CDs at 10: Altering music industry's track // Battle brews over used
discs // Distributors and artists resist trend
David Zimmerman
* 08/03/93
USA Today
(Copyright 1993)
Compact discs are one of those near-perfect products. They never
wear out.
That - plus the fact that they're not cheap to buy new - is why
used CD outlets are popping up in strip malls and as a
controversial sideline in major record stores.
TD "Customers demanded used CDs," says Bill Lavery of Village
Records in Shawnee, Kan. "They were popping in the front door
saying `Do you carry used CDs?' and then leaving. After six months
of this and business going down, you don't have to be a genius to
know what you have to do."
Even big retailers are jumping into the used-CD business. In
retaliation, four major music distribution companies, worried that
used CDs may cut into new CD sales, have withheld millions of
dollars in co-op advertising support from retailers who sell used
CDs, including Wherehouse Entertainment Inc., which has used CD
sections in 260 of its 339 stores.
Two weeks ago, Wherehouse filed a lawsuit against distribution
giants CEMA, Sony, Uni and WEA, saying that withholding ad support
from some stores and not others is a violation of antitrust laws.
Wherehouse lawyers say they'll also argue the companies are trying
to restrict used CDs to maintain high prices for new CDs.
Independent store owners, hit hard by losing ad support, have
reduced orders and stopped promotions and discount pricing for new
releases from the four distributors.
But those on the other side of the issue, including Peter McCann
of the Songwriters Association International, say if secondhand CDs
reduce sales of new CDs, "the public eventually is going to be
hurt."
McCann, who wrote the Jennifer Warnes hit The Right Time of the
Night, says used CD sales don't compensate those "at the end of the
food chain," which means less support for new songwriters and
artists. Songwriters and the publisher, McCann says, split a maximum
of about 6 cents per song per CD sold. Most of today's songs are
co-written. When the songwriter share is split three ways, McCann
says, a songwriter will make $16,000 on a million-seller.
Those who sell used CDs argue that they don't necessarily reduce
sales of new CDs. Wherehouse CEO Scott Young says "used compact
discs help stimulate additional sales of all CDs - both new and
used."
But Bob Freese of Liberty Records says secondhand sales "are
beginning to take a bite out of our business." So Garth Brooks'
upcoming Liberty CD won't be distributed to stores that deal in
used CDs.
"The way Garth and I feel is that it takes away money from the
songwriters and people in his band and people in the back rooms in
the management office," Freese says.
Erik Flannigan of the CD-specialty newsletter International CD
Exchange says it's hard to argue against used CD sales "when there's
a secondhand market for so many things like cars and books."
