Best Buy is Pulling the Plug on its CD Business, Billboard Reports

Best Buy is Pulling the Plug on its CD Business, Billboard Reports

While Best Buy may part ways with its CD business, the electronics retailer in the meantime will continue to sell vinyl records.

Richfield-based electronics retailer Best Buy will be hitting the pause button on its music compact disc (CD) operations this summer, according to a report from Billboard.
The music industry publication, while citing unnamed sources, said Best Buy, once “the most power music merchandiser in the U.S.,” is planning to officially pull CDs from its website and in-store displays on July 1.
Best Buy, meanwhile, has not commented on the report.
The reasoning behind the supposed decision isn’t farfetched. Data from Statista shows that at a larger rate than any other form of music, CD sales have decreased year-over-year almost every quarter since 2012. All the while, 62 percent of music business revenues came from streaming services in the first half of 2017 while CD revenues fell (though slightly, compared with previous declines), as reported by the Recording Industry Association of America.
Best Buy isn’t the only one who’s noticed the numbers and consequently altered their approach to CDs. Target, as reported by The Verge, is set to only sell CDs on a consignment basis – paying music labels only when customers buy the CDs, rather than buying in bulk. This takes away the inventory cost risk from Target and puts it back on the labels.
However, as widely recognized as the downward trending of CDs has become in recent years, Best Buy’s move is perhaps the most significant indicator yet of the market’s gradual demise, given the company’s storied history with CDs and music as a whole.
It’s reputed to have once been the largest music reseller in the country, with CDs having been a large component of Best Buy’s business. The company previously made significant investments in music sales, including purchasing the Minnetonka-based audio and video chain Musicland, and the similarly-focused, Seattle-based chain Magnolia Hi-Fi Inc. in late 2000/early 2001, according to an LA Times article.
Although the Magnolia acquisition panned out, the Musicland purchase was a bust, and Best Buy sold it off at a loss just two years later. Still, Best Buy has long been a go-to for consumers to get their favorite CDs, so it’s telling that the company has recently only made $40 million per year in those sales, according to Billboard.
With Best Buy’s potential exit from the space, Target, though readjusting its strategy, has said it isn’t quite ready to give up on discs. It still offers 187 exclusive CDs and appears determined to remain in the market.
“Entertainment has been and continues to be an important part of Target’s brand,” read a statement sent to The Verge. “We are committed to working closely with our partners to bring the latest movies and music titles, along with exclusive content, to our guests.”
Meanwhile, in Japan, a majority of the $2.44 billion in music sales comes from CDs, as reported by Quartz Media. Even with CD prices running at twice the cost or more compared to almost any other country, it remains the preferred form of listening. The interest overseas is catered to by 6,000 stores across the country, according to an estimate from the Recording Industry Association of Japan (RIAJ).
No matter the outcome come July 1, Best Buy won’t totally be removing itself from selling music. Best Buy will continue to sell vinyl records for at least the next two years, Billboard said, per an agreement it made previously with music vendors.
With the vinyl renaissance of recent years, selling records could still turn out to be lucrative for the electronics retailer. Nearly one out of every ten album sales last year was for a vinyl album, Nielsen Music reported last month. Following twelve-straight years of year-over-year sales growth, vinyl records reportedly crossed the $1 billion threshold in 2017 and show little sign of slowing.