Surfdog Records Stays Afloat Despite Steep Drop in CD Sales

April 30, 2012, Judd

When’s the last time you visited your neighborhood record store — like legendary local, Lou’s Records — and actually purchased a CD?

If it’s been years, you’re not alone. After all, with iTunes, internet radio, file sharing (both legal and not), and other digital media outlets, it’s no wonder that nobody seems to be buying albums anymore.

Record stores now seem like cigar shops, relegated to the status of a subculture and serving the needs of eclectic aficionados. Box chain stores like Wal-Mart and Best Buy now sell more records than music-only shops.

Record labels and recording companies have taken a financial beating. Although physical CD sales still outsell digital recordings, by next year, industry analysts believe digital sales will surpass physical. CD sales are expected to drop another 40 percent next year, to $2.7 billion dollars; digital will likely gross slightly more, at $2.8 billion.

So what to do if you’re a local record company? Do you close up shop?

If you’re Dave Kaplan, of Surfdog Records, you’ve got more than a record label to worry about keeping afloat.

Kaplan also owns Java Hut coffee shop.

If you never knew that behind the Java Hut there’s a record label operating and representing  mega acts like Brian Setzer (as well as the Stray Cats), Grammy winner and country legend Glen Campbell, reggae legend Pato Banton, and Dave Stewart (still vital 30 years after the Eurythmics) — Kaplan is fine with that. He prefers the anonymity.

But Kaplan isn’t about to shut Surfdog’s doors.

Kaplan admits he never would have predicted the decline in physical music sales, but he’s glad he’s always had more than one egg in the recording industry’s basket.

“I didn’t have this ‘Beam me up, Scotty’ epiphany 10 years ago. I don’t think anybody in our industry could have conceived the digital revolution that’s transpired with mobile devices and the like,” says Kaplan, in his tiki-hut like office behind Java Hut, where Kaplan has kept his cost for a bar of surf wax at 48 cents.

“Surfdog Records is doing just fine but I do lose about 50 cents on each bar of wax I sell,” adds Kaplan.

Selling CDs is no longer the major business paradigm for Surfdog.

“The recording side, which was extremely successful for a number of us over the years, has become completely obliterated,” Kaplan says. And despite iTunes royalties, digital revenues don’t come close to making up for the loss in physical CDs.

“The decline in record sales is radical; the increase in digital sales is gradual,” he says.

And despite media reports of armies of hipsters engineering a vinyl record renaissance, Kaplan says that vinyl is still a droplet in an ocean.

“It’s like quadrupling the number one versus quadrupling one million; vinyl is not significant to our bottom line.”

So how has Surfdog, a label that before the digital revolution released three recordings that benefitted theSurfrider Foundation, titled, Music for Our Mother Ocean (aka ‘MOM’, and featuring Snoop Dogg, Paul McCartney, Red Hot Chili Peppers, Pearl Jam and other music gods) survived the digital revolution and managed to support eight employees?

“It’s still all about finding authentic and kick-ass artists who have amazing music. Nothing has changed in that capacity, but the management side of the business has taken up the slack of the CD sales,” says Kaplan.

For country music legend Glen Campbell, Surfdog is in the midst of managing his farewell tour and also acting as Campbell’s worldwide merchandiser. It also released a box set for the artist, who has sold more than 45 million records. (Ghost on the Canvas is his first release on Surfdog.)

Surfdog also makes money if artists’ recordings end up on movie soundtracks, TV commercials and shows. Former Stray Cat, Setzer, has had his work featured on the motion-picture, Shrek-offshoot, Puss in Boots. British soul-singer Joss Stone’s most current work is on the Surfdog label and her voice has graced promos for the USA Network. The aforementioned Eurythmic’s frontman, Stewart, has been featured on Dancing with the Stars.

As for releasing another MOM recording, Kaplan says, “Probably not, which is a sad answer; it’s a casualty of records not selling enough to make it worth our, and our artists’ time. It’s really unfortunate because the [MOM] recordings were one of Surfrider’s largest donations ever.”

Kaplan, who worked with crossover surfers-come-guitar/singer/songwriter sensations Donavon Frankenreiter and Jack Johnson at the beginning of their music careers, says that despite the continuing downtrend in physical CD sales, with digital outselling CDs in the very near future, the CD is still the relevant artistic expression of an artist.

“I keep hearing that we’re going away from the album. I keep hearing that’s going to change, but every time I see a talk show host introducing a musician, guess what they’re holding up? A CD.”

Some things never change. At least not yet.

Judd Handler is a freelance writer and wellness/lifestyle coach in Encinitas, California. He surfs uncrowded, fun reef breaks; plays instrumental alternate-tuning guitar; goes hiking in the backcountry; and is amazed on a daily basis by just being alive.