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Dec 7, 2008
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Teen retailer Hot Topic expands music focus

By
Reuters
Published
Dec 7, 2008

By Kamau High

NEW YORK (Billboard) - Music doesn't account for a large portion of Hot Topic's overall business.

In fact Betsy McLaughlin, the CEO of the teen apparel and lifestyle retailer, says music CDs and DVDs are only "a single-digit part of what we sell."

Still, Hot Topic has made judicious use of marketing partnerships with record labels and film studios to drive traffic to its stores -- and, yes, to sell the occasional CD.

In October, Hot Topic expanded its music retail operations with the launch of a digital storefront called Shockhound.com, which sells music downloads and licensed merchandise and incorporates social-networking features throughout the site.

In an interview, McLaughlin talked about Hot Topic's approach to music retailing.

BILLBOARD: SOME RETAILERS HAVE ANNOUNCED PLANS TO CUT BACK

ON THE AMOUNT OF FLOOR SPACE DEVOTED TO MUSIC. IS HOT TOPIC

PLANNING A SIMILAR MOVE?

BETSY MCLAUGHLIN: No. We are experiencing double-digit increases in (sales of) CDs. We have more market share because so many of the record stores are going out of business. Last summer we repositioned the inventory to be about small bands. We want only 20-25 of the (albums) we sell to be really big bands and the rest to be small, regional bands, the kinds of bands people want to support and are willing to pay for a CD.

BILLBOARD: WAL-MART, BEST BUY AND TARGET CONTINUE TO SCORE

EXCLUSIVE ALBUM RELEASES FOR BIG-NAME ARTISTS. DOES HOT TOPIC

HAVE ANY INTEREST IN VYING FOR ALBUM EXCLUSIVES AS WELL?

MCLAUGHLIN: It depends. They are paying a lot of money to secure those album releases. We are more interested in small and medium artists than in paying millions in upfront money to larger artists.

BILLBOARD: HOT TOPIC WORKED CLOSELY WITH ATLANTIC AND

SUMMIT ENTERTAINMENT TO PROMOTE THE "TWILIGHT" SOUNDTRACK, WITH

THEMED WINDOW DISPLAYS AND EVEN A LINE OF "TWILIGHT" APPAREL.

HOW DID THAT DEAL COME ABOUT?

MCLAUGHLIN: We have a license business as well as a music business. Whether it's "The Dark Knight" or "The Nightmare Before Christmas" or "Iron Man" or the upcoming "Punisher: War Zone" and "Watchmen," we have this history of doing licensed properties.

Summit, which has the rights to the movie, was looking for a retail partner and they approached us. At the time we had no idea Paramore was going to do the title track. As the soundtrack came together we started to realize a good portion of the music in it was applicable to Hot Topic. When the soundtrack was released we were a natural place to put it.

When we placed our order, Atlantic may have been a bit shocked. We actually took our numbers up after we saw presales. We had more people show up for "Twilight" listening parties and presales than we had ever before. Our initial order was for 15,000 units. Then it went to 30,000 and finally up to 50,000.

BILLBOARD: WHAT WILL BE THE NEXT "TWILIGHT?"

MCLAUGHLIN: I don't know. We're still working on "Twilight" and they have maybe three more movies. Harry Potter will be interesting. "Twilight" is one of those licenses that comes along once a decade.

BILLBOARD: WHY START ANOTHER WEB SITE DEVOTED TO SELLING

MUSIC AND MERCHANDISE?

MCLAUGHLIN: The initial plan was to incorporate the digital music piece into hottopic.com. As we started to scope it out, we realized how much opportunity there was for not just rock but other genres. At the time we started planning the site (about a year ago) there were sites selling only music or only with editorial (content). There weren't many social-media sites combining merch with music. We have 3 million tracks in all genres. No longer are teens just interested in only one genre of music. They're not just listening to rock but their father's rock or jazz because it's an inspiration to their favorite artist.

BILLBOARD: WHO IS THE SHOCKHOUND CONSUMER? I ASK BECAUSE ON

THE TOP ARTISTS PAGE RECENTLY, THE NO. 1 PICK WAS PINK AND NO. 2 WAS DEAN MARTIN.

MCLAUGHLIN: One of the things we're seeing is we're getting a wide variety of customers. less than 50% of people's profiles on Shockhound say that rock is their favorite genre. It spreads out to pop, hip-hop, electronica and jazz. I'm not sure how Dean Martin got up there. Pink doesn't surprise me, and country artists have made it to the top five. I'm hoping Tom Jones will hit the top five.

Reuters/Billboard

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