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The News & Observer (Raleigh, NC)
June 25, 1995
CD WARS
By Stewart Ugelow
STAFF WRITER

Lovers of Michael Jackson, Hootie and the Blowfish and other major recording stars will soon get more music for their money: Prices for some compact discs are plunging across the Triangle as the region’s record stores prepare for a major price war.

But while they’re lowering their prices, some Triangle store owners aren’t even sure whether they will survive the competition.

Consumer electronics chain Best Buy opened its first Triangle store in Raleigh’s Pleasant Valley

Promenade on June 16 and will open its second in Durham’s New Hope Commons in October. It will sell CDs at or below cost as a way of luring shoppers into its store. Circuit City will match the promotion, as it has in other markets where the two compete.

The archrivals hope that a discount of a few dollars on CDs will lure customers and spur sales of stereos, televisions and VCRs.

Consumers across the Triangle are already seeing a savings of about $3 a disc at the electronics chains and at some record stores that are slashing prices to stay competitive.

Nationally, while chains like Sam Goody/Musicland and Blockbuster Music have survived the Best Buy blow, the competition has claimed a number of casualties among regional chains and independent stores.

"It’s big business putting little business out of business," said Don Kulak, executive director of the Independent Music Retailers Association.

In markets where it competes with Circuit City, Best Buy is charging $10.99 for new releases and best-sellers and no more than $12.99 on most other CDs, according to a Billboard magazine survey.

Even before the Minneapolis-based Best Buy opened its Raleigh store, Triangle stores had started to react.

The Schoolkids Records chain in Raleigh and Cary lowered prices on its top 25 best-selling albums to $10.99 about two months ago. Current titles at that price include Hootie and the Blowfish’s "Cracked Rear View," "Encomium: A Tribute to Led Zeppelin," and Fugazi’s "Big Red Medicine."

"We would have sold the same titles for $13.99 before," said John Hornaday, manager of the Hillsborough Street store. "That was kind of brought on by Best Buy."

At Durham’s CD Superstore, manager Jeff Hill says his store will match or beat Best Buy’s prices for its discount savings club members. But he expects shoppers who are already in the club to stay in it.

"I just don’t see it affecting us too much because we already have a clientele," Hill said. "We beat the mall prices already."

While managers at other area stores said they were still

discussing an appropriate response, awaiting word from a corporate parent or unaware of Best Buy’s prices, most said their stores’ selection, service and

distance from Best Buy would determine how much they are affected.

"I’m quite sure I’m going to lose customers but I’ll gain some too," said Ronald Winslow, manager of Willies Records and Tapes in Raleigh, who is counting on his store’s strength in harder-to-find music. "We’re more into urban music than they are. I welcome the competition."

Waves Music in the Cary Towne Center has no plans to change

its prices, even though they are $2 to $3 higher than Best Buy’s, assistant manager Craig Hilton said.

"We’re in the mall here, and we get a different crowd then they do," Hilton said. "It was a big deal at first, but we’re not really worried about it."

Jack Campbell, owner of Poindexter’s Records in Durham, said he will not change his prices but will count on his special selection of independent rock to counter the competition. He says the Triangle’s more traditional record stores will duke it out with Best Buy.

"It’s really going to affect CD Superstore, Camelot, Blockbuster and the other mass merchandisers," Campbell says. "We really cater to a different customer.

We try to concentrate on carrying labels that no one else carries."

At $10.99 a CD, he says, "I know enough about the music business that for CD Superstore and Blockbuster Music, it’s not enough profit to keep going."

For those mass merchandisers, there is not much room to maneuver. The price you pay for your favorite disc is largely determined by six major distributors that supply almost all CDs sold across the country. Owned by or affiliated with major record labels, distributors sell CDs to retailers for about $10.75 and typically suggest that stores sell them for about $18.

Since Best Buy started cutting prices in 1989, profit margins have been too narrow for some retailers in other cities who have tried to compete.

The competition from Best Buy’s first North Carolina store in Charlotte was enough to force independent store Sounds Familiar into bankruptcy last year.

Last month the CD discount war claimed its largest casualty yet in Kemp Mill Music, a 25-store chain based in the Washington, D.C., area, which declared bankruptcy.

"It’s the dark side of capitalism," said Leslie Robbins, manager of Raleigh’s Nice Price Books. "It’s great to have cheap CDs but it [hurts] independent stores. I hope it will make people realize it’s worth that extra $2 to shop at those stores."