Record Breaker

As the traditional bricks-and-mortar structure of music retail continues to crumble, Newbury Comics czar Mike Dreese is reinventing himself. Again.

WALK INTO A NEWBURY COMICS SHOP today and you won’t see many comic books. Racks of CDs fill most of the store, but your eye will more likely be drawn to the walls dripping with action figures, lunchboxes, bobble-heads, novelty key chains, and SpongeBob plush dolls. There are talking bottle openers, trucker hats, and every imaginable piece of merchandise that can be branded with the face of Homer Simpson. It’s a snapshot of today’s pop-culture soul.

That’s a soul that doesn’t buy a lot of records. Meaning that, not for the first time, Newbury Comics is being forced to reinvent itself. The longtime industry leader is hatching a new business model, one in which CDs yield to Corpse Bride dolls. In the iPod era, Mike Dreese, the man who runs Newbury Comics, sees this as the future for music retailers.

Even Dreese isn’t sure it will work, or if his small, familiar chain will follow its competitors over the cliff. “Frankly, it’s an open question whether Newbury Comics will prove nimble enough to make the transition,” Dreese says. “An era is definitely coming to a close.”

Which begs the question: What do you do when your main business is selling something nobody wants any more?

THE STORY of how Newbury Comics already reinvented itself—twice—starts in 1978 in a shop on the wrong end of Newbury Street, where MIT dropout Dreese was spending a lot of time whacking the buttons on an arcade machine.

“They had Missile Command, one of the early video games, in the shop and apparently had the time to master it,” says Oedipus, now vice president of alternative programming for CBS Radio but then local host of the country’s first punk program. Dreese and his partner John Brusger, who was still an MIT undergrad, had pooled their savings and Brusger’s comic book collection to open the store and played arcade games during the long waits between customers.

“They were unbelievable, scoring in the hundreds of thousands,” says Oedipus, though he’s not referring to sales. “They had great eye-hand coordination.”

Such skills don’t necessarily parlay into the multimillion-dollar retail success story that would see Newbury Comics grow to 26 stores across New England with nearly 400 employees and annual revenues exceeding $75 million. But the two friends had other things going for them. For one thing, Dreese was working 80 hours a week at McDonald’s and Brigham’s so he could plow every cent back into the fledgling company. For another, they understood cool.

“They had import singles and the cool new records out of New York I could play on my show,” says Oedipus. “They had things you couldn’t get anywhere else.”

A lot has changed in 28 years. The rent on Newbury Street has crept up from $260 a month to a cool $23,000 as the neighborhood’s gone posh. And while Dreese and Brusger’s business still has a reputation for the esoteric, they’re facing a grim future. Album sales have decreased steadily for half a decade. Record labels are stripped to the bone by layoffs. Chains like Tower Records have gone through bankruptcy, and downloads are making CDs obsolete. So far, Newbury Comics has survived, and in the music business, survival is triumph. But Dreese says the whole industry is in its end days, fractured by its failure to recognize the download threat and guilty of marketing flavor-of-the-month artists to such an extent that music is perceived as a disposable commodity rather than a cultural legacy that breeds loyal customers.

Dreese isn’t making light of the problem. “I don’t see traditional music retail stores surviving,” he says, “past maybe seven or eight more years.”

NOT IN A MILLION years would he have predicted this would be his lifelong vocation, says Dreese, now 50, who lives in Newton with his wife and their two children. “You can imagine the joy of going home for Christmas and informing your parents you’re dropping out of MIT to start a comic book store.”

But then, retail is in his blood. In the corner of his no-frills Brighton office, Dreese keeps a safe that belonged to his great-grandfather, who owned a general store. Dreese’s father was an officer in the Navy Supply Corps. “We moved every two or three years. I saw Japan and Taiwan. Also, one of my best friends was the son of an entrepreneur who ran a sandwich-making business near San Francisco. I worked for him and that’s what really gave me the bug.”

Though Dreese can’t remember what inspired him to go into selling comics, he started by trading books at comic conventions, then took the next step as a lark.

“When we started Newbury Comics we were full of confidence, which, in retrospect, was entirely unjustified,” says Brusger, who, as Newbury Comics’ IT mogul, is the technically minded yin to his friend Dreese’s more outwardly visionary yang. “But we arrived at a time when there were changes going on in the culture being expressed in comics and in the birth of punk rock, and we were a gathering place for people who were interested in those things.” It helped that they were willing to undercut the competition. If someone else offered a comic book for 35 cents, they sold it for 31.

Dreese and Brusger—who remain the chain’s co-owners—had already developed a knack for ruffling manes while roommates at MIT, playing practical jokes including a bet-winning gustatory stunt involving a cat box full of oatmeal and raisins. Now they’re the Penn & Teller of music retail. Brusger’s the whip-smart but quiet one. The more outgoing Dreese, who’s become Newbury Comics’ mouthpiece, has a reputation as a gnat in the ear of the music business.

“There’s the story about the Christmas party where Mike got up and told all the record company people they’d be unemployed in two years,” says Brett Wickard, president of the Maine- and New Hampshire–based Bull Moose Music, who says he was moved to found Bull Moose by his visits to Newbury Comics. Wickard calls Dreese “the finest competitor anybody could ask for. He keeps us on our toes and is somebody to learn from.”

Dreese considers himself a blunt speaker of sometimes unwelcome truths. “I like to analyze issues in the industry and share the results,” he says, “which is something I learned at MIT writing papers on Harvard Business School studies. I’ve remained curious, but I also have a big stake in this. I’m an independent operator, so I’m risking my net worth with the business decisions I make.”

