Retailers can't get no satisfaction

When the Rolling Stones' new DVD of concert footage, "Four Flicks," hits the streets Tuesday, it will only be available at one outlet: Best Buy.

What started as a deal to benefit consumers is now putting the band between a rock and a hard place, as angry retailers in the United States and Canada protest the exclusive arrangement. In the US, some national and local chains are pulling the band's CDs off shelves or canceling plans for special promotions of Stones music.

The deal was the breaking point for some music-store owners, who have watched the rising number of "exclusives" between mass-market chains like Target and Best Buy and artists ranging from Christina Aguilera and Justin Timberlake to the Eagles to U2.

In the case of the Stones, retailers are smarting from being ignored by a band whose career they've supported, but they and others in the industry say there is more at stake if such deals continue. Exclusive deals could hurt the already diminishing independent and smaller chain music stores, further limiting consumers' choices. They also have the potential to make shoppers unhappy by forcing them to go from store to store to find their favorite music.

"If this practice doesn't change, then we're going to be forced to work our own exclusives on new releases. And I don't think that's good for the music industry, and I know it's not good for the consumer," says Fred Fox, executive vice president of merchandising and marketing at Trans World Entertainment, one of the largest specialty music and video retailers in the US.

Trans World, owner of Strawberries, FYE, and other chains, is pulling all but a handful of Stones albums from its 950 stores and sending them back - with the total returns potentially reaching 75,000 units. The move is not intended as a publicity stunt, says Mr. Fox, but to send a message to the Stones and other artists: Reconsider marketing with a single retailer.

Circuit City, a Best Buy rival, is also among those that took action, choosing to cancel a Stones promotion scheduled for November and December. "We feel the arrangement not only damages other retailers who have supported the Rolling Stones for years, it is also damaging to the band, because this product will be available in far fewer outlets," says Jim Babb, a spokesman for the 614-store chain.

While Best Buy is in a position to wield some clout with its 583 US stores, local chains and independent stores are not. Their livelihood is already affected by discount chains like Wal-Mart and Target, which are attracting consumers by offering albums at lower prices. Industry watchers say it's not surprising that retailers are rebelling.

"The don't need anything new coming down the pike. The Internet is bad enough," says John Kellogg, a professor of music business at the University of Colorado at Denver. He says the real concern with such a high profile deal is this: "If it's successful, then you're going to see other artists following the same type of business model."

These deals could be the model of the future, say some who follow the music business, with artists bypassing labels and other middlemen to deal more directly with distribution of their wares. Best Buy, for example, took on the production, manufacturing, marketing, and distribution of "Four Flicks" on the Stones' behalf. Instead of lots of entities between the band and the fan - increasing costs - it was just the retailer, says Gary Arnold, senior vice president for entertainment at Best Buy.

Some deals, like those made with Target, include albums made exclusively for the store.

In the case of the Stones, the band's management brokered the deal. After soliciting offers, they settled on Best Buy, because it could offer the four DVD set for $29.99 in the US. "The other offers we received ... would have had the product being sold for at least $20 to $30 higher to the consumer, something which was unacceptable to the Stones and TGA," said Michael Cohl, CEO of TGA Entertainment, the Stones' tour promoter, in a statement.

Best Buy's Arnold dismisses the idea that consumers will be inconvenienced if such deals continue, pointing out that people can order products online or by phone - and have them delivered, rather than hopping from store to store.

The upheaval from retailers is puzzling, he says, noting that now is a time to make entertainment offerings more compelling to consumers. "The music industry has articulated ... all the challenges confronting the business," he says. "[But] it's too easy to sit on the sidelines and not do anything."

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