Latin Music Week
Your Guide to 2019's Billboard Latin Music Week
Billboard Sounds Showcase Lineup Features Voz de Mando, Pipe Bueno & More
Here Are All the Artists Performing at the 2019 Billboard Latin Music Awards
Latin Music Week 2019: J Alvarez to Headline Billboard Sounds Showcase, Sponsored by Glad Empire & ASCAP
Nowhere Else, Man: The Beatles, Best Buy and the Birth of Exclusives
"You still have to focus on the consumer and not the competition," says longtime buyer Gary Arnold.
Back in the CD era, there were few executives as powerful as Best Buy's Gary Arnold. As the main music buyer for the electronics giant, he helped oversee the chain's growth from a tertiary "specialist" seller into a dominant force in music retail, moving hundreds of millions of albums to a voracious customer base.
Starting in the early '90s, Best Buy was first to embrace exclusives on a national scale, poking competitors (other big box retailers like Walmart and Target) with what were then called "value adds." Not unlike what the industry is seeing today, with artists like Frank Ocean and Drake opting for a digital partnership that would shut out all others (Apple Music over Spotify, in both cases), product offerings that favor one merchant at the expense of another have a long history.
So what was the first ever music exclusive? Back in 1995, Arnold and his then boss Jeff Abrams stunned music retail when they came up with an exclusive Beatles CD interview disc as a giveaway to anyone buying the Beatles' Anthology 1 album. A bonus CD manufactured without input from the Beatles’ label, Capitol Records, was in the clear when competitors complained.
The result of the exclusive offering? It was seen as a very successful promotion that helped Best Buy sell 800,000 units of the Anthology 1 package, Billboard reported at the time. Others, like longtime music industry executive Jim Urie, point to another promotion with Barbra Streisand (a bonus concert video on VHS) a decade earlier. Even more remember the Eagles' Long Road Out of Eden, a Walmart exclusive that got major media attention at the time.
Billboard tracked down Arnold (who left Best Buy in 2012 to start his own firm, Gary L. Arnold Consulting) to speak on how the industry has changed... and not changed.
Billboard: How did the idea to have Best Buy offer a free Beatles interview CD to every customer that purchased the Beatles Anthology 1 come about?
Gary Arnold: It was Best Buy trying to find a way to bring excitement to the business and to show the labels how to give extra value to the consumer. It was not about the exclusive, it was about trying to get the consumer to come in and shop more frequently. Traffic is important and we found when there is an exciting offering of differentiated product, it drove a lot of traffic to the benefit of the stores.
How many did you sell in the first week?
We sold a couple hundred thousand in the first week, but it wasn’t just our promotion. It was a wonderful collection of music, including the then-unreleased “Free As A Bird” song. There were all sorts of other marketing going on around that project, including, if I remember correctly, a network television special on the album that ran over a number of nights. So customers came pouring into Best Buy and what that said to us is, if you put together a massive creative campaign, the customer would respond and everyone would benefit.
Best Buy also utilized windowing with a Prince release in 1998 and a U2 DVD in 2001.
Our relationship with Prince started with Crystal Ball. Since we were both in his backyard in Minnesota, we had pursued a dialog for a long time and one day he called. He had put out Crystal Ball already through his website and now wanted it to go to retail. He provided us with the artwork we could use and we came up with a very elaborate package with a clear see-through case, and later it came out in a more traditional package. We had an exclusive window for a couple of weeks.
With U2’s Elevation 2001: Live From Boston, that was a project that that they wanted out in conjunction with a tour so we had it for a short window exclusively. At that point, deluxe packaging and value-added packaging was one thing, but an exclusive window really upset our competitors. It became very clear that exclusive windows would cause a lot of negativity. I remember after that I approached them on something else and they [the U2 camp] responded by saying, "This time, could we do something that won’t start World War III?"
But retail reaction didn’t stop you from pursuing exclusives?
We were trying to win every day with the consumer, and one way to do that was to have differentiated project rather than just competing on price levels. If you look at the Rolling Stones, Elton John and Tom Petty projects, each of which we had exclusively for a short window, they were multiple discs each with four DVDs, but we had them priced between $19 and $29. In every case, the artists were aware of the price point and they were excited about the value created for the fan. That’s why it worked.
What do you think about today's discussion of exclusives, as they relate to digital services?
It makes the days of physical retail look very uncomplicated. We were very good at selling one thing to a lot of people. In today’s world, you have to figure out how to sell a concert package, a song, a stream and how to monetize each niche. You have to put on all these different hats to maximize results and profitability. There continues to be a lot of stress in the market, due to the exclusives.
How does selling a subscription to a Spotify or Tidal compare to the Best Buy's effort to get a customer in the store?
It's more difficult to get the kids to go to a new site than it was to get them to go to a different [brick and mortar] retail store. No matter which store you bought the CD from, when you got home, it would play right away. Now, you have to go and learn how to get on the new site, and get a new password and then figure out how you're going to get your playlists over there. It's a much harder process to switch services. I just got accustomed to the site I am on and setting it up on all my devices and now you want me to go to another service and start all over again? I'd much rather wait until the album is available everywhere, including my service.
Isn't that the old person view?
I don’t know. I talk to my children who are 21 and 22 and they seem to have the same attitude on this.
What experiences in the brick and mortar world translate to the digital world?
I think you still have to focus on the consumer and not the competition. The consumer will tell you if you are winning and losing. Look, we did exclusives, but soon so did Walmart and Target and with deluxe packages that did great things for their stores. If you are going to participate in this area, expect to be beaten sometimes. You don’t win every game.