Newbury Comics earns nearly triple the industry average per store, says Ed Christman, retail editor for Billboard. “Mike Dreese is totally ahead of the game,” Christman says. “Labels like Newbury Comics’ adventurousness. It helps introduce new artists. Newbury has also been able to diversify beyond music to become a lifestyle retailer—a place where fans of music, cult movies, pop culture, and the counterculture congregate.”

Having moved from comic books to music, the chain would morph again. The website helps pull in $4 million a year in sales, and used CDs have become a part of the equation, stocked at stores and sold online through Amazon and eBay. “What’s exciting is the advent of HD-DVD,” says Dreese, who smells another opportunity. “You can see the difference between a DVD and an HD-DVD. I think we will see an entire upgrade cycle in the DVD business to that higher standard, much like people traded up their favorite records to CDs.”

It’s this sort of thinking that’s kept Newbury Comics healthy in the declining brick-and-mortar music retail business. In December, the company’s holiday profits hit a record high, even as big national chains like Tower have had to deal with bankruptcy. Tower closed many of its urban stores across the country, including its flagship Boston spot right down the block from Dreese and Brusger’s first location. (That space is now occupied by another dinosaur: Virgin Megastore.) In January, the powerful Musicland lost steam, filing to protect the assets of its more than 800 stores—including Sam Goody, Suncoast Motion Picture Company, and Borders-wannabe Media Play—from creditors. And while Strawberries is still a powerful presence in New England, it’s Newbury Comics that the big retailers are watching.

So far, Dreese and Brusger’s empire has resisted ill winds, though it laid off four buyers in a reorganization last summer. “It’s a problem when you have people who grew up with indie rock and have wanted to work with it all their lives, and don’t really love action figures, say, and can’t make the transition,” Dreese says.

On the other hand, he says, one of his company’s strengths is having employees who get street-smart pop-and-rock culture. “We have people who are connected to the world in ways that somebody who works in the John Hancock Tower probably isn’t. You can hang out in Newbury Comics for 30 minutes and learn about fashion, trends, and music just by watching people and picking up cues.”

EVEN CREATIVITY has its limits, though, and sometimes an independent retailer has to dig in his heels. In 1998, Dreese decided to withhold Newbury Comics’ sales information from SoundScan, the industry’s electronic retail tracking system. He was at a convention when he heard a music buyer brag about using regional SoundScan figures to determine which new artists to stock at Wal-Mart. “SoundScan is a dream for merchants like these and for Best Buy, who don’t understand regional preferences in music the way we do,” Dreese says. “They can use information that regional retailers provide, along with their clout with record companies, to draw customers away from smaller chains and independent retailers. Then when they’ve put the little guy out of business, they no longer have an incentive to carry CDs by independent or local bands. So I decided it wasn’t in our interest to share that information.”

He held out for four years. “We started reporting again because the labels are terribly interested in getting credit for their sales, and we’d gotten all the advantages we could from withholding that information. Also, local artists were at a disadvantage. Newbury Comics is the biggest outlet in this market for Boston artists and a major force in developing new artists, and they might get more attention nationally if the numbers proved their sales were strong here.” Newbury Comics carries 800 to 1,000 discs from local bands on consignment.

Lately, Dreese has aimed his critical crosshairs at online music providers like iTunes. As he sees it, even the days of the 99-cent song download are nearly over. “Flat pricing is going out the window,” he says. “Apple is extracting the vast bulk of the value, but the record labels and artists haven’t been well served by that model. There is no reason why the Beach Boys’ 87th-best song should be selling for the same price as a new Green Day hit. It’s very clear in the end that both the consumer and artist will enormously benefit from these technologies. It’s just a matter of getting the rules straightened out and being sure that Apple doesn’t become the next major label, making most of the money while the artists are on the sideline hoping for a small piece of the pie.”

Dreese thinks the digital pie will soon be the only one left on the table. “The losses as a result of switching to digital will be crushing for any but the most nimble of retailers,” he says.

HENCE THE POKEMON TOYS. Dreese’s strategy of moving deeper into “physical media,” stuff you can actually look at or touch, seems to be working. “There’s no doubt these alternative product lines can equal the revenue we got from music retail,” Dreese insists. “These things take a lot of detailed knowledge and can’t just be prepackaged and thrown out on a shelf at Wal-Mart.” Indeed, a lot of his merchandise would never appear on a Wal-Mart shelf because it would offend religious right-wing or social conservatives (an ironic Jesus action figure, for example). “I think there will always be a market for a company that caters to an alternative point of view. But there are special-interest groups that pig-pile on you any time you offend them.”

Just mention the words “Marilyn Manson” in some quarters, and you’re liable to provoke a letter-writing campaign. But Dreese isn’t afraid of the big bad boycott. It’s Newbury Comics’ countercultural credibility that keeps him in the black. “We’re not here to make everyone happy,” he says. “We’re here to give people access to the ideas of pop culture artists, and, in a world that’s increasingly homogenized, there’s a core base out there that certainly appreciates what Newbury Comics tries to bring to the market. I think the whole region has been exposed to things that might not have happened quite the way they did if it wasn’t for our existence. I feel pretty good about that.”

But what will Dreese do if Newbury Comics plunges into the abyss with the rest of music retail? “I might do some angel investing in little start-ups, where you can make an investment in somebody else’s dream,” says Dreese. “I might also do more work with not-for-profits.”

He already has strong ties to the Berklee College of Music. Dreese and Brusger have given more than $600,000 to the school, including $250,000 in scholarships, and he’s on its board, to which he also just recruited his friend Ernie Boch Jr. of the auto dealership dynasty.

“I might even pursue something in academia myself,” Dreese adds, “although I’m getting a little too old to enjoy going back to school to get a degree.” Then again, the college drop-out isn’t planning to retire yet. “What I really want to do is just keep beating Wal-Mart.”