Red-Hot Record Sales Starting to Cool Off

Polygram Records officials were sure that the debut album from the Scottish band Texas--fueled by rave reviews and publicity from the group’s first U.S. tour--would go gold. But the album, “Southside,” has yet to reach the half-million mark since its July release, a company official confirmed.

Janet Jackson--who begins a nationwide tour next month--is also feeling the music industry blues. Sales of her heavily promoted “Rhythm Nation 1814” album, which has sold more than 2 million copies since its release in October, are falling short of expectations in some regions, according to several record dealers and sources at Jackson’s label, A&M; Records.

“It’s not explosive,” said David Blaine, general manager for the 33-store Waxie Maxie chain in Washington. Blaine said a recent computer analysis showed that Jackson’s album, as well as recent releases by Paula Abdul and Quincy Jones, are being outsold by old albums reissued on compact discs. These “catalogue albums” typically rank at the bottom of the chain’s top 10 sellers, he said.

As the record business prepares to fete its musicians with Grammy awards tonight, the industry is facing a cooling off of red-hot record sales. But unlike the previous drought, which lasted from the late 1970s until 1987, the current sluggishness in unit sales is being offset by relatively healthy profits and revenues from the growth in market share of high-priced CDs and the elimination of low-margin vinyl records, experts say.

“Unit sales have been pretty much flat, but overall (dollar) sales have increased because of the displacement of vinyl records by compact discs” and other formats, said David J. Boczar, an entertainment industry analyst with New Japan Securities in New York.

Unit sales were flat or declined last year at Polygram and Motown Records. And A&M; Records had such a bad year that, before the October release of the “Rhythm Nation” album, the label’s biggest seller was a fluke No. 1 single by former soap opera star Michael Damian.

Also hard hit was RCA Records, where sales in 1989 declined $25 million to about $200 million due to the lack of a hit album of the magnitude of RCA’s 1987 movie sound track release, “Dirty Dancing,” said company President Robert Buziak.

The Recording Industry Assn. of America, which next month will release industry sales estimates for 1989, predicts that last year’s growth in overall unit sales will fall below 1988’s increase of 8%. For the first six months of 1989, unit sales in the major formats--LP, cassette and CD--increased less than 1%, compared to 11.5% in the first six months of 1988.

“We’re coming off a string of good years,” said Jay Berman, president of the Washington-based trade group. “It’s hard to maintain those kinds of (large) percentage increases.”

A less than 8% rise in unit sales, following two years of huge increases, is of course a comparative disappointment. And “flat sales,” officials point out, do not mean an actual decrease.

The sales slowdown, notes Al Teller, president of MCA Records, comes amid a “rising cost environment” for record companies, which have been under consumer pressure to reduce CD prices even though companies face increased marketing, production and distribution costs as well as wholly new expenses, such as producing music videos to promote their artists.

What’s more, the slowdown in U.S. record sales is in contrast to the continued rapid expansion of the industry overseas and, thus, may be the first confirmation of the fear of some retailers that strong sales of catalogue CDs in the United States may be masking the fact that the record business is not expanding domestically.

“This year seems worse than normal,” said Jim Bonk, chief executive of Camelot Enterprises, a North Canton, Ohio-based record chain with 234 stores in 32 states. “What we keep telling the labels is that consumers have money to spend but no where to spend it. . . . We need some new product; sales are flat.”

To be sure, some companies, such as Arista, Geffen and CBS, reported especially strong sales in 1989, although none would provide specific figures. And at Time Warner Inc., which probably topped the industry in 1989, a huge 24.7% increase in revenues, to $2.5 billion, and a 29.8% increase in profits, to $500 million, was aided by strong international sales, company officials said.

But the industry, which lives and dies on the strength of the latest hit, has recently not heard from a number of artists, such as Robert Plant and Public Enemy, who had been expected to deliver new albums by now and help stimulate overall sales.

Although Clive Davis, president of Arista Records, agrees that there is a “tremendous desire for new records from new talent,” he maintained “any kind of gloominess over the state of the record industry is misplaced.”

Others, however, are taking a wait-and-see attitude.

Jim Urie, senior vice president of marketing at Polygram, said his company “had a mediocre year because of a lack of new releases by superstars.” He also cited the generally lackluster batch of albums released by Polygram and others in recent months: “I think some of the product was not up to par.