Fans of the Bonus Discs from the BestBuy-owned chains, be aware... (1 Viewer)

[David Lambert]

If you enjoy the excluse Bonus Discs available at Best Buy and sister stores (Suncoast/MediaPlay/Sam Goody/FutureShop), like those that came/come with these TV shows:

• Star Trek: The Next Generation
• Star Trek: Deep Space Nine
  
• American Idol
• Space: 1999
• the upcoming Xena season sets

...and others I probably am forgetting right now, then be aware that Best Buy Looks to Unload the Musicland Chain.

So if it is your habit to get these bonus discs via Suncoast, MediaPlay, or Sam Goody, then you might have to change your plans.

That is all.

 

[Mark Silver]

This does not suprise me one bit. I don't know about anywhere else in the country, but in the NJ/PA there is Best Buy within 10 minutes of every Suncoast/Sam Goody. Even though they are the same company, Best Buy always has DVDs at $7-10 less than Suncoast. Best Buy is driving their own subsidiaries out of business.

 

[Eric Peterson]

Mark,

You nailed it on the head. The only reason that I have ever bought anything at Musicland, Sam Goody, Suncoast, etc.. is when I'm desperate for a certain title and don't want to wait for an online order. For a major release I will always go to Best Buy and get it for stustantially cheaper. I can't understand how Musicland has stayed in business as long as it has charging $15.99 & up for CDs.

I can't help but think this was a predetermined destiny. They figured they could buy the competition and when not successful close them down, and get a tax write-off.

 

[Lew Crippen]

They figured they could buy the competition and when not successful close them down, and get a tax write-off.

Doesn’t a write-off mean that you lose money?

 

[Peter Kline]

This is old news. Best Buy is consolidating its' operations and closing those stores that are under-performing. Mall oriented stores such as Musicland and Sam Goody's pay higher rents then stand-alone ones such as Best Buy, Media Play and Future Shop. They cannot deep discount product because of this. With CD sales suffering in the marketplace, DVD sales cannot pick up the slack for them. You do not hang on to money losing stores. I know because I'm in the business.

 

[Damin J Toell]

Doesn’t a write-off mean that you lose money?

It means you lost money, but it also means that you save substantially on taxes. Such a tax savings can certainly make a buy-and-destroy procedure for dealing with competitors very attractive. You lose some, but not all, of your investment, and you no longer have that competitor down the road to hurt sales at your main stores.

DJ

 

[Eric Peterson]

Doesn’t a write-off mean that you lose money?

Yes, but in the long run they lose any competition from these stores and it cost very little to buy them and keep them open for a year with a chance that maybe they could turn the business around. That's what I was implying.

I'm far from being a financial consultant, but I would have never recommended buying those mall stores unless there was something else crooked going on behind the scenes.

Why they didn't just buy them and close them immediately is a bit strange, but it probably didn't cost much more to keep them open for a year and see if a few minimal changes might help turn the businesses around.

 

[Mark Zimmer]

Right, in most cases there would be multi-year leases in place that they'd still be on the hook for, so they might as well give turning the mall stores around a shot for a year or so, since that's money that will be out the door in any event. As the leases expire, the doors will shut.

 

[Lew Crippen]

You lose some, but not all, of your investment, and you no longer have that competitor down the road to hurt sales at your main stores.

Of course. So obvious.

 

[Jeff_HR]

With the competition from these stores out of the way, will BB raise prices at all?

 

[David Lambert]

Jeff, BB's already raised prices in the past six months.

 

[Jeff_HR]

I had not noticed since I buy only about one out of 25 DVDs that I buy from them. Everything else is bought online.

 

[Stephen Heath]

If they're typical of most other companies that adopt this practice... probably =p

In some cases, the tax benefit can even be higher than the price you paid. If the company hasn't been doing well the last few years, it may have had tax carryforwards leading up to the buyout. Even if not, it's possible. Check out this scenario... I doubt that this is the case with Best Buy but I was involved in turning this real life situation into a case study for an economics textbook.

