Music labels uneasy over Wal-Mart deal

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January 29, 2006|By ABIGAIL GOLDMAN AND CHARLES DUHIGG | ABIGAIL GOLDMAN AND CHARLES DUHIGG,LOS ANGELES TIMES

Deb Whittington, a 41-year-old high school science teacher from Effingham, S.C., and a devoted Garth Brooks fan, had to go to Wal-Mart.com to pre-order the country singer's new CD and DVD boxed set.

And when she wanted another "Garth Brooks: The Limited Series" - just in case anything ever happened to her first set, she said - she had to go to her local Wal-Mart store to get it. That's because the retailer has exclusive rights to the discs and all of Brooks' past and future music as well.

"I have to go to Wal-Mart anyway for other stuff, so I probably would have picked it up from Wal-Mart anyhow," Whittington said of the $25 set. "Not to mention it was a great price."

Just as it has done with toys, clothes and toiletries, the world's biggest retailer went right to the source - in this case, Brooks himself.

"The middleman's cost that was eliminated was also eliminated for the people," Brooks said. "To get a box out like that for $25 just shows me that these guys are not just eliminating the middleman and keeping the middleman's money - that makes me feel very good."

This latest example of Wal-Mart's "direct procurement" approach continues the company's practice of upending the traditional relationship between makers and sellers of goods.

The deal has some in the recording industry alarmed at the thought of Wal-Mart establishing direct partnerships with musicians and cutting out the labels. And it may just be the start.

The company announced Wednesday its Wal-Mart Soundcheck, a series of exclusive musician performances and interviews that will be broadcast in stores and over the Internet. The offerings initially include half-hour studio sessions with rock bands Yellowcard and Switchfoot and will expand to include performances from country, R&B and hip-hop stars.

Wal-Mart's arrangement with Brooks marks the first time a superstar has made an entire catalog available only through one outlet. Although one-time exclusive albums have become common - Bob Dylan and Alanis Morissette released albums through Starbucks Corp., for example - few artists have been willing to be a partner with a single chain.

The Brooks deal reflects the retailer's power within the recording industry, particularly in country music. Some label executives estimate that Wal-Mart is responsible for 50 percent of the genre's sales.

"Could Wal-Mart become a label? Absolutely," said Neal Spielberg, a former Warner Bros. Records Nashville sales chief, echoing the concerns of other executives. "There's a huge concern that someone like Faith Hill will do a deal directly with Wal-Mart," he said, referring to another country star.

So far, the Brooks partnership has been a success. "The Limited Series," released over Thanksgiving weekend, sold 1 million copies after 15 days on store shelves, Wal-Mart said. The record industry association said it was auditing sales data submitted by Brooks' personal label, Pearl Records.

David Porter, Wal-Mart's vice president for movie and music merchandise, orchestrated the Brooks deal. Porter said he had taken plenty of calls from entertainment executives wanting to know Wal-Mart's plans. At the moment, he said, there aren't any beyond the Brooks deal. Neither party would disclose terms of the deal.

Not everyone in Nashville, Tenn., views Wal-Mart as a threat.

"I don't get the sense that Wal-Mart is trying to enter the label business," said Joe Galante, chairman of RCA Label Group/Nashville. Galante said he was told that Brooks' Thanksgiving release was intended primarily to lure customers into Wal-Mart stores during the holidays.

"Labels do a lot of things besides manufacture and sell records," Galante said. "We market musicians, we get radio stations to play songs, we help produce tracks and guide musical careers. Wal-Mart doesn't have an expertise in those things."

Abigail Goldman and Charles Duhigg write for the Los Angeles Times.

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