February 8, 2018
Physical CDs are still selling well, although the U.S. has seen sales down by 18.5 percent. But Best Buy and Target have just taken steps that may hasten the demise of physical media. Best Buy, which was once the biggest music seller in the U.S., has told its music suppliers that it plans to pull CDs from its stores on July 1. The company will continue to carry vinyl records for two years, fulfilling a promise made to vendors. Meanwhile, Target is now telling music suppliers it will sell CDs on a consignment basis. The move would also impact sales of movies, TV shows and other video content on DVD.
Billboard reports that Best Buy’s CD sales are “only generating about $40 million annually.” According to sources, Target wants to switch the model whereby it “takes the inventory risk by agreeing to pay for any goods it is shipped within 60 days, and must pay to ship back unsold CDs for credit.”
The new model it proposes is to shift that risk back to music labels. Target has already diminished the number of music titles it carries, from as many as 800 titles to less than 100 in most stores.
Sources say that, “Target gave the ultimatum to both music and video suppliers in the fourth quarter of last year that it wants to switch to scanned-based trading, with a target date of Feb. 1.” That would mean that Target would only pay for a DVD when it is sold or scanned at the register. Target has reportedly moved its deadline to either April 1 or May 1.
How the music industry will respond is still unclear, although sources “say that at least one major is leaning no, while the other two majors are undecided.” Billboard opines that, “if the majors don’t play ball and give in to the new sale terms, it could considerably hasten the phase down of the CD format.” Music sellers may be waiting to see how the studios respond to the demand for DVD sales to move to a new payment system.
Target can still play a major role in CD sales, having “moved over 500,000 CDs of Taylor Swift’s ‘Reputation’ album.”
“Entertainment has been and continues to be an important part of Target’s brand,” said a company statement. “We are committed to working closely with our partners to bring the latest movies and music titles, along with exclusive content, to our guests. The changes we’re evaluating to our operating model, which shows a continued investment in our Entertainment business, reflect a broader shift in the industry and consumer behavior.”