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Make Your Own Kind Of Music


In 1990, as music megastores were taking over city blocks and CDs were spinning LPs into relics, Marc Weinstein launched what seemed like the wrong company at the wrong time. Weinstein, who managed San Francisco's legendary Streetlight Records Ltd. for seven years, went ahead and started Amoeba Music Inc., a Berkeley (Calif.) record shop devoting half its inventory to used and rare vinyl. Weinstein wanted to make Amoeba into his ideal of the music shopping experience. "I always imagined a community-based record store where everyone celebrated the artists and the music," he says.

To do that, he and two co-founders pooled $325,000 from loans and savings, then took over a dilapidated 3,500-square-foot storefront used mostly by homeless people. Its first day, Amoeba took in $10,000. "We've been busy since the day we opened," says Weinstein, now 48. "We've never looked back." Amoeba's Berkeley store is now in a 12,000-square-foot space (formerly a bowling alley); the newer Los Angeles and San Francisco stores are more than twice that size. Next, Weinstein is launching a record label and planning a Web site for paid music downloads, just as the industry is being cannibalized by file sharing.

Amoeba's success defies the industry's malaise. Its sales grew 6.5% in 2005, to $60 million, even as industrywide album sales fell 7.2%, according to Niel- sen SoundScan.

Weinstein's secret is simple: "We are not influenced by industry standards or norms," he says. Instead of focusing on hit makers, Amoeba has built critical mass across genres that include soul and jazz but also Hungarian folk music and Pakistani qawwali. Amoeba carries 2.5 million titles, including DVDs, vs. 60,000 in a typical big-box music store.

That selection inspires cult-like devotion. Marlon West, a Los Angeles special-effects animator, took empty suitcases on twice-yearly Amoeba pilgrimages until the Hollywood store opened. "I'm just glad that I haven't sustained complete financial ruin because of it," he says, still in awe of the time he found a complete box set of trip-hop artists Massive Attack at the San Francisco store.

More than selection distinguishes Amoeba. The company doesn't take retail display allowances from record labels, so the CDs that get displayed are the ones staffers enjoy. Those 520 staffers know their stuff: Before being hired, each one must listen to a random box of CDs, then brief Weinstein on the artists. Employees make between $9 and $20 an hour, with Amoeba paying half their health insurance premiums after six months. After two years Amoeba foots the entire bill.

To launch the record label and Web site, Weinstein and his partners will be trading on their credibility as music zealots. "We can easily make money selling 50,000 units," says co-founder Dave Prinz, because Amoeba will spend much less than the majors on manufacturing, distribution, and marketing. Aram Sinnreich, a partner at Los Angeles media consultants Radar Research, agrees. "The majors have developed an inverse economy of scale," he says. "They are duty-bound to spend and sell an ever-escalating volume." Amoeba's first efforts will be an album of unreleased material by the late country rock pioneer Gram Parsons and works by emerging Gypsy jazz artists.

Amoeba is more tight-lipped about its Internet strategy. The co-founders say they'll spend $10 million to $20 million in the next 18 months developing their online presence. They think they can design something combining their breadth of knowledge with a superior buying model. After all, Amoeba has already done quite well dancing to its own beat.

For more on entrepreneurs, visit BusinessWeek.com/smallbiz

By Stacy Perman


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