every town across the country — and during weekdays they were deserted.
More people were home-taping off the radio, too, or from a friend who had bought the original LP — a forerunner to the illegal downloading that led to Napster and all the other sites which offered the punters music for free.
The digital revolution had arrived in the recording studio some time before, and computer software was already employed to mix albums and soundtracks. Now, though, digital music was about to take the public by storm.
Dire Straits were the format’s first big seller. Vinyl fought a valiant rearguard action, and the aficionados said they still preferred the analogue sound. Many a music snob with a Quad system turned his nose up at Dire Straits on a plastic beer mat. Many, many more went ahead and bought it. Philips, the Dutch electronics giant, predicted at the major Paris music fair that the compact disc would become ‘the new world audio standard’.
There was fierce debate in our office between the hi-fi buffs. Could vinyl ever be surpassed by a shallow digital sound system? At the time there was genuine doubt — even today I hear people say that vinyl is much better. An LP’s record cover and the sleeve notes, meanwhile, had become a contemporary art form.
But the shiny CD was on the march. It was more convenient, it was easier to use
Philips, who had developed the system, announced plans for software to be manufactured and released by PolyGram and sold through record retail outlets, separately from the hardware. The CD also had a competitor in the LaserVision disc which was ready for the spring of 1983. JVC, the Japanese electronics giant, was promoting its VHD system. There were about thirty companies looking at manufacturing special CD players, and I was very keen not to be left behind if this was going to be the new standard.
Only PolyGram and Ariola had made agreements with Philips for the release of products for the new CD system. (At that time, I thought the royalties being demanded by Philips were too high.) Philips began delivering the first CD players in Belgium. They could be attached to a hi-fi system, as a separate, just like the record deck, and were expected to sell for around ?300–?400. This was a lot of money for the young record-buying public — and in the early days the CD owner was usually the richest guy in the street.
From launch, around 200 titles would be available, retailing at between ?7.50 and ?8.50. PolyGram were preparing a disc-pressing plant in Hanover in West Germany, which could produce 500,000 in 1982, and a staggering four million the following year. In June 1982, Sony ran some full-colour adverts in the music press. They showed a full-size twelve-inch LP, alongside a compact disc, depicted in actual size. The advertising campaign was slick and it impressed me: ‘Six months from now the industry will expand dramatically.’
The CD was the answer to many a music lover’s prayer: no wow, no flutter, no wear, virtually immeasurable distortion, wide dynamic range and no surface noise.
My notebooks are full of the questions I had about the impact on our business and what we should be doing to counter any threats. I wrote: ‘
The arrival of the compact disc was a shot in the arm for our industry but, as with most medicines, in the wrong dose it could quite easily kill the patient. The CD was a game-changing technology — and we had to adapt or die. The arrival of the CD and, later, the DVD would eventually give retail a lease of life, but at first the only way for our business to survive the CD menace was to cut the cost of vinyl. And that’s what we did. We needed to start shifting stock and clear the decks for the new. The era of selling vinyl LPs by the truckload was coming to an end.
Meanwhile, in March 1982, Virgin Records shuffled the pricing structure for dealers. Price changes were being forced on all of the industry by high inflation rates in the early years of Mrs Thatcher’s government in Britain. We had to put up the price of our chart-topping bands, so
Some of the smaller independent retailers protested. Alan Davison, the vice chairman of RAVRO, the association of record dealers, who ran a small record shop, joked at the time in
Poor Alan: the only way you can get away with charging high prices in a deflating market is to downsize and specialise. That means you’re firefighting and innovating at the same time — a difficult double somersault, and one Alan simply didn’t have the will for. He simply put his prices up to the full recommended retail price in order to ensure his business mark-up of 33 per cent. This made no business sense to me. The margin on records and tapes was dropping from 32 per cent in 1978, down to 23 per cent in 1981, and cut-throat discounting had it as tight as 16 per cent. According to the BPI, the notional price of an average LP was ?5.22 in 1981 — while the actual price paid by the record buyer was ?4.39. Margins were so tight that a record company without hit artists that season was unlikely to weather the storm.
Meanwhile, another new retailing phenomenon was dawning (or looming — it depended on your point of view). In 1980 the British inventor and entrepreneur Clive Sinclair broke the ?100 barrier with his Sinclair ZX80 computer. If you were brave you could buy a kit for ?79.95 and solder it together yourself. A year later, he brought out the ZX81, and in 1982 he brought out the Sinclair ZX Spectrum. By the middle of 1982, there were nearly 500,000 video-game machines in use in the UK. I was surprised at how rapidly it spread across into our business — and again we had to be prepared for its impact.
One day one of the reps came in to see me. ‘Richard, the kids are really getting into this Pac-Man video gaming. Perhaps we should be selling some games, too.’
We started to order computer games directly from Atari — a subsidiary of Warner Communications. The arrival of Pac-Man, a maze-chasing alien who munched up fruit, helped bring in excellent business for years, outselling every other arcade game including the hugely successful Space Invaders, the staple of every single student-union bar in the country. With Tetris, Pac-Man became a starter game for Nintendo’s Game Boy, introduced in 1989. In the early 1990s Sega’s Game Gear introduced us to Sonic the Hedgehog. Popular games for young people allowed home computer games to lift off, especially in the UK, and introduced a whole generation to computing. The hardware multiplied and diversified at a dizzying rate: the Atari ST, the Commodore 64, the Amiga, the Apple Mac… The computer-gaming industry was about to go into overdrive.
Pac-Man was, indisputably, the first computer game icon. We didn’t get into our stride until the arrival of Nintendo’s Super Mario at Christmas in 1985. It was to become a worthwhile sideline for our stores as they expanded around the UK and into Europe. Software cartridges selling at ?15 to ?45 offered us a much greater mark-up than music, so computer games and then films — on video, then on DVD — became an increasing part of our range.
The truth is that even from the start our smaller Virgin Records shops made very little money. The stores kept our name in the public eye, and represented our youthful, irreverent brand, but they were unsustainable in the long run. One of my biggest business mistakes — indeed, regrets — was not selling all of our stores sooner.
By 1986, even the Megastores were under threat. Our biggest rivals, HMV, had taken up the cudgels against us and were launching a new store on Oxford Street in June which would stock every record currently available, while Tower Records was opening at a prime site in Piccadilly Circus.
Undeterred, in March we launched our Dublin store, the biggest in the world, at Aston’s Quay. We spent ?1 million on converting the five-floor 50,000 square foot McBirney’s store — and it would be similar to our Megastore on Oxford Street.
The press thought we were mad. Stanley Simmons, a director of Music Makers, pitched into the debate in the Counterpoint section of
But he was missing the point. Our Dublin store not only stocked specialist classical and jazz, folk and rock
