CM Takes On Musicland With Eye on Turbulent Sector

Retail music sales were down 8 percent last year, and the industry is in turmoil, but Campbell Mithun is betting that the mall locations of Musicland Group’s stores will be a primary factor in its bid to remain at the top of the music-retail category.

The challenge for CM is to make the stores relevant to teens who are already visiting malls.

“You have to look at the mall, the environment, what’s getting [teens] there and what’s keeping them there overall,” said John Kasper, a vp, management supervisor at the Interpublic Group shop in Minneapolis, which landed the estimated $5-10 million account last week.

The win followed a review that sources said came down to CM and Omnicom Group’s Martin/Williams. The contest was set in motion after the June sale of Musicland by Best Buy to investment company Sun Capital Partners.

Advertising, previously handled in-house, will continue to rely on newspaper inserts and promotions, sources said. Officials at Musicland, whose stores include Sam Goody, Suncoast video and Media Play, declined comment.

With $1.8 billion in sales last year, according to Hoover’s Online, Musicland’s chains are the biggest in the music-specialty-retail category. Competitors include No. 2 Trans World Entertainment Corp. (which owns Camelot Music, Record Town and Fye) and No. 3 MTS Inc. (which owns Tower, among others), as well as more general retailers. Musicland’s sales have been flat for the past three years.

Music-download sites have received most of the blame for the decline of retail music sales, but those sites still account for less than 10 percent of the $12 billion industry, said David Card, an analyst at Jupiter Research in Darien, Conn. Chains like Musicland are also being squeezed by discounters. “If I’m a physical retailer, I’m more worried about Wal-Mart,” which can sell CDs at a loss to lure customers, Card said.

Adding in other factors, such as piracy and less disposable income, Card predicted music sales would be “flat at best” in the coming years.

“Clearly, the industry is undergoing change, and retailers have to look at a variety of options,” said Kasper, who added that it’s too early in the agency’s relationship with Musicland to know what those options are.

Musicland and other music stores are not yet dinosaurs. Roxio, which bought the Napster name and relaunched it as a payable download site, is including traditional retail as part of its sales mix. The company is launching a pre-paid gift card that will be available in stores, allowing consumers to give downloadable music as gifts this holiday season.

“We view the world as being a multi- channel world,” said Scott Steinberg, evp of strategic marketing at Santa Clara, Calif.-based Roxio.