'97 U.S. Record Shipments Drop Nearly 10 Percent

The lack of production from popular recording artists such as Smashing Pumpkins and Alanis Morissette,

who together boosted 1996's retail business in a big way, is being blamed at least in

part for a drop in overall record sales for the first half of 1997.

But Tower Records' Senior Vice President Stan Goman also places blame on the Recording

Industry Association of America (RIAA), which he said is ostracizing the younger record buyer

by raising prices beyond their means. "The RIAA has done everything in its power to make

sure our industry is an imploding one," said Goman, who said he also feels that a glut

in releases and unit costs and an industry-wide boom in retail outlets are to blame for the declining music market.

"Maybe the overall industry isn't growing as fast as we'd like it to," he added. "But

then again, kids can't pay $15 every week to buy new music." Any way you slice it the

Washington, D.C.-based RIAA says business is down, and down significantly in the first

half of the year, as shipments of audio and video products dropped 9.7 percent since

January, causing revenue to fall about 5 percent in the process.

The RIAA reported recently that the total number of shipped audio and video products

in the first half of 1997 fell to 470 million as compared to last year's first-half

figures of 521.2 million. Not surprisingly, then, revenue from these shipments has

fallen to $5.2 billion this year, down from last year's mid-point tally of $5.5 billion.

At the heart of the decline is CD orders. Shipments of full-length CDs, the flagship

format of the record business, fell 7.3 percent from last year, a slide the RIAA blames

on decreases in mail order and record club tallies. About 18 million fewer vinyl

singles were shipped in the first half of 1997, while the number of cassette singles

plummeted by 26.5 million during the period, a loss of more than $32 million in revenue.

Although retailers shipped about the same amount of music videos thus far this year,

their revenue has increased by about $23.5 million.

"I'm looking forward to a better second half of the year," said John

Ganoe, RIAA director of member services. Ganoe worked directly with the

accounting firm of Cooper and Lybrand and industry tracking giants

Soundscan in tallying the 1997 mid-year figures. "Sure, we haven't had

another Alanis Morissette, but she does continue to sell -- as do the

Spice Girls."

Ganoe said he discourages focusing on the overall drop in prerecorded

video and audio product numbers, and instead points out that the retail

market has shrunk over the past few years, a move which should foster a

healthier music marketplace for the near future.

On the positive side, shipments and sales of CD singles and full-length

vinyl recordings have increased, a fact which the RIAA attributes to limited vinyl

pressings of new releases and an increase in the amount of "bonus" tracks available

on CD-5s. The number of CD single and vinyl LP shipped increased by 70 million and

16.2 million respectively, while combined, the formats have collected nearly $150 million

more in sales during the first half of the year.

But Ganoe still has the drop in CDs to answer for.

"Perhaps the retail universe had expanded beyond the needs of the

consumer," Ganoe said, agreeing in part with Goman's assessment . "However, we're now

looking at a healthier and stronger marketplace for both consumers and retail outlets."

RCA Vice President David Fitch claims that slumping sales are also a direct result of

1997's lack of big-name releases. While the first half of 1996 was marked by sky-high

numbers from artists such as Morissette, The Smashing Pumpkins, Tupac Shakur and other

mega sellers, he said, 1997 has been lackluster with only a handful of platinum contenders

including Prodigy and Wu-Tang clan. Adding to the problem is U2's super-hyped but

low-selling Pop, Fitch added.

Puff Daddy, Spice Girls, the Wallflowers and Jewel have also enjoyed the big numbers

thus far in 1997, though two of those records -- from Interscope's Wallflowers and

Atlantic's Jewel -- were released in 1996. While Oasis' Be Here Now is expected

to do well at retail, the year's next biggest hyped record, Jane's Addiction's It's

My Party is made up of mostly older material. That leaves The Dance, the

Fleetwood Mac reunion album and Bridges To Babylon by the Rolling Stones as

1997's best chances for recovery.

"Just take a look at the release schedule," said Fitch, who's enjoying big years from

Wu-Tang, and, most recently, Robin. "The first half of 1997 was pretty slow. But this

is the time of the year where we'll be

seeing the amazing record releases. If Christmas were tomorrow, I think

we'd have a good holiday. But I don't know if we're out of the woods yet

-- we still have too many releases and too many stores hitting the

consumer at once. The tree needs to be pruned a little."

While Goman said business is up throughout the Tower chain, he still

feels the music industry has lost touch with the younger demographic,

giving them less products to purchase at affordable prices. What the industry needs

to do is stop preaching to the converted, he said, and try and attract new consumers.

While Fitch said it's hard to predict whether numbers will rise during

the remainder of the year, he does hope for a more active fourth quarter at

RCA. The Verve Pipe and Dave Matthews Band records are still selling, and

a new release by R&B faves LaBouche and a second single from Swedish

chanteuse Robin have him looking on the bright side.

"The independent retailers are confident," Fitch said. "The medium size

and large chains are confident, too. Retail is showing signs of turning

around. The biggest problem is the release cycle -- last year, we had

bigger names and bigger albums, and this year was kind of slow."

"One message the music industry finally received from retail," said

the RIAA's Ganoe, "is that the concentration of major releases during

the final quarter of the year was killing them. But that's changed.

We've seen a number of high-scale projects released throughout 1997 --

and there's still a new Mariah Carey record on its way, more Spice

Girls, and if the stars align properly, the new Garth Brooks record. The

remainder of 1997 looks just fine for the industry."

But while retailers are also banking on Oasis, the Rolling Stones and possibly

Pearl Jam to carry them into the black by year's end, Tower's Goman insists that unless

the industry does something to appeal to the younger consumers, they will be feeling

the impact of these times for years to come.

Making up about 25 percent of Tower's overall business, the 10-to-20-year-old record buyer

doesn't earn enough to buy music on a weekly basis, he said. And if you can't hook kids

into the market now, he added, they won't be there as adults later.

"We're asking the kids to buy a new CD, which is about $16," Goman

said. "And then, the kid is going to want to see the new movie that

week, and then bring a date and buy some popcorn. And even if they go to

the bargain matinee, that's another $12." Throw in school lunch,

clothing and transportation funds, and Goman figures that the average young person

would need about $50 a week, well over what they can afford.

"If we don't have the kids in, we have a huge blip in the population," he said. "The

RIAA is, in essence, a self-fulfilling prophecy. We already have the adults hooked.

But we're having a hard time hooking a kid without something less than $2 to take home.

I mean, what could be better than a whole bunch of kids getting together on a Saturday

afternoon to listen to new music? The only problem is that they can't do that -- it's

too expensive." [Tues., Sept. 2, 1997, 5 p.m. PST]