Record industry out to fight home taping
Four people sort through the albums in freshly painted display counters at the Strawberries record store here. Nobody buys one. When people do get records, the manager says, they buy only one at a time. Records at Strawberries average $ 7.49.
But down the street in Nuggets, which sells mostly used albums averaging $3. 99 each, more than two dozen people are crammed into the dingy aisles. And Jimmi Quidd, an employee, says it's a slow Saturday. Usually there are twice as many people, including some devoted customers who buy three to five records a week.
Retailers and manufacturers in the recording industry are having the worst slump in their history, even while the American consumer barely makes a move without music.
If you were to ask a record executive, he would say the reasons for the decline are the surge of home taping, record counterfeiting, and, to a much lesser extent, record rentalufjump1111 jump stores. And he would say the only solution was to pass legislation that would protect the copyrights. But ask any record buyer and the answers change. Records cost too much and don't offer the convenience and versatility of tapes.
In 1981 the number of albums sold fell 11.4 percent from the previous year. And this year it's expected to drop 15 percent, according to Stephen Traiman, executive director of the Recording Industry Association of America Inc. (RIAA).
''Life styles have changed dramatically in the last few years,'' Mr. Traiman explains. ''Society is more mobile. You can't take along a record in the car or walking down the street.''
But you can slip a cassette into a car stereo, one of the 3.9 million personal portable stereos (such as the Sony Walkman), or ''boom boxes,'' large portable radio/tape players. Which is why cassettes are the ''one bright spot'' in the industry: Unit sales grew 25 percent last year and are expected to perform at least that well again this year. By 1983, Traiman predicts, cassettes will dominate the market.
''To the extent that the recording industry is giving the consumer what he wants - that is, tapes - it is profiting very handsomely,'' notes Allan Schlosser, director of public affairs at the Electronic Industries Association and spokesman for the Audio Recording Rights Coalition.
But the record industry can't cash in on the high demand for portable music by selling prerecorded tapes, it says, because people make their own tapes instead of buying new ones.
A survey commissioned by Warner Communications Inc. and released in March found that almost as many albums were taped at home last year (455 million) as were bought (475 million). The record industry, which was running at $3.6 billion in sales, estimates home taping siphoned off about $1 billion of potential sales that year.
A study commissioned by the Audio Recording Rights Coalition, which opposes proposed legislation, found home taping does not substantially cut into retail sales. According to a survey by Yankelovich, Skelly & White Inc., 55 percent of those surveyed buy a record after they tape all or part of it. That way, taping actually stimulates record sales.
Furthermore, the survey found the price of records was not an overriding factor in people's decision to tape at home. Four reasons were mentioned most frequently: Tapes can be played where records cannot; they allow one to make a program of different selections; they are more convenient to play; and they damage less easily.
Record store managers say the record companies are barking up the wrong tree. ''They're using home-taping as a scapegoat,'' says Dennis MacDonald, manager of Discount Records in Cambridge, Mass. ''Prices have gone up, and people can't afford to spend $7.49 on records anymore.'' Record prices have soared 25 percent in the last two years, he adds.
Richard Moran, the manager at Strawberries here, says the problem goes beyond pricing. ''Record companies are being run more like a business than they used to be. They prefer to put their money into tried-and-true artists rather than into new bands. They avoid a lot of risk that way, but don't develop new consumer tastes.''
Nonetheless, the industry is going after home taping, with Sen. Charles McC. Mathias Jr. (R) of Maryland playing tackle. A bill introduced by Senator Mathias would allow individuals to tape prerecorded music, but would impose a royalty on manufacturers and importers of audio recording devices and blank tapes. The royalty would be determined after the Copyright Royalty Tribunal, set up in 1976 , studies the industry's losses.
Mr. Schlosser says such legislation would be unfair to more than half of the people making their own tapes. ''The legislative proposals,'' he said, ''don't differentiate between people who tape prerecorded music and the 52 percent who tape for educational, business, and other purposes.''
In West Germany, manufacturers and importers pay up to 5 percent of the wholesale price on audio and video recorders. Movie and record companies then divvy up the royalties according to their relative sales. In Sweden, blank audio and video tapes are taxed at about half a cent per minute.
''People who like to buy records are subsidizing those who tape at home,'' argues Charles Borden, a legislative aide to SenatoZ Lathias. And while no definite fee has been decided upon, ''the senator envisions a very small nominal royalty.''
If the fee resembles the one in Sweden on videotape, it will be neither small nor nominal, says Joseph Pope, owner of Nervous Records, a Boston retailer and record renter. The tax in Sweden on a $13 videotape is $7.50, raising the price by more than 50 percent.
If it mirrors West Germany's 5 percent royalty, on the other hand, the record companies' payback may be more in satisfaction than in money. According to Commerce Department statistics, the value of imported tape recorders in 1981 - the bulk of audio recorders - was $439.7 million. During the first half of 1982, they were off 14.4 percent; if that trend continues, imports of audio recorders will be about $375 million. Added to the estimated $600 million in blank tape sales, a 5 percent royalty fee would give record companies at most $50 million to split up.
Furthermore, what is being taped is the life preservers on the Titantic, so to speak. Only 17 percent of popular albums and 6 percent of classical albums break even. Even before a record is released, people have it on tape - as when station WCOZ in Boston announces its commercially uninterrupted playing of Diana Ross's as-yet unreleased album two weeks ahead of time.
Pirating and counterfeiting are the second-largest thorn in the industry's paw, and together drain more than $300 million from legitimate sales, according to the RIAA. In each, records are taped and sold commercially for about half the retail price. Counterfeit tapes look like the originals, from the cover to the label, and are often sold by unsuspecting retailers. Pirates, however, can be identified immediately, because they are in cheap containers and are sold underground rather than in legitimate stores.
''You don't see counterfeiting and pirating every day, but you know when it happens,'' notes Larry Palmacci, the Boston branch manager of RCA Corporation. ''All of the sudden unit sales of a certain artist drop off, and you know someone's been (counterfeiting) or pirating.'' Almost any record that makes the best-seller charts is likely to be copied, he notes.
To fend off such blows in the future, the 1982 Counterfeiting and Piracy Amendment Act, signed on May 24, increases the maximum penalty for counterfeiting records from $50,000, two years in prison, or both to $250,000, five years, or both.
Finally, record rental stores may be the little smudge on the horizon which becomes a tornado. Only an estimated 133 rental stores exist in the United States today; but eight months ago none existed. In Japan, there were no rental stores two years ago. Today close to 1,500 have set up shop. But record companies aren't worried. An RCA spokesman noted there is more incentive to rent in Japan because record prices are higher there.
In the end, it may be that the recording industry's problems cannot be solved by legislation. Competition for the leisure dollar is stiff. In the dizzy world of Pac-Man, Space Invaders, and Donkey Kong, records can seem all too one-dimensional.
''There are simply no Beatles around,'' Mr. Pope muses. ''In the '60s, music was bigger than just music. It was the emerging youth consciousness. You just don't see that anymore.''