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THE TOP 100: Music/Consumer Electronics Chains Humming a New Tune

30 Apr, 2002 By: Thomas K. Arnold

This week, Hive4Media will bring you Video Store Magazine's Exclusive Annual Research bonanza, the Top 100. Two parts of this unique research series will appear every day this week in this space. Today we continue the series with a look at the Top 10 specialty chains and the Top 10 music and consumer electronics stores. To view supporting charts and tables, see your copy of Video Store Magazine!

If music retailers were hungry for DVD in the past, their appetite last year became positively voracious. For the first time in nearly a decade, music sales were down, and retailers --whose core business was under attack by file-sharing and unrealistically high CD prices -- turned to movies for relief.

“It's a visual world out there,” said John Thrasher, VP of video purchasing at Tower Records and Video. DVDs “are priced at or below current CD prices, and our customers have altered their buying habits,” he said. Buoyed by DVD, the video category at Tower finished the year at nearly 20 percent of overall sales, an all-time high.

At Wherehouse Music, another leading music chain, president Larry Gaines reported “triple-digit gains” in DVD sales in stores that were open at least one year. DVD sales accounted for 15 percent of total revenue in 2001, Gaines noted.

Meanwhile, consumer electronics kingpin Best Buy and leading music chain Musicland finished their first year as a merged company with $19.6 billion in gross sales. The fourth quarter was particularly bountiful, with the combined company reporting an 84 percent increase in earnings. Sales at Best Buy stores open at least one year were up a healthy 4.5 percent. Even Musicland, suffering from the downturn in music sales, managed to post a minor gain in same-store sales in the fourth quarter “due to strong sales of DVD movies and video gaming,” the company said.

Tom Adams, president of Adams Media Research, isn't surprised record stores are doing boffo business in DVD. “Music stores have always been sellthrough specialists, and DVD has tilted the scale in the business toward sellthrough,” he said.

Music retailers also are motivated to embrace DVD because music sales are in a slump. Recording Industry Association of America (RIAA) figures show total U.S. music (CD, cassette and LP) shipments dropped from 1.08 billion units in 2000 to 968.58 million units in 2001, a 10.3 percent decrease.

Matt Lasorsa, SVP of marketing at New Line Home Entertainment, said music retailers are becoming “increasingly important as they expand their [video] sections to accommodate more breadth of titles than they have traditionally [in the VHS-only days].” He said music-store traffic is well tailored to New Line's core 25-and-under audience.

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