The success of the pop star’s new work, released first on iTunes, may rewrite the rules on music retailing, analysts say.
Target Corp. apparently doesn’t want to put a ring on it.
The Minneapolis-based retailer confirmed Tuesday that it will not sell the CD version of Beyoncé’s latest self-titled album because the pop superstar decided to release it on iTunes first.
Target, which previously worked with Beyoncé, said the singer’s digital-first distribution strategy sapped the excitement and sales that retailers normally gain from a new album, especially one of this blockbuster caliber.
“At Target we focus on offering our guests a wide assortment of physical CDs, and when a new album is available digitally before it is available physically, it impacts demand and sales projections,” Target spokeswoman Erica Julkowski said in a statement. “While there are many aspects that contribute to our approach and we have appreciated partnering with Beyoncé in the past, we are primarily focused on offering CDs that will be available in a physical format at the same time as all other formats.”
Analysts say they weren’t surprised by Target’s decision. Like most retailers, Target normally wants to be first or at least tied for first when it comes to new merchandise. “Target is thinking, ‘We’re not going to get the initial big bang from the release so why pick up the scraps?’ ” said Carol Spieckerman, president of Newmarketbuilders retail consulting firm.
Still, Beyoncé’s decision “sets a troubling precedent for retailers,” Spieckerman said.
As more people purchase music and movies from the Internet, sales of CDs and DVDs have fallen dramatically over the years. Digital music downloads grew 8.6 percent to $2.9 billion in 2012 from $2.6 billion in 2011, according to the Recording Industry Association of America. During that same period, physical music sales dropped 16.5 percent to $2.8 billion.
As a result, retailers like Richfield-based Best Buy Co. Inc. have been reducing the amount of space devoted to CDs and DVDs. By contrast, Target has invested more money in its music and movie business, having remodeled the entertainment sections in its 1,800 stores in the United States. To help boost sales of physical CDs in a digital world, Target has forged partnerships with stars like Tony Bennett, Taylor Swift and Justin Timberlake to release exclusive versions of their new work, often containing a bonus track or two.
But artists are increasingly finding new ways to completely bypass retailers. Earlier this year, rap mogul Jay Z, who is married to Beyoncé, raised eyebrows when he forged a deal with Samsung, in which customers who bought a Galaxy smartphone or tablet would receive his new album for free with the help of a special mobile app that unlocked the music in the device.
Beyoncé’s strategy was even more radical. The singer released the album on iTunes Friday with no advance publicity and still managed to sell over 600,000 albums over the weekend without the distribution and marketing muscle of a major retailer. Target, by contrast, developed a long and extensive marketing campaign to promote Timberlake’s “20/20 Experience.” This included a well-received commercial that ran immediately after he performed on the Grammy Awards, an “I Heart Music” concert that was broadcast simultaneously online and on radio stations nationwide and a surprise performance at small club in New Jersey that also served as material for a Target commercial.
It’s not that Target is unaware of the growing prominence of digital content. Earlier this year, the retailer launched Target Ticket, in which consumers can enjoy movie and music from the online service.
But the Beyoncé situation shows that Target should start thinking about how to use its muscle with the entertainment industry to offer exclusive content online and in stores, Spieckerman said.
In the meantime, the decision not to sell Beyoncé’s album means the retailer will forgo any sales and extra foot traffic the album might have generated during the key holiday shopping season, said retail consultant Brian Kelly, a former top executive at Sears.
“Target heavily relies on its entertainment product to bolster its master brand,” he said.
Thomas Lee • 612-673-4113