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News Bits December 10, 2001, Vol. 1, Issue 12 Published by NARM
1. 2002 Convention: Exhibitor Information Available; Schedule Takes Shape
Plans for the 2002 Convention & Trade Show are kicking into high gear:
exhibitor information in the form of the Trade Show Prospectus will be
mailed on Monday, November 12, but get a head start on reserving your
space by downloading the information from the NARM Web site. Sponsorship
Opportunities information is also available on the Web site, and while
you’re there, be sure to peruse the schedule for these 2002 Convention
& Trade Show highlights:
Also, be sure to look for registration and housing information, which will be available in December.
Trade Show Prospectus: http://www.narm.com/events/2002_Convention/TS/2002_ts.htm Sponsorship Opportunities: http://www.narm.com/events/2002_Convention/TS/02SponsorshipOps.pdf Schedule: http://www.narm.com/events/2002_Convention/2002sked.htm 2.
Update: Department Of Justice Files Brief On Litigation Against
Sony On
October 31, in an amicus curiae (friend of the
court) brief filed at the request of the U.S. District Court for the
District of Columbia, the Department of Justice said that NARM’s
complaint against Sony Music Entertainment “fails
to provide an adequate factual predicate for [NARM’s] claims that Sony
has violated federal antitrust laws through its inclusion of hyperlinks
and related products and services on the music CDs that it sells."
After
reviewing the comments in the amicus brief, NARM’s counsel highlighted
the fact that the government specifically stated that it was not
commenting on the competitive effects of the joint ventures and licensing
arrangements that are alleged in NARM’s complaint. Those allegations go
to the very heart of NARM’s antitrust claims and NARM's concerns
regarding the direction of the music industry. NARM is convinced that
recent events, including the Justice Department’s active investigation
of joint ventures and other arrangements in the music industry, confirm
the antitrust concerns expressed in NARM’s complaint. NARM
sued Sony Music in January, 2000, alleging that Sony forces retailers to
carry CDs with hyperlinks that direct consumers to Sony’s own retail Web
sites. In addition, the complaint alleges that Sony engages in licensing
arrangements with other entities, including its joint venture partners,
that grant them preferential treatment vis-a-vis NARM retail members in
the form of significant discounts and promotional payments. In August, 2001, Judge Emmet G. Sullivan asked the Department of Justice to file its amicus brief in the case. NARM and Sony have until November 30 to file a response to the DOJ brief.
Click here to see the official press statement: http://www.narm.com/news/Press%20Releases/2001/Nov_2001/PR_DOJ_Sony.htm 3. September
11: J&R Music World’s Actions In The Face Of A Tragedy From
the New York Times on October 25, in an article titled “Dust Settles And
Retailer Is Set to Face The Crisis” “Here
comes Jason Friedman, flying in from Southern California with just
one-eighth of a master's degree. The family business needs him early, he
has decided. The
six storefronts of J&R Music and Computer World, the company his
parents built into an economic anchor and landmark on Park Row in Lower
Manhattan, have been shut since Sept. 11. On the day of the World Trade
Center attack, a thick cloud of hot, black soot blew through the doors and
settled inside the DVD players and computer hard drives. Rescue workers
also smashed some doors, to set up a triage center that got little use.
… “ Just
a few blocks from the World Trade Center, the store that Joe and Rachelle
Friedman opened in 1971 using money they received for their wedding,
reopened for business on October 25. According to the Times article,
J&R fared relatively well in the attack and its aftermath: “Among
downtown business owners, the Friedman’s were pretty lucky. None of
their 650 employees were killed. The buildings, which they own, are
standing. The sealed compact discs and software packages seem in good
shape. And
today, after throwing out electronics worth tens of millions of dollars,
replacing about 3,000 square feet of carpet, slathering new paint on most
walls, sucking the ash out of five escalators, cleaning credit card
terminals and cash registers, revamping the heating, ventilation and
air-conditioning system, and screwing in dozens of new light bulbs, the
Friedmans have accomplished several things. While the air outside smells
like Coke cans on fire, the record store smells like a record store. And
as of today, all of J&R is open for business.” On
October 25, the day the store reopened, Rachelle Friedman, former NARM
Chairwoman, e-mailed NARM President Pamela Horovitz. We’ve reprinted her
e-mail here, as a testament to the courage and resilience of the Friedmans
and New Yorkers, and the spirit of Americans everywhere. “Today
was the official Grand Opening, with Giuliani cutting the ribbon. Business
has been very good this week, with loyal customers returning and buying a
lot. Many haven't bought DVDs for six weeks and have now picked up all new
releases. We've had terrific press, besides the NYT article. I was
interviewed live by Neil Cavuto on Fox News. After it aired each time, new
customers from around the U.S. called with inquiries (Did we really pay
our whole staff their full salary and full benefits, these past six week
… Yes) and placed a lot of orders. The area is getting better. It is
still closed to vehicular traffic, but that should open soon. We are
survivors. We are New Yorkers. We are all Americans and will beat these
crazy maniacs.” 4.
