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DVD Strikes Right Note at Small Music Chains

23 Jul, 2004 By: Jessica Wolf

Small music chains and indie record stores are loading up on DVD like they never did with VHS. They're making some money at it, and, in the process, essentially creating pop-culture, one-stop shopping for consumers.

“VHS was never an attractive or sexy piece of product,” said Larry Mansdorf, buyer for Newbury Comics, a 15-store chain with locations in Massachusetts, Maine, Rhode Island and New Hampshire. “But DVD, it's been awesome; it's been a huge growth category. Two years ago it was 8 percent of our sales, and now it's 13 percent and growing.”

Newbury tries to carry the spectrum of DVD products, from music-related titles to box office hits to arthouse releases. The chain got into DVD fairly early, in 1999, due to its locations in college towns and “early adopter areas,” Mansdorf said. Music DVD is one of the top-selling DVD genres, he said.

Amoeba Music, a three-store chain based in California, in March expanded the DVD section in its San Francisco location to create a 4,000-square-foot movie superstore and doubled its DVD inventory at the chain's original Berkeley location. The Los Angeles store, which opened in 2001, came already fitted with a 5,000-square-foot DVD section. “We like DVD — a lot,” said co-owner Dave Prinz.

Amoeba carries every genre on DVD and, not surprisingly, music DVD product also does particularly well, he said. “We're a record store, so music stuff does a lot better for us than it might at a chain or a video store,” he said. “We try to get as much music stuff as we can.”

Record/music stores take about 6 percent of the overall DVD sales revenue pie, said Tom Adams, president of Adams Media Research. That's actually a little lower than previous years, he added, due to significant store closures for larger chains like Tower Records and Wherehouse.

The smaller music chains and independent record stores have more in common with their video counterparts than just DVD. Shakeouts in the retail climate and the rise of corporate giants in both industries have shuttered stores in both markets. The product convergence and similar competitive climates for the two types of retailers are among the reasons execs at the Video Software Dealers Association (VSDA) and the National Association of Recording Merchandisers (NARM) are considering a merger of the two trade groups.

But, like the small video chains or indies that have found ways to thrive in today's market, the little guys left on the music retailing side are the businesses that had a strong model and good strategies to begin with, Adams said. “Any that have survived to this point are well embedded in their community, but that can be said about the independent video store also,” he said.

Suppliers like Palm Pictures and Eagle Rock Home Entertainment, who specialize in music and lifestyle programming, find their philosophies are very simpatico with smaller record stores.

“There have been some promotional campaigns recently where we've targeted those independent stores rather than going to a national chain,” said Paul Freehauf, VP of marketing and product development for Eagle Rock.

It's about selling more than just the product, said Lisa Nishimura, general manager for Palm.

“Independent record stores are extremely important because they're like lifestyle locations for the community,” she said.

That's what it's all about at Amoeba, Prinz said. “There are a lot of really, really strong music and movie fans out there,” he said. “They just needed a store where there's a feeling of community.”

Smaller music retailers face the same competition as video dealers for shoppers' DVD dollars with the mass merchants and discounters.

Newbury offers a huge assortment of licensed goods, from products with movie or TV tie-ins to Boston Red Sox and Paul Frank gear, even the trendy Ugly Dolls stuffed animals. “We are in the trend business. We're probably one of the largest stocking retailers of ‘Simpsons' licensed products,” Mansdorf said.

TV-on-DVD has been a big growth area for the chain lately and seems to be one genre they can compete with low mass-merchant pricing on, he said.

At Amoeba, used trading keeps the discounting competition at bay. “As long as we have [used product], we're pretty protected,” Prinz said. “I think DVDs are almost more oriented toward that [used] transaction,” he added. Music lovers may hang on to a CD that's not among their top favorites just in case they want to listen to a track sometime, he explained. But if someone has lukewarm feelings about a movie they watched, they're more likely to give up the DVD.

Showing indie music stores' interest in the DVD segment, Coalition for Independent Record Stores (CIMS) members last year sent protest letters to members of The Eagles and The Rolling Stones, after both groups offered Best Buy exclusives on DVD content.

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