Music to buyers' ears

By KATHERINE HOBY

A price war in the music CD market has left some specialty music stores struggling, and consumers coming out the winners.

The price for a top-20 CD has dropped over the past five years from between $32 and $35 to as low as $25.

Many specialist stores are being forced to lower prices to compete with large chains that can buy bulk stock and slash prices.

A stroll down Queen St in central Auckland reveals top-10 CDs such as Ronan Keating's Destination, Come Away With Me by Norah Jones, Bic Runga's Beautiful Collision and The Eminem Show from Eminem selling for as little as $24.95 and $26.99.

Specialty music retailers sell the CDs for $29.99 to $34.95 - and admit they are finding it tough. Store owners say they are trying to combat price drops with specialised knowledge, listening post facilities and, in some cases, free coffee and comfy chairs.

The manager of a small Auckland music store said since The Warehouse entered the market with cut-price music he had lost business.

The man, who declined to be named, said he had been in the music business for about 15 years.

"We've always offered music knowledge, a cup of coffee, as much time as you need to listen to your chosen music and a fair price," he said. "But that's not really enough these days. People want cheap music - and I find I can't keep up."

He said he still had regular buyers who came into the store, seeking his expertise.

"I think the connoisseur might stick with the people who know their tastes but for your average buyer who knows what they want - they would go for the lowest price any day."

The Warehouse music buyer Terry Anderson said the company was able to buy big volumes and offer them at low prices, attracting a large number of people.

"If we can move high volumes of Eminem or whatever it might be, we can keep buying and keep costs low," he said. "That way we're happy, the record companies are happy and consumers are happy.

"It comes down to buying power. We're not looking to put the little guys out of business but they might buy one unit and we might buy 1000. It's mathematics."

Mr Anderson said The Warehouse stores did not offer listening posts, or specialist music knowledge in most cases.

"But most come in knowing what they're after. Consumers are the winners in this big time."

As well as good value, he said The Warehouse was not intimidating to consumers, whereas some stores aimed at younger buyers might be.

"You can hear what you're thinking in here. And you don't have to be embarrassed asking for Neil Diamond."

Sounds music stores marketing director Shaun Joyce said the market started to change in the mid-1990s. The number of "players" in the music retail field dropped from 10 to 15 in the early to mid-1990s to four by the late-1990s.

But while some were finding it tough, Mr Joyce said Sounds opened its chain of stores in 1991, the same year as The Warehouse started selling music.

"We started with 1 per cent market share, we now have 20 per cent," he said. "We're not at war with them. We've existed quite nicely alongside them. There's room for the different things we're offering."

Mr Joyce said there was no way he could match Warehouse prices.

"If price was all that mattered, we'd be out of business but we blow them away in terms of service."

He said Sounds customers would always pay for service and quality.

Recording Industry Association of New Zealand chief executive Terence O'Neill-Joyce said stores such as The Warehouse could afford to slash margins on music if that profit was coming elsewhere.

"The thing that hurts Sounds and the CD Store and those guys is that they don't have people walking into their stores to buy, say, a vacuum cleaner. They can't regain margins that way."

Despite cheap prices, sales are falling.

Mr O'Neill-Joyce said sales of CDs to June 2002 had dropped just under 1 per cent, mostly due to piracy.

"You may be excited to buy a CD for $24.95 ... but that, in turn, cannot compete with $1.50 for a pirated copy."