returned unsold units to the distributor, which then returned them to the record company, Because of the return privilege, Compass typically manufactured about 30% more units than it estimated would actually sell at retail outlets; the company would usually write those units off after two years
At the retail level, there had been a major shift from specialty record shops to mass-market and on-line retailers(see Figure 2). Record stores' share of US, music sales declined from 51% , in 1998, to 33% , in 2003. while the mass-market stores' share grew from 34% to 53% over the same period. Getting a record well placed with the large retailers was expensive. Brown estimated that Compass might spend around $5,000 for a new artist on in-store listening stations and other retail programs. The average retail list price for a Compass CD was $17.98 per unit.
Retailers gave an album only about 90 days from its release date to generate meaningful consumer demand; if that failed to occur, they exercised their return privilege. Therefore, in order to ensure high demand by an album's release date, sufficient publicity and promotion had to occur months in advance. "From a financial point of view.' Brown said, "that means incurring all your recording , preproduction, and manufacturing costs six months or more before you will ever see any return." To keep an album available in the stores, a record label had to sell at least 50% of the total forecast sales in the first three months after the release date, and perhaps reach 75% in the first year. After that. sales might fall off quickly, with most of the remaining inventory sold the following year