Buying company A acquires it's competition (company B) which has cash, inventory, and assorted fixtures, it rents the property. A buys the shares of B from the owners, paying only shares of itself. A sets itself up with a cross company promotional marketing agreement with B that the second corporation is bound to, which effectively lets it siphon money off from B to A. As losses mount in B, less and less inventory is available, and sales go up in the company A. Company B then declares bankruptcy. A bankruptcy liquidator comes in and tries to sell the goods on the open market, has no takers for the company as a unit.

The buying company wanted to ditch the locations anyway, so only made an offer on the remaining inventory at half cost on the dollar, and wound up getting it, leaving the fixtures to go to junk dealers. Because the company was bankrupt, the shares of the company that the buyer held were now worthless, and that company wrote it all off as a tax deduction.

The tax deduction was disallowed because the key to the shares being worthless was the marketing agreement, and that had been agreed to when the companies were no longer at arms length. If they had made the agreement before the sale, it would have been allowed.

Kindof scary that companies could agree to this as a way of merging and milking taxes (not to mention screwing creditors), but if done at arms length, any deal is binding, even one that drives you into bankruptcy.

 

[Eugene Esterly]

This does not suprise me one bit. I don't know about anywhere else in the country, but in the NJ/PA there is Best Buy within 10 minutes of every Suncoast/Sam Goody. Even though they are the same company, Best Buy always has DVDs at $7-10 less than Suncoast. Best Buy is driving their own subsidiaries out of business.

You're correct about that. In Whitehall, PA , there is a Best Buy & the Whitehall Mall (Suncoast is in the Whitehall Mall) is across the street from Best Buy.

 

[Larry W]

I work for Musicland and I thought I should point out that Suncoast is making money, but Sam Goody is loosing money. The problem is more people are downloading their music, they are not buying it at the store.

 

[Rob Dwyer]

The problem is more people are downloading their music, they are not buying it at the store.

Bah. So says the RIAA.

The truth: Bad music + high prices (and RISING prices mind you) = lower sales.

I'm not the only person who wouldn't pay money for something I'd never listen to. Not to mention, I think I can count the number of songs I've downloaded from the internet on one hand.

Edit: Needless profanity removed voluntarily

 

[Paul.Mc]

That's true. I think I've bought 3 CD's over the past 2 years. (While not downloading music either.) And I've bought 175 DVD's. That's where my entertainment dollar has been going.

 

[William Waits]

The truth: Bad music + high prices (and RISING prices mind you) = lower sales.

That equation suits me to a T. Prices for music are SSSOOOO way out of line it is not even funny.

First of all, the physical cost of producting the actual item of a CD vs DVD is less.

Secondly, and most importantly, look at where the money goes in the form of royalties. Take any CD and look at the credits. Now take any movie and look at its credits. I am sure that there are alot more people to pay royalties to on a movie that a CD any time of the year (aside from 4 man independant film companies, but you get the picture....). Then there is set and construction costs which can go way out of line, and special effects can add to the costs (A good movie that attributes both to its costs? Titanic anyone?). I can't see the same for music.

Basically, it is all about value, and music doesn't have it. Period. They want to blame their ills on the very people that support them. I am not going to say that piracy isn't a problem, but it is NOT their main ill. Value and lack of a quality product is. The RIAA would like to sell you a bloated cost CD with one hand and slap your wrists with cuffs with the other. Kinda two-faced if you ask me... They are the only group that I know of that automatically think that every one of its customers is a crook. Aside from the value thing mentioned above, I am boycotting CDs in general because of that attitude.

People NEED samples in order to buy. Why do you think that movie trailors are so beloved on downloads? Some are just quality (Spider-Man anyone?), and some allow us to "sample" a movie. Hell, Apple even has a site specifically to download movie trailors, and announcements are made when some are available (Star Wars?). It is a big deal.

