Can Legalized Weed Sales Help Ailing Record Stores Turn Over a New Leaf?

Ryan Snook
          

It seems miraculous that any music retailer has survived the demolition-like forces that piracy, downloading and streaming have unleashed during the past 15 years. CD sales have plummeted from $9.4 billion in 2006 to just $1.5 billion in 2015, according to the RIAA — an 84 percent drop — and the much-ballyhooed vinyl resurgence has done little to staunch the bleeding, making up only 6 percent of physical sales in 2015. “I don’t know if record retailing — specifically selling new LPs and CDs — is really a viable business in most parts of the world anymore,” says Josh Madell, whose beloved downtown New York store Other Music closed in June after sales fell from more than $3 million annually to roughly half.

But there is hope on the hazy horizon, and it’s coming in the five-leafed form of marijuana, which is legal in a majority of states — 28 of them have sanctioned cannabis for medical or recreational use — following the 2016 elections. What does reefer have to do with records? With music retailers getting into the dispensary business or aligning their physical location with pot shops, the long-standing symbiotic relationship between music and weed may finally be (legally) monetized.

“There’s a history of marijuana and music that goes back to the jazz era,” says Michael Kurtz, co-founder of Record Store Day, who also notes retail’s role in selling paraphernalia — record stores birthed head shops. “Anytime human behavior is decriminalized, it’s good for business.”

And the pot business is booming. Projected to generate more than $1 billion in revenue in 2016 in Colorado, where recreational marijuana is sanctioned, legal weed will soon stretch all the way down the West Coast — from the border with Canada to the North to Mexico in the South — once California’s Proposition 64 goes into effect in 2018. No wonder record stores are, for the first time in more than a decade, feeling optimistic.

“With marijuana, everything has gotten better,” says Paul Epstein, owner of Denver’s Twist & Shout Records, which has been in business for 28 years. “You would be hard pressed to find any business in Denver for which the legalization of recreational marijuana hasn’t had a positive effect.”

“Tax revenue [from cannabis] all told last year was $140 million for 2015,” says Andrew Freedman (aka “the weed czar”), director of marijuana coordination for Colorado, an outlier state that legalized recreational use in 2012. Today, Denver has nearly 400 licensed medical and/or recreational-cannabis retail outlets. According to a study by the Marijuana Policy Group cited by Freedman, pot revenue had a $2.4 billion economic impact in Colorado, creating 18,000 new jobs.

That said, Epstein and other music retailers Billboard spoke to in Colorado, Seattle and Los Angeles say they have yet to see significant dividends. “My sales aren’t up,” says Louis Lambert, co-owner of the Independent Records & Video chain in Colorado Springs, Colo., who also is a partner in two medical dispensaries. “I have a dispensary next to my store,” he says, “but there are 10 other dispensaries right next to them.” Other stores, too, spoke of a “weed glut,” along with strict regulations impeding them from fully capitalizing on a nascent pot market.

Another concern is that an incoming Trump administration and its attorney general nominee Jeff Sessions may roll back state marijuana laws. Recalling the hysteria of 1930’s propaganda film Reefer Madness and the Reagan administration’s benighted “Just Say No” policies, in April Sessions called weed “not the kind of thing that ought to be legalized” and a “very real danger.” In fact, Sessions, who was rejected for a 1986 federal judgeship for his alleged racist views, said he thought Ku Klux Klan members were “OK, until he learned that they smoked marijuana.” (Worth noting: Seven of the eight states legalizing recreational cannabis and the District of Columbia backed Hillary Clinton’s failed presidential bid.)

But California chain Amoeba Music, which is leading the state’s music-retail charge into cannabis, may be immune from future “re-criminalization,” as the dispensary license it recently obtained for its Berkeley location is medical and not the result of the recently won recreational rights that came with Prop 64’s passage. Meanwhile, its San Francisco store has opened Green Evaluations adjacent to its location. There, for $44, California residents can be examined by a physician and receive a medical marijuana ID card. That business now covers half of the Haight Street store’s annual rent. Amoeba’s Hollywood store, which is set to move from its current location within five years, may explore a similar strategy.

“We’ve gone to great lengths to keep the Berkeley store going for many years without making much money, but just trying to keep it alive,” says co-owner Marc Weinstein, who notes that Amoeba earns roughly half the revenue it did in 2008 and is down to 35 employees from 90. “The reason we worked on getting this permit for five years is because we really believe this is the mix that can help the store make it in the long run.” He adds that pot’s profit margin is greater than recorded music’s and “something Amazon can’t kill you on.”

Still, there are challenges, like stipulations as to what can be sold and where. Says Colorado’s Freedman: “You’re only allowed to sell marijuana products and some amount of paraphernalia, but very little else in recreational and medical establishments here.”

When asked what makes him think he can run a successful dispensary in what is still a budding crossover market, Amoeba’s Weinstein cites his 26 years running one of the country’s most successful independent music-retail chains. “Our model is to have as many products as possible, know about them in depth and be able to offer people selection,” he says. “We’re just interested in having a killer retail store.”

For Madell, whose Other Music was in business for 21 years, the possible marriage of music and marijuana comes too late. “For many customers, myself included, this would be a dream combination,” he says. “I can’t really say if Other Music would have gone this route if we had the opportunity — too many hypotheticals here — but I will say 100 percent that I will frequent the first New York City shop that realizes the dream.” 

States With Decriminalized Marijuana

Alaska*
Arizona
Arkansas
California*
Colorado*
Connecticut
Delaware
Florida
Hawaii
Illinois
Maine*
Maryland
Massachusetts*
Michigan
Minnesota
Montana
Nevada*
New Hampshire
New Jersey
New Mexico
New York
North Dakota
Ohio
Oregon*
Pennsylvania
Rhode Island
Vermont
Washington*
Washington, D.C.*

*Legal for recreational use

This article originally appeared in the Dec. 10 issue of Billboard.