Despite the price hikes and restricted access to content, overall revenue for the music industry continued to rise during the 1990s, reaching a peak of $14 billion in 1999. *Somebody* was making money, and those somebodies were the record labels. Without stopping to ask how much of that was actually *profit,* speculators dove in to the business. Numerous mergers took place, and the industry was essentially run by three conglomerates.
Traditional promotional outlets also jumped the shark. MTV, long a source of exposure for new music, began to focus on original programming like *The Real World,* and actual music videos were gradually shifted out of the prime-time lineup. Clear Channel began buying up top-tier radio stations in large markets, and their business model focused on playing familiar hits rather than new music.
Retailers on the ground took the biggest hit. As CD prices rose, their margins actually shrank. Dealer cost for a $17 title was around $13. The irony was that they had to make up their margins on things like blank media, which were being used for piracy. The small and medium chains either failed or merged with larger ones. Most of the “mall stores” like Record Bar, Sound Warehouse, and Sam Good merged with Turtle’s, who merged with Phillips, who then sold the whole shebang to Blockbuster.
And that screwed things up worse than anything. Blockbuster had no clue that they were buying into an industry with razor-thin margins and a dependence on people who knew their local markets. Rather than apply their influence to negotiate better prices from distributors, they settled for driving independent shops out of business by saturating markets. Alternative labels stopped doing business with them when the company announced it didn’t want to stock records with objectionable lyrics, and repeated cuts to wages and benefits resulted in a workforce that lacked the knowledge and interest to promote their wares.
They had become the 900lb gorilla but they’d underestimated the cost of bananas. They were hemorrhaging cash, and they made vain attempts to expand into other industries in which they had no experience, like books and comics. In one year, they went through three CEO’s. At a shareholder meeting, the third announced that the company would be “streamlining” their workforce. When a manager asked how they’d sell that to the employees, his response was, “they’re expendable.”
The trade publications were watching Blockbuster closely, and that phrase was duly reported. As the company flailed and died (they’d sell their music operations to a used-CD retailer named Wherehouse in 1998), so did music retail in general. Though Tower records and HMV maintained large stores in urban centers, the death of Blockbuster’s music division meant the disappearance of neighborhood mall stores. If you lived in the suburbs, your only sources of music were stores like WalMart of Best Buy, whose selections were often redundant and meager.
With the exception of a few specialty independent shops, the concept of the record store was dead.