Did internet kill the record store?

I was watching The Wall Street Journal report a few weeks ago, and money honey Maria Barteroma was talking about the record industry, and how the internet had changed things, including causing mall record retailer Sam Goody to go out of business. And when bsom and I were discussing the Record and Tape Traders Auction(a local chain that recently closed up), the internet came up as the cause of their demise. And I've heard rumors online that FYE isn't doing too well, either.

So did the internet kill the brick and mortar record store? Well, it definitly stabbed it a few times, but I think it had help.

First of all, when people cite "the internet", it really composes several factors. The first of these is file sharing - free, pirated music from peer to peer and torrent sites. It's always tough to measure the impact of file sharing, because lots of the stuff that gets downloaded gets downloaded because it's free - people wouldn't have paid money for it. The second of these is paid sites, like iTunes or Rhapsody. This too, is tough to measure. People definitly use it as a substitute for records. However, if you've read books like The Long Tail, part of the appeal is that the selection is much broader than a retail store - lots of the things that get purchased from these stores is stuff that isn't popular enough to stock at a store. The beauty of digital distribution is that there is no inventory carrying costs, so online sites can stock way more stuff. The third part of the online picture is online retailers - Amazon and half and other places where they mail you a disc. Once again, you have the broader selection that an online seller can deliver - not as broad as a digital download, but more than a mall store can hold, and at lower prices, and you don't have to put on pants to order.

But there is another thing that helped kill the record store - catagory killer brick and mortar stores. Best Buy and Circuit City use CD's as a loss leader to draw people into their stores. They price cd's - especially new releases - below cost in the hopes that people will come in and buy some high-margin accessories while they are there. And then their are discount department stores - Wal-Mart and Target sell CD's, and often at everyday low prices. A few months ago The Eagles decided to sell their CD excuslively through Wal-Mart because Wal-Mart moves so many albums.

The fact is that prices at Sam Goody were always expensive - mall real estate isn't cheap. Just as in other areas, brick and mortar catagory killers have impacted the record industry, making it harder for small retailers to keep going. I think the internet has played a major roll in the decline of the local record shop, but I think the role of the big-box store is often ignored despite being a major factor.