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Box Stores vs Major Labels: Fight Over CDs

Are CDs finally on the Way Out?

While it has been quite obvious that the sale of CDs has declined since the rise of the digital age, there have been a few retailers who still were big staples in the industry. Best Buy and Target specifically would have special releases through their stores. So, even though digital music distribution is on the rise, physical is still selling quite well on a global basis. However, CD sales were down 18.5 percent last year and it looks like things are about to get worse.

As of July 1st, Best Buy has told music suppliers that they will pull CDs from their stores. At one-time, Best Buy was the top music merchandiser in the United States. However, nowadays it is a shadow of its former self. According to sources, Best Buy’s CD business is only generating about $40 million annually. Ironically, as Best Buy pulls CDs, they intend to still carry vinyl for the next two years based on a commitment to vendors. Although the vinyl will now be merchandised with the turntables.



What About Target?

Sources have reported that Target has told music suppliers that they want to be sold on a consignment basis. As of right now, Target takes the inventory risk when it agrees to pay for any goods that are shipped. Any unsold CDs can be returned after 60 days for credit. Regarding the consignment, the inventory risk slides back to the labels.

It should also be noted that Target gave the ultimatum to both music and video suppliers last year in the fourth quarter that they intend to switch to scanned based trading. Their target date was February 1st but the deadline has been moved back to April or May 1st. If major labels don’t play to the big box retailers terms, there can be a huge decrease in CD sales. How this plays out can influence what happens in the music industry.