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Holiday Sales Vital To Cd Industry

Sat., Dec. 21, 1996, midnight

Sherree Harris marked one item off her holiday shopping list, spending $34.99 on a Smashing Pumpkins CD collection for her daughter.

“We buy a lot of music all year ‘round, but especially before Christmas,” she recently said outside a Sam Goody music store.

The music industry is counting on people like Harris to lift itself out of a troubling slump that has seen record retailers shut down and albums by once-dependable stars fall flat with fans.

Album sales through most of 1996 have grown by only 1 percent, while music shipments to stores and other outlets are down slightly. Country music sales are off about 10 percent.

The holiday season offers a chance at redemption, which is why the third Beatles anthology and new albums by Bush, the Smashing Pumpkins, Whitney Houston and Dr. Dre are in stores.

As much as 20 percent of album sales each year come in the final five weeks of the year, said Mike Fine, chief executive officer of SoundScan Inc., a New York company tracking music sales.

“I think people are buying for Christmas. They’re buying for themselves. They’re in the buying spirit,” he said. “But it’s also a self-fulfilling prophecy because the record companies hold their releases until the fourth quarter.”

But this year, albums that record labels thought would be big sellers - by R.E.M., Pearl Jam, Hootie & the Blowfish and Sheryl Crow - have all been disappointing.

Celine Dion and No Doubt are breakout hits, but there’s nothing on the order of Alanis Morissette, whose debut album is finally starting to cool off.

“It’s a hits-driven business,” said Jay Berman of the Washington-based Recording Industry of America Association, which follows the number of music shipments. “It’s very, very difficult to duplicate hits.

“It’s not like a car model, when you get a successful make, you continue to churn it out.”

Bob Barrett is so disgusted with the lack of good, new music that he may close his new-and-used CD shop in Brentwood, a Nashville suburb.

“It’s hideous, but that’s just my opinion,” he said. “I hope it’s not that I’m getting old, but I just don’t think the music is all that strong right now.”

Price wars with big chain music retailers may drive him out first.

Intense competition for music-buyers’ dollars has caused discounting wars. And there have been some losers: California-based Wherehouse Entertainment Inc., Peaches Entertainment Corp. of Florida and Kemp Mills Music Inc. in Washington, D.C. have all gone to bankruptcy court.

The nation’s largest music retailer, Musicland Stores Corp. of Minnesota, posted a $136 million loss last year.

Industry analysts and insiders say the price wars are just one of the reasons growth in the industry has stalled recently. It had averaged 10 percent a year over the past decade.

Eddie Reeves, executive vice president and general manager of Warner/Reprise Records in Nashville, contends the slowdown is part of a natural cycle in business.

He said the industry will become healthy again if record companies stop taking the easy road - chasing single hits rather than developing artists for the long haul.

And, he said, it’s necessary to put the lackluster performance in 1995-96 in context. He likens the slowdown to the ups-and-downs of stock prices.

“If you bought stock in 1989 at $4.50, and in 1995 it was worth $20 a share, but in 1996 it dropped to $19 a share, would you be panicking? I don’t think so,” he said.

“That $1 loss might cause you to look and see what the problem is, but you wouldn’t sell the stock.”

Part of the problem is the intense competition for Americans’ entertainment dollars.

“Now you have the Internet and people are spending time on-line that they may have spent listening to music in the past,” said Tom Hutchison, who teaches about the recording industry at Middle Tennessee State University in Murfreesboro.

In fact, they could even be listening to music through the Internet. Then there are movies, video games and other forms of entertainment.

The fierce competition is easy to see at a local Media Play store.

Before even getting to the first CD, customers are confronted by a huge, hovering spaceship - on a display for videos of the movie “Independence Day,” a riser with mystery writer Sue Grafton’s latest book, “M is for Malice,” and enough “101 Dalmatians” T-shirts to cover a Christmas tree.

Then there are computer games and TV games like Nintendo.

“The fact that the record industry has been able to have some growth - any growth - is remarkable,” said SoundScan’s Fine.


 
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