On July 1st, Best Buy was supposed to end its long history with the Compact Disc (better known as the CD). The company had announced months ago that it had set that date as its deadline for ending sales completely, but according to several reports, is still is selling them, although with greatly reduced inventory and floor space. The company has indicated that it will offer only “select CDs” going forward.
What’s especially interesting is the fact that Best Buy was at one time the largest music retailer in the United States, often using the latest CD releases as loss-leaders to get people into the store to buy higher-priced hardware. But everything evolves and as the music business headed full-steam towards digital, physical product lost favor with consumers for the cheaper and more convenient digital formats of downloads at first, and now streaming. With the CD division of the giant retailer bringing in only $40 million of the company’s $4.2 billion in revenue last year, it makes sense to relegate the valuable floor space that CDs occupied to other more profitable products.
The fact that Best Buy is winding down CD sales isn’t as bad as it seems in the grand scheme of things however. According to the RIAA, 2017 sales for the format hit just over $1.057 billion, so the company’s $40 million is only a small piece of the overall revenue picture. That said, it’s symbolic of the decline of the format, and is part of the self-fulfilling prophecy that if there are fewer places to actually buy the product, then fewer pieces of product will be sold.
The big-box giant hasn’t totally given up on physical music product though, as it’s made a commitment to the music industry powers-that-be that it will also continue to sell vinyl for at least another two years. Of course, what’s prompting that action is the fact that turntables are once again a viable hardware product, so a vinyl album sale provides the company with a desirable upsell potential.
Although retail rival Target hasn’t ended CD sales yet, it has put some limitations on the sales of the format in its stores by adopting “scan-based” terms. This means that the product (along with DVDs, another bright and shiny plastic disc that’s heading the way of the dinosaur) is basically held on consignment until it’s sold (and scanned in the process). The company has also told vendors that it will only hold the product for 60 days and then return it if unsold, basically eliminating all catalog sales while concentrating on the faster moving popular hits.
But wait – if the giant big-box retailers aren’t selling a lot of CDs, yet 87.6 million of the suckers were purchased last year (again, according to the RIAA), then where are consumers buying them? If you guessed online, you’d be right, as Amazon has now become the largest new CD retailer, and it’s deep in catalog too, something that very few brick and mortar retailers are able to provide these days.
There are still pockets of consumers that prefer their music on CD (country music fans account for 13% of album sales according to Neilsen year-end report) and they need places to easily buy them. With fewer and fewer retail outlets carrying a wide selection of the format, you have to wonder which will die first – CDs or downloads? I’m putting my money on CDs having greater staying power, but not by much.