Looking Into The Future of Internet Marketing

A quick smile flashes through his gray beard when Sykes thinks back to his first vinyl record, an album by Herman’s Hermits, which he purchased at age 8. He speaks fondly of listening to the radio on weekday mornings as a teenager and of watching “American Bandstand” on Saturday nights.

It’s what steered Sykes toward a job at the old Burlington Stereo City more than 30 years ago. And what compelled him to open his own record store eight years later.

Sykes, 52, has survived through a bevy of changes in the music industry, seamlessly transitioning from records to 8-tracks to tapes to compact discs.

Music will always play an important role in Sykes’ life. But he wonders how long he’ll make a living from it.

“I imagine I’ve got a couple more years left,” he said sadly. “Hopefully.”

Business isn’t what it used to be at Keith’s CDs and Tapes, located at 2222 Maple Ave. in Burlington. The emergence of digital downloading off the Internet and iPods has driven away potential customers in droves.

Sykes isn’t alone. Since 2003, about 25 percent of independently owned music stores nationwide have closed, according to statistics compiled by the Almighty Institute of Music Retail.

Record labels seem powerless to turn around slumping CD sales. They’ve dropped 20 percent in the first three months of 2007 compared with this time last year.

“I would think it’s definitely a trend,” said Rob Jara, sales and marketing representative for the music distributing company AEC One Stop. “I have a lot of friends at record labels who say the final days are upon us.”

IF THAT’S TRUE, independent store owners such as Sykes are suffering the consequences.

When Sykes started Keith’s Record Shop in 1985 — the name was later altered to Keith’s CDs and Tapes to keep up with the changing technology — there were as many as four independently owned music stores in Alamance County. Now it’s just Keith’s and a small store on South Mebane Street called CDs R Used.

Shopping at Keith’s means a more personal experience. Sykes can special order CDs from any popular artist, no matter how old, and have it shipped to his store in a few days.

But shopping at Keith’s also means paying a couple more dollars than at national retail stores like Wal-Mart and Best Buy.

Those larger stores hold an advantage because they deal directly with the record labels, Jara said. Keith’s has to buy its music from distributing companies like AEC One Stop, which must mark up the product to earn its profit.

“(The Wal-Marts and Best Buys) get a better price, but they also don’t care about the price because it’s not their primary product,” said Joel Oberstein, president of the Almighty Institute of Music Retail. “So they don’t have to mark it up as high.”

Despite some initial worries, Sykes said Wal-Mart and Best Buy haven’t made a significant dent in his business. He believes the popularity of digital downloading has made a far greater impact.

“In a way, I can’t blame them,” Sykes said. “People are just not going to pay $20 for a CD when they can go online and buy one song for 99 cents. … But where does that leave me?”

JEANNIE BURGESS, owner of CDs R Used at 2640 S. Mebane St., Burlington, said digital downloads haven’t dramatically affected her bottom line. She blamed any dip in business on higher gas prices and a poor economy.

Unlike Keith’s, CDs R Used doesn’t rely on distributors to stock its shelves.

Burgess said most of her store’s inventory comes from customers looking to unload music they no longer want. That allows her to sell most CDs for less than $10, and continue a longstanding “buy three CDs, get the fourth free” policy.

“To be quite honest, it’s been so prevalent for so long that it was a lot more noticeable a few years ago,” Burgess said. “A few years ago, you’d hear kids (who came into the store) say to one another ‘don’t get that, I’ll just burn you a copy.’”

That mentality, Jara said, is a by-product of the music industry’s constant overpricing.

“In the mid-1990s, (record) labels started raising list prices,” Jara said. “It was immediate. It would go from $13.95 to $15.95 to $16.95. It was at that point that they started to price them too high.

“Then the digital stuff started to appear more. The record companies almost drove people to look at digital because the prices were so high.”

Slowly, the music industry has adjusted to the changing climate. Instead of producing full-length CDs, some labels are promoting artists by releasing one or two songs for digital downloads.

Daniel Gross of the online news and culture publication “Slate Magazine” contends that companies are finding innovative ways to keep the CD alive.

Starbucks, for example, announced that it will launch its first CD this summer from Paul McCartney. Amazon began a classical music retail to profit from that genre’s surprising surge in popularity.

Burgess has noticed teenagers taking a liking to vinyl records because of the “retro” factor, and believes CDs might someday hold the same distinction.

“What we are witnessing is not so much the imminent death of CDs, but the death of the old methods of selling CDs,” Gross wrote in an article called “The CD is dead: Long live the CD.” “It’s still possible to make money in the CD business … The incumbents are getting killed, but upstarts are thriving, using different methods.”

Alamance County’s latest music casualty came last month when FYE, a nationwide chain that sold music and movies, left the Burlington Square Mall. Spokeswoman Julie Swanner said she could not say if the mall planned to fill that vacancy with another music store.

Sykes said he has started carrying DVD movies to supplement his store’s income. Perhaps that would help him and co-owner Colon Moffitt stay in business a little longer.

“I love my business,” Sykes said. “I don’t want to get rid of it.”