Trouble with used CDs -- Artists and record labels are angry over the lost profits from sales of second-hand discs

By David Browne
Updated July 30, 1993 at 04:00 AM EDT

Is anyone who has ever bought a battered second-hand LP will tell you, a used CD is another species altogether. It looks and sounds just like a new, sealed CD; better yet, it can carry a price tag of anywhere from $1 to $10 — a real steal compared with the $12-to-$17 cost of new discs. A few years ago, you could buy secondhand CDs only at small, independent record stores. But lately the trend has gone mainstream; it’s now possible to buy them (and trade in your old discs) at chains like the 339-store, California-based Wherehouse Entertainment. Depending on who’s talking, sales of used CDs gobble up anywhere from 1 to 10 percent of the market.

Grab ’em while they’re hot, though, because the secondhand-disc surge has ignited a brushfire in the music business that could have a huge effect on what you can buy. Furious because they don’t make any money off used CDs, four major distribution companies — CEMA, Uni, Sony, and WEA (whose parent company, Time Warner, is also that of this magazine) — have stopped underwriting newspaper advertising for those stores that carry them. That move alone could cost the stores hundreds of thousands of dollars in lost revenue. (As a result, the Wherehouse chain announced on July 19 that it is suing the distributors because their policies ”unfairly discriminate” against Wherehouse and other chains selling used discs.) Last month, the war gained its first celebrity spokesman when Garth Brooks — one of CEMA’s best-selling artists, coincidentally — began telling reporters that he would not allow CDs of his next album, tentatively titled Pieces and due in mid-September, to be distributed to any stores that carry used discs. Even Paul Anka, who hasn’t enticed customers into record stores in two decades, jumped aboard the anti-used-CD bandwagon.

Anything that irks the large corporations (not to mention Paul Anka) is perfectly okay with me, although in the case of secondhand CDs, the companies may have a legitimate gripe — maybe. Their contention, as voiced by Brooks, is that the sale of used CDs means that performers and songwriters won’t be paid the royalties owed them. The industry is also concerned because, as pointed out by the CD newsletter ICE, future forms of prerecorded music, like digital audiotape (DAT) and digital compact cassettes (DCC), are supposedly as ”indestructible” as the compact disc — meaning the music business must clamp down on secondhand sales now to set a precedent.

Yet in some ways, the thriving used-CD market is the labels’ own fault. It is common knowledge that CDs now cost as little to manufacture as LPs once did — about $2 per disc. Yet retail disc prices continue to escalate. And the record business enticed consumers to abandon LPs by telling them the CD would never wear out, and now that promise has come back to haunt the labels. If a used CD is as good as a new one, why not pay half the price?

As others have pointed out, there is also some question as to where those cut-rate discs come from. Record companies have been pointing a pinky-ringed finger at record clubs, saying consumers take advantage of those ”12 CDs for a penny” offers and then trade in the goods for big bucks. Others beg to differ: ”A large percentage are promotional copies sold by DJs, radio station staffers, and music store employees,” wrote a CD wholesaler to Billboard early this month. And since promotional copies are not tallied for royalties, is anybody, aside from the government, actually losing much money? It wouldn’t seem that way.

There are other arguments to be made for patronizing the used-disc bin at your local record store. Cut-rate CDs actually allow record buyers to take a risk on unfamiliar artists — something they’re not likely to do when a new CD costs as much as a tank of gas. And who’s to say that the lure of secondhand CDs won’t make customers pick out a few new ones while they’re browsing?

Given what you’re likely to find in used-CD bins, you might want to stick to the unopened discs anyway. You’ll rarely, if ever, find CDs by the likes of Garth Brooks — or top-selling acts like Janet Jackson or U2 — in the secondhand section. Instead, those racks are generally packed with some of the dreariest sludge foisted upon the public. In my own perusals of used-CD bins, the luckiest I ever got was stumbling upon a CD reissue of Lou Reed’s 1973 album Berlin for $6.99. It was a real find, but it was also an exception.

That’s a subjective judgment. Here’s a fact: The war between record companies and record stores over used CDs is only likely to get nastier, especially once stores start losing serious advertising money and pressure-point albums like Brooks’ come out. What everyone needs to realize is that recorded music is getting too expensive, and that record buyers’ interest in cheap used CDs is a form of protest. Until the industry recognizes that reality, customers will continue to pore through the secondhand bins, and they won’t even notice that their newspapers are carrying fewer record-store ads.