Don't tell brothers Wayne and Gary Johnson the CD business is dead or that the brick-and-mortar record store has gone the way of the five-and-dime.Or go ahead. Tell them. They'll just smile. That's because they run Rockaway Records in Silver Lake, one of the longest-surviving independent record stores in Los Angeles. It has successfully been trading since 1979 in various forms of music technology pronounced dead or dying in most other corners of the ailing music industry."I feel more confident than ever," Wayne Johnson said during an interview in the back office lined with memorabilia that reflects his lifelong love of the Beach Boys and their music.As the bottom fell out from under the retail music business, the Johnson siblings witnessed the demise of Rhino, Aron's and other local independent record stores as well as onetime behemoths such as Tower Records and Virgin Megastores.About 3,650 stores that sell music have closed nationwide in the six years since the Studio City-based Almighty Institute of Music Retail marketing research firm began collecting data. During that period, about 2,000 new stores have opened, but 70% of those have been big-box stores such as Wal-Mart, Target and Best Buy or chains including Borders and Barnes & Noble. That leaves about 600 free-standing music retailers.Rockaway has sidestepped that fate with a combination store and online business where customers can find music as cheap as 99 cents or spend thousands for coveted pop music collectibles such as a copy of the Beatles' first album, "Please Please Me," signed in 1964 by all four band members and on display in a glass case. Cost: $28,500.The Johnsons have survived, they say, thanks to a simple philosophy. "You have to know what you're doing," Wayne said. "You can't wing it anymore. It used to be easy to buy collections and turn them around and sell them for more than what you paid. But now, there are so many avenues -- people can go on Amazon or EBay and find out what stuff is worth. Now you really have to know the market."Rockaway's calling card is collectibles, the same thing the Johnsons started out selling in the '70s out of the basement of the house they shared in Brea. Back then, they could pick up items in thrift stores or yard sales for 25 or 50 cents each and then sell them for $5 to $10 apiece to collectors around the country -- or the world, for that matter. (Last year it sold some acetates of unreleased Frank Zappa music to a collector in Andorra for $12,000.)But, to the delight of sellers, Wayne said, "we pay as much as we can." They bought a collection of 100,000 albums from a collector in Hollywood several years ago for $600,000, their biggest purchase. "There are some collections I've seen that I'd be willing to pay $1 million for."Their thinking since the early days: Word would spread among collectors that they pay fairly. It seems to work: Wayne said five or six local collectors approached Rockaway after hearing about the $600,000 outlay. Rockaway finances big-ticket purchases either through the seller or with help from a bank, Wayne said.Several years ago Rockaway stopped selling new CDs when Best Buy, Wal-Mart and other major merchants began selling them for $9.99 or cheaper. That's $2 to $3 less than independents such as Rockaway could buy them for wholesale. But the Johnsons have kept Rockaway afloat by taking in used CDs, LPs, 45s and DVDs -- items that don't reach the "collectible" threshold but still create enough profit to make them worth stocking."A few years ago I was thinking the used-CD business would just go away," Wayne said. "But that has kind of changed, and the CD business has gone way up. A lot of that is because of what has happened to the competition. So many stores went under; there are not many places to buy used CDs."Another such place is Amoeba Music in Hollywood. Amoeba, which opened in 2001, at first dealt a blow to Rockaway because of its massive size. But Rockaway recovered and in some cases has even benefited from the misfortune of other independent stores that went out of business and had inventory to unload.For example, the Johnsons paid $150,000 for the entire inventory of 75,000 CDs from a store in Clear Lake, Iowa, that went under. "That kept our CD bins stocked for a long time," Wayne said.Independent music retailers such as Rockaway and the mammoth Amoeba account for only 7% of all album sales, according to Nielsen SoundScan, compared with about 14% in 2001. Nontraditional outlets such as Amazon, iTunes and Starbucks, which represented just 3% of the market in 2001, now account for 29% of sales. Chains such as Best Buy, together with Wal-Mart, Target and other mass merchandisers, capture 65% of album sales today, although that's down from the 82% they commanded eight years ago."Even in this economy, we're still doing pretty well," Wayne says. Rockaway has logged annual sales in the low-seven figures in recent years, and Wayne said they planned to add 1,200 square feet to the 3,500-square-foot store.The store carries about 75,000 CDs, 20,000 LPs, 20,000 45s, 10,000 DVDs and thousands of vintage magazines, books, posters and memorabilia, an inventory that Wayne said is worth at least $1 million. On Sunday Rockaway will hold a 30th anniversary parking lot sale with 30,000 CDs on sale for 99 cents each.In the last four years, he said, sales have turned around and have been growing steadily again, despite the industry's overall double-digit annual drop in music sales.Trafficking heavily in albums benefits Rockaway in the iTunes age that favors singles, Wayne said.Additionally, the Johnsons don't have to worry about downloadable versions of offbeat items Rockaway sells, such as Frank Zappa's hand-written score for his "Low Budget Symphony" ($5,000), alenticular3D rendering of a Cream album cover that was a record store display piece created in the 1990s ($1,500) or a Michael Jackson "Thriller" display piece. That one had been listed for $700 to $800 before his death in June, jumped to $3,500 shortly after and is now priced at $2,200.That reflects the ever-shifting collectibles market."People like to think that every year their collectibles will go up in value, but look at prices for houses, look what's happened to the stock market," Wayne said. "Why should collectibles be any different?" And at the top?"The Beatles are the blue-chip stock in [pop music] collectibles," Wayne said. "It doesn't get any better."Rockaway has a copy of the much-sought-after original cover for the group's 1965 "Yesterday and Today" album -- signed by Paul McCartney, George Harrison and Ringo Starr -- in its display case with a $12,000 price tag."If I had the fourth signature, I'd add another zero to the price and it'd be gone like that," Wayne said, snapping his fingers.
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