Ritmo Latino: Latin CD Sales Falter

By LILY MIHALIK

As the Monday morning customers shuffled through the star-studded entryway of the Mission District’s Ritmo Latino, loud posters of Michel Jackson, and Los Tigres Del Norte invited them to buy their latest releases.

In the background, the sad serenade of Espinoza Paz floated over a wailing brass section, singing, “We tried to make it work, but it couldn’t…”

Like Paz, Latino music purveyors across the nation are struggling to make it work–their business model, that is.  For years, the rising popularity of salsa, cumbia and reggaeton and the new buying power of Latinos, offered hope to a music industry facing diminishing sales.

Nowadays, rising unemployment among Latinos and a new movement toward digital media has Latino stores hoping they can survive.

“I just don’t think CDs alone will pay the rent,” said Ritmo’s Regional Manager Mireya Chavarria. “It has to be more than CDs. Look at Tower Records, it’s been gone for two years, and Virgin Records started closing stores a year ago.”

Arturo Sanchez, the manger of Ritmo’s top competitor, Azteca Distributers, added:  “People have to buy tortillas, they don’t have money for CDs. We have seen a 60 percent drop in sales over the last year and half.”

As a result, the Azteca has been forced to downsize, closing nine stores over the last two years, and leaving them with a total of five locations in Stockton, Modesto and Sacramento.

“It’s really four things,” said Sanchez, “the economy, downloading, piracy, and immigration.” Immigration, he added, is a surprisingly strong force in declining sales. “The people who would normally buy our product, and use CDs are being deported.”

While no independent studies confirm Sanchez’s hunch about the crackdown on illegal immigration, it’s clear that the economy and piracy have played big in Azteca’s and Ritmo’s decline.

Few companies rode the upswing in the Latino market as  smoothly as Ritmo. Founded in 1989 by Latin music tycoon, and Mexican American, David Massry, Ritmo  grew with a population that in just one decade, jumped by 37 percent to 35.3 million, according to the census.

Demographers estimate Latinos now number close to 50 million or more than 15 percent of the U.S. population.

The New Jersey-based Ritmo quickly expanded to some 50 stores across the country including  the 1995 opening of Ritmo Latino at 20^th and Mission streets. By the end of the decade Ritmo was the largest Spanish selling music chain in the country, according to the LA Times.

But last year, chain music stores and Latino music started to struggle.  Latin Album sales fell 21 percent in 2008, and by 35 percent from August of 2008 to August of 2009, according to Neilson Soundscan.

In 2008, digital music accounted for 32 percent of music purchases across the board, an increase of 27% from 2007.

In the last year, Ritmo has closed 15 stores nationwide, canceled its annual conference where it once wooed the latest Latino stars and is struggling to maintain the 35 stores that remain.

Ritmo’s store in Watsonville was the most recent casualty.

“They just couldn’t pay the bills,” explained Assistant Manager of the Mission shop, Sandra Andrade.

Even in the Mission District, she said, sales have plummeted.

“We used to sell three times as much as we do now,” she said.

Not only have more Latino’s gone digital, the recession that began last fall has hit them hardest.  The number of out of work Latinos increased by five to eight percent from 2007 to 2008, outpacing national unemployment rates, as reported by the Pew Hispanic Center earlier this year.

Spanish music sellers are thinking of new ways to stay afloat.

Chavarria, the regional manager for Ritmo,  said it’s unclear how many shops will close, or what the plan is for the future, but there is no current discussion of incorporating mp3s into the business model.

“The music industry has been changing the last 18 months, and will continue to change,” said Chavarria, “so far I think we’ve done better than most because we sell so many different products.”

The Mission store is no exception. Although CD sales have dropped precipitously, other merchandise have helped to keep the doors open.

“We sell the most sporting goods of anyone in the chain,” said store manager Magaly Perez, “we also sell the latest DVDs and soap operas from Mexico. “You see,” she said, “we adapt to what the customer wants, and they keep coming back.”

“Most of our customers are from Mexico, Honduras and Central America, but we serve people from all over,” said Perez and, sounding like a good salesmen, added, “Even in today’s economy, we have something for every pocket book.”

And, most of those are looking for bargains.  On a recent Monday morning  Jorge Coot and his wife Paula Canul from Yucatan, Mexico, enjoyed a DVD of Michael Jackson’s best concerts playing on a store monitor. “It’s so sad,” said Jorge, talking about pop icon’s death, “it’s cool to watch, but we’re just looking today, not here to buy.”

Manuel Ceptino, also from Yucatan, said he visits the store whenever there is a deal, “my wife likes the ballads, but I just pre-ordered the new Tigres Del Norte CD, you get it for a discount if you buy it early,” he explained referring to the $3.51 cents he saved by pre-paying.

“I used my ‘Friends of Ritmo Latino’ card to get an extra discount, it’s a great deal.” The bargain customers aren’t the only patrons Massry would like to attract, it would please him to hear the other reasons Ceptino shops at Ritmo: “I come here for the customer service,” he said and “there are things here you can’t find anywhere else.”

UPDATE 9/13/09: Ritmo Latino closed the week of September 7^th after reporting massive sales losses. The storefront continues to be owned by music mogul David Massry, and is scheduled to reopen October 8^th as a T-Mobile phone center. “ The music business is dying, I’ve had to change my strategy,” said Massry.