Recording Industry Hits a Flat Note; Profit Margins, Growth Show Signs of Slowing
Here in the platinum-record lined offices of the music business, you can almost hear the sound of money.</br></br>At Geffen Records storefront shop on Sunset Boulevard, the label's boyish boss, David Geffen, is burning up the phone lines a month after selling his company for $545 million to MCA Inc. Geffen is reportedly spending a fraction of his windfall on a $47 million estate in Beverly Hills.</br></br>A few blocks away, at A&M Records, founders Jerry Moss and Herb Alpert, the trumpeter, are sitting on $500 million, the haul from the sale of their company in October to the Dutch-owned PolyGram Inc.</br></br>Shrewd operators all, Geffen, Moss and Alpert may have cashed out at just the right time. Fed by the startling success of the compact disc, the recording industry finished its best year ever in 1989-but is showing incipient signs of losing its groove.</br></br>As measured in dollars, record sales grew only 3 percent last year, less than the inflation rate and the slowest growth since 1985, according to the Recording Industry Association of America. Unit shipments were up 5 percent, thanks mainly to the CD, but cassettes-still the backbone of the business-actually experienced a slight decline. Even the CD explosion begins to look a lot less dynamic for record companies in light of the inexorable fall in CD prices and profit margins: The average disc sold for $12.49 last year, down from $15.63 in 1986.