D. Stephen Heersink wrote:

>There seems to be little doubt that retail of classical music is not
>where the big bucks are.

I believe I disproved this thesis a few months ago, unless of course you
don't consider $350-400 million (US) "big bucks".  I do.

>The former bulwarks of the classical-recording industry, e.g., Deutsche
>Gramophone, Decca (London), and Philips, now release very few issues, and
>EMI, just sold recently, is likely to follow suit.

This is nothing new.  They've been ramping down for several years now.
I've often wondered if their release decisions, including the steep decline
in new releases, is a cause rather than an effect.  In other words, if they
hadn't been heel bent on the latest teenage sensation or the Nth Beethoven
symphony cycle, would the fall off in sales they've seen taken place at
all? I personally think they brought it on themselves.  The market has
not gotten smaller, it's their vision of the market that has shrunk.

>This leaves Chandos, Hyperion, ASV, and other smaller labels, along with
>the brilliant marketing of Naxos, to fill in the enormous gap caused by
>the less-than-complete engagement of the major recording companies.

As well as several hundreds other independent labels.

>Indeed, word has it that to pad their pockets even further, some of the
>larger orchestras are going to record for their own label and cut out the
>recording artisans altogether. No longer will we buy DG, Collins, Naxos,
>but the NYP, the CSO, the SFSO, etc., all as their own label.

I believe the labels will do the same things.  In fact, they already are.
You've been able to buy Naxos direct for years now, and at a price lower
than nearly any retail outlet.  BMG seems to be setting up for the same
thing with their arrangements with getmusic.com, an Internet startup.
I don't know how many noticed this, but www.classmus.com was one of the
oldest, and one of the best, label sites out there.  They had the entire
catalog online, and did a reasonable job keeping it up to date.  They had
composer and perform3er biographies.  Because they were on the scene early
(circa 1993, I think) they were the most linked classical music site on
the web by a large margin.  What a perfect opportunity for them to begin
selling through their web site.  But it's all gone now:  classmus.com is
no more and bmgclassical.com point to an essentially empty getmusic.com
page (it's been this way for some time).  Another example of big label
mismanagement and missed opportunities? We'll see, but I fear so.

>Retailers, Tower among them, realize that the merchandize in the
>'classical' section doesn't turnover like other genres.  I'd certainly
>be interested in knowing if Tower has done an inventory turnover ratio for
>its classical recordings.  I suspect it is terribly long.  All other things
>being equal, this would dramatically increase overhead and the cost of
>particular merchandize.  Inventory turnover is critical to any industry,
>and I suspect that hoards of merchandize sitting in bins for quarters on
>end don't add to the bottom line.

I don't disagree with this observation.  But I have to wonder, once again,
if it's a cause rather than an effect.  About seven or eight years ago
I was having a long conversation with the classical manager at the new
Tower Records in Chicago (back before they bought Rose Records).  They
were having their grand opening storewide sale, and the classical room was
packed.  He commented that so far the classical section had out produced
every other section in the store in terms of dollars spent per square foot.
He was actually lamenting that they hadn't given him more room for
inventory as he was sure he was missing a lot of business because he
could only stock one or two copies of most titles.

This and similar experiences elsewhere lead me to wonder, once again, if
there's a significant price barrier involved.  Tower lowers their prices a
few dollars per CD, and their sales volume explodes.  As they've gradually
raised prices in subsequent years, their sales have dropped.  As sales
drop, they decide to limit inventory further, and perhaps even raise prices
again.  Does this make sense? Sure it does, in an Alice-in-Wonderland sort
of way.

But much as I criticize this situation, I still have to lay most of the
blame on the labels.  With distribution costs so high, the retail margin
is very slim.  There's just not much wiggle room for brick-and-mortars such
as Tower.

>I don't know if San Francisco's Columbus Street store is the largest
>warehouse for classical music, but it is large and carries a very good
>variety and large selection of CDs.  But my experience with this fine
>store is that most customers are to be found at the semi-annual store
>sale.  Even then, the traffic is not proportionate to the value I perceive.

It does show, I think, that people will gladly pay extra to be able to walk
down to the store and pick up the disc(s) they want.  The relationships
between volume, revenues, inventory, and price are complex and decidedly
non-linear.  There are points at which people will simply stop driving an
hour to get to the semi-annual sale.  When the selection has shrunk to a
certain point, the trip just becomes disappointing.  That occurs too often,
and the trips don't happen at all.  More than perhaps any other genre of
music, you reach a critical mass in classical inventory that gets you the
reputation that will draw in customers from a wide geographic area.  Fall
below that point, and the revenues drop dramatically, even during sales.

>When one walks into a music store and finds 90% of its clientele in the
>rock and similar genres, and only 10% of its clientele in the classical
>bins, ...

True, but let's please remember that's it's not bodies they get paid for,
it's sales.  Many of those bodies in the rock aisles are there to hang out,
wait for the next celebrity appearance, and maybe buy a disc or two.  This
is quite different from the average body in the classical section who might
spend $50, 100 or even far more, and do so on a regular basis.

>...it doesn't take an expert to recognize that the way classical music
>will be distributed is in for some significantly and fundamentally
>different means from the past.

No question about it.  Many companies in just about all commercial sectors
are struggling with mechanisms that will allow them to sell directly to
customers, effectively cutting out the distributors and other middle men,
yet still retain the loyalty of those same distributors and middle men in
traditional sales channels that are absolutely essential to their current
business.  There are no easy answers, and as probably less than 10% of
total CD sales will be via the web this year (according to the RIAA, 1999
web sales were 2.4% of the total, mail order was 2.5%, and CD clubs were
7.9%), we still have some transitions to go through before we find out how
the story ends (or, rather, how this chapter ends, and how the next
begins).

BTW, a trip to the RIAA web site (http://www.riaa.org/) can be very
informative.  On August 25th they released their mid-year sales data.
Overall revenues are up more than 4% this year over last, and CD sales
revenue have jumped almost 10%.  I can really see their point about Napster
and MP3.com hurting the music business, not.

Dave
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http://www.classical.net/