Scholarship: Application Deadline Approaches; Foundation Seeks
Donors As the 2002 NARM scholarship deadline for students approaches (November 20), NARM is already looking ahead at ways to fund more scholarships for members and their children. If you’re interested in sponsoring a scholarship for 2002, contact Pat Daly at daly@narm.com.
Auction
Items Sought The
Scholarship Foundation’s Silent and Live Auctions will again be part of
the 2002 NARM Convention & Trade Show in San Francisco. Last year’s
auctions generated more than $20,000, which translated into four
additional scholarships for 2002. The auctions held to date have generated
a grand total of more than $100,000.
A donation to the NARM Scholarship Foundation’s Silent Auction includes:
Donation
categories have included fabulous items from the entertainment and sports
world, in addition to vacations and weekend getaways, and, of course,
wine. However, don’t limit yourself in terms of ideas. We welcome your
creativity! To
donate a silent auction item: http://www.narm.com/programs/Scholarship/Silent_Auction_application.htm 5.
Merchandising: Here’s To The Winners A
panel of judges from the NARM/RIAA Merchandising Committee has selected
the winners for the 2001 Academy of Country Music Awards and MTV Video
Music Awards merchandising campaigns. We’ve posted photos of the winners
to our Web site as a way to share merchandising ideas among members. Also,
be sure to check out the list of winners from the CMA Awards that aired
November 7. Academy
of Country Music Awards Display Contest Winners
Chain
Retailer Grand
Prize: $500 Wherehouse
#520 Phoenix,
Arizona Jessica
Baker, Artist T.J.
Jordan, Manager Rack
Jobber Grand
Prize: $1,000 Eurpac
for Oceana Navy Exchange #30155 Virginia
Beach, Virginia Representative:
Penny Phillips No
independent retail winner was selected for this contest. MTV
Video Music Awards Display Contest Winners
Independent
Retailer Grand
Prize: $500 Crow's
Nest Enterprises, Inc. Cresthill,
Illinois Artist
& Manager: Andrew Sandler Chain
Retailer Grand
Prize: $500 Tower
Records/Music/Video #858 Brea,
California Artist:
Steve Miller Manager:
Sharon Vitro Rack
Jobber Grand
Prize: $1,000 Handleman
Co. for Wal-Mart #753 Cedar Falls, Iowa Representative:
Kathy Ludwig CMA Winners: http://www.cmaawards.com/2001/2001awardwinners.asp
ACMA Display Contest Winners: http://www.narm.com/programs/awards/2001/ACM/2001_ACM_winners.htm MTV VMA Display Contest Winners: http://www.narm.com/programs/awards/2001/MTV/2001_MTV_winners.htm 6. Commentary:
The Changing Face Of Retailing by Marco Scibora, President, Advanced Communication Design
Over the last decade, the Internet has had a significant effect on our lives, but perhaps not as dramatic as staunch supporters of the information superhighway predicted. The Internet is certainly not causing the downfall of traditional shopping as we know it. While the hype about the Internet is subsiding and the Web is slowly becoming an ordinary part of everyday life, shopping malls and department stores are selling more goods and making more profits than ever. In fact, traditional stores are thriving while many of the most touted e-tailers are still not showing a profit or living up to expected levels of customer service. Worse yet, they are going out of business. Many existing e-tailers may go out of business by the end of this year.
In fact, traditional shopping continues to be one of America’s favorite pastimes, as American as baseball and apple pie. The initial wave of excitement over virtual shopping and the convenience of “point and click” is subsiding because it’s not as much fun anymore, and consumers continue to enjoy the traditional shopping experience. People like the act of physically going into a store to see and feel the merchandise and enjoy the ambiance of the shopping environment. Also, we should not overlook the fact that a significant number of people in the United States still do not own a computer or have an Internet connection. Those of us who do are losing the excitement of online shopping — we want to get out of our chairs and experience going into a store and being with people.
For music lovers, however, the Internet offers some unique benefits that the majority of traditional music stores still do not have. Consumers go to the Web to search for tunes by song title, album title or artist; to get song reviews and band information; for good pricing and more, all in one place. The most significant feature the Internet brings to music shoppers is the ability to sample thousands of CDs. The music is right there for them to hear. Click once to sample music and click once more to order. Early on, consumers and e-tailers got excited about this ability that traditional music retailers did not immediately offer. And then came Napster: Click once to find your music and click once more and get it, for FREE. Wow, what a way to build business and customer loyalty — all free music at your fingertips from the privacy of your home, office or dormitory. Could anyone beat it?