The RIAA also won't acknowlege that sales were improving during the Napster reign. Why? Music sampling. I'd be stupid to suggest that piracy wasn't an issue with Napster, but most were legitimate users who needed to sample items before plopping down hard earned cash for some music, and I don't blame them, especially with the way quality is sorely lacking in its overall product. It used to be that when I bought an albulm after 1 ro 2 songs were released on the radio, I would generally like most, if not all, of the tracks on the albulm. Can't say that anymore! I also bet that few actually can (and let's discount those that would love anything put out by artist XXX JUST because it is artist XXX.)

Take note RIAA: Movies are where the value is, and movies are where my enteraiment dollars are going, not into computer equipment to set up a piracy ring.

Bill

 

[David Lambert]

Okay, since this point of Music vs. Movie sales has been brought up, I'll play: Since Sept. 1999 I have done the following:

Bought 1,996 DVD discs.

Bought 14 CD's (not counting 2-3 that came free with DVDs like Highlander, and one that came free with a Happy Meal!)

Downloaded 1, count it: 1 .mp3 (it was the theme song for Power Rangers Lost Galaxy, which I could not find for the life of me on CD and which my son wanted me to burn to CD-R for him to listen to with the other old Power Ranger theme songs).


Hmmmm...where has my entertainment dollar gone? The truth is that my collection of CDs has always been considered HUGE (now at 436 CDs), but that there are a lot more movies I enjoy than best-of albums to buy from my favorite artists. And maybe I'm turning into an old fuddy-duddy, but the new artists just don't interest me and the older artists I enjoy - if they DO put out new stuff - just churn out songs that sound like all the new stuff I tend to hate.

So, I've pretty much got all the music I'll ever want to collect, except for a few soundtracks here and there. Movies, on the other hand...there are literally hundreds left that I want DVDs of. Maybe even thousands.


Getting back on-topic, the posters who have discussed the high rental costs of mall space are dead on. I used to manage in a mall environment for over a decade. If you work in a stand-alone store or strip mall, the store or its chain are directly responsible for things like garbage pickup, maintenance, promotions, etc. etc. Malls charge more because your store is part of an "attraction destination" (the mall itself) and they arrange for all that stuff, plus central security and more. So the store owner, instead of choosing the best price/performance themselves, is locked into paying as part of the rent whatever the mall decides is the way to go. That isn't necessarily the lowest price...package deals and kickbacks, ya' know. Oh, and on top of that, the mall owner tends to tack on a "fee" for making sure these services are provided to you.

In short, to make a profit for their shareholders, the owners and managers of mall-bases stores have to watch P&L in a very different way, and items are marked appropriately. I avoid all mall-based purchases where possible...the consumer is the one that gets reemed. That's why mall culture is declining all over America.

I doubt Best Buy finds a buyer for this easily, or at a price they want. Investing in mall-based stores aren't the thing.

Having said that, Suncoast COULD be a good destination for movie lovers if it was maintained like a bookstore: a place to look for the hottest new bestsellers at okay (but not the best) prices, but the REAL find there would be that just about any and all "popular" catalog titles could be found there, in-stock and ready to take home for instant gratification with at least a 5-10% discount, and anything else could be special-ordered on a less-than-a-week basis with no down payment needed. With a staff that knows DVD product inside and out. That's why you go to B. Dalton or Waldenbooks, right? Suncoast could be the same! Borders is close to that model right now. Suncoast was on the road to that model...until Best Buy bought them.

 

[Craig W]

I have noticed that Best Buy is already raising prices here in Minnesota for titles that are probably more in demand. I saw several 14.99 titles now marked up to 17.99.

Best Buy is strapped for cash. They just built a huge 4000+ person corporate campus in Richfield, MN and just started laying off some of its work force. You have to ask, what are 4000 people going to do at one location for a single retailer. When you see these corporate giants make large expenditures for building these campuses it usually spells trouble down the road. There are a number of examples of this in the Twin Cities area.