. Schaidler, who had been at Sony for two years. That created a void that Ronn Werre (whose later exit from the company left many baffled) filled with the highly respected Dominic Pandiscia, who had been heading up Caroline and EMI Label Services. While Pandiscia now oversees both operations, Mike Harris took over day-to-day for Caroline.

On the heels of Trans World’s Jim Litwak leaving the fold, TW founder Bob Higgins tapped Mike Honeyman to take the President/COO reins.

And last, but certainly not least, we’d like to send our best to Russ Solomon, the architect of modern music retailing, as he announced he was calling it a career. He sold his R5 Music retail outlet (that was housed in the original Tower Records site) to Dimple RecordsDilyn and John Radakovitz. He was thrown a retirement party in July and what amounts to a Tower Records shrine has been erected in the store. Russ, you will be sorely missed in the music industry.