How Did The Industry Deal With The Internet? To
begin with, major labels such as AOL Time Warner's Warner Music Group, EMI
Group, Bertelsmann's BMG Entertainment, Vivendi Universal's Universal
Music Group and Sony Music Entertainment sued Napster to stop the free
music-sharing. While the legal system began to squeeze Napster’s
business, many new alternative file-sharing services popped up, claiming
legal impunity. Some in the industry argue these file-sharing companies
will not survive the legal pounding, while others are convinced these
companies will not only survive, but will flourish. On the other hand,
unrealistic business models, bad license deals, lawsuits and lack of
support from major record labels have forced many independent
Internet-based music companies out of business.
While fighting Napster and those who facilitate free music distribution over the Internet, the major record labels began to create subscription services of their own to directly engage in digital music sales over the Internet. If unanswered, each successful step toward such subscription services will affect traditional music retailers’ sales and will most likely bypass them all together.
By the late 1990s, traditional music retailers began to shift their focus toward Internet-based business models. Back then, traditional music retailers still controlled 99% of the music distribution in the United States. They went on a spending binge to build their own e-commerce business, rolling the dice on what many thought to be the most promising and lucrative technological opportunity ever.
Retailing
Outside The Box Today, traditional music retailers subsidize money-losing Internet ventures by sapping profits generated by their stores. Many comfort themselves with the perception that they are a casualty of a bad market or overstated optimism, while the real cash cow (traditional stores) falls victim to neglect, stifled by old business models and flawed perceptions. It is time for traditional music retailers to think outside the box. It is time to review the extraordinary efforts and expenditures they have made in e-commerce compared with the efforts and expenditures made on modernizing their traditional music stores.
Music retail management can no longer accept the validation of their traditional music stores’ successes and failures by playing the old tapes of reasoning that date back to the 1960s: “We need new media/format to stimulate sales. We need new big hits to bring people into our stores. We need more signage and advertising to inform shoppers. We need better coop deals to bring in more cash. We need better store locations. We need to close poor performing stores; etc.” One can argue favorably that the successful implementation of any one of these initiatives would bring welcome spikes in sales. But one cannot argue the fact that in order to sustain consistent growth and improve the competitive nature of traditional music retailing, such initiatives today are simply not enough.
As the Internet has introduced music shoppers to many valuable services and technologies, and as shopping is becoming more of an entertainment experience, traditional music retailers must start to think outside the box. As music merchandising evolves, forward-thinking leaders will stand out by taking advantage of the many technologies currently available to them and creatively integrate them into their traditional retailing environment.
Today,
most traditional music stores serve a single-purpose: to make them
convenient for the music shopper to find a specific CD and purchase it.
They are not designed to cultivate “shopping.” In fact, once music
shoppers are inside a traditional music store, they see thousands of music
CDs but they cannot experience them. Only being able to sample a few newly
released CDs that they have most likely already heard further discourages
shoppers. Also, they are subjected to overhead music without knowing what
CD is playing. This environment does not facilitate shopping.
Today, music shoppers are very sophisticated, demanding the highest quality of service and unprecedented attention to their needs. Having many choices in where and how to buy music, traditional retailers must show their customers that they are important and win back their loyalty by meeting their expectations.
Why Should Music Retailers Invest In Technology? To most shoppers, traditional music stores have not really changed much since the days of vinyl records and 8-tracks. Ultimately, the successful music retailers will have to quickly and aggressively begin integrating their traditional shopping models with new technologies and creative merchandising concepts. As technologies and music formats change, so should the traditional music retailers.
Considering the downward slide of their captive and loyal music shoppers, music retailers must strive to meet music shoppers’ needs and bring to their stores new and fun technologies. If music retailers do not “get with the times,” they will continue to experience this decline from what used to be an almost 100% music sales channel. Integrating new technologies into existing music retail models allows music retail management to create, test and ultimately implement a more engaging and exciting shopping experience. Such efforts will increase store traffic and sales, as well as provide the technological foundation to allow music retailers to be ready players for digital music distribution.
While still controlling the greatest volume of music sales, music retailers, using a single voice, must burrow into the inner workings of record labels’ digital music initiatives in order to quickly establish their own foothold for in-store digital music distribution. It is important for music retailers to create their own in-store digital music services as a competitive alternative to other distribution channels.
Today,
music retailers have the greatest opportunity to create a killer shopping
environment. However, to succeed in today’s competitive, global
marketplace, music retailers must bring new technologies integrated with
creative merchandising concepts that meet the challenging expectations of
sophisticated music shoppers.
National Association of Recording Merchandisers 9 Eves Drive, Suite 120 Marlton, NJ 08053 Phone: 856.596.2221 Fax: 856.596.3268 Web: www.narm.com
For comments or suggestions, contact Communications Manager Susan L’Ecuyer at lecuyer@narm.com.
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