When Michael Bunnell opened the first Record Exchange in Boise in 1977, it sold used 8-track tapes and vinyl records. Today, Bunnell's record store and coffee shop at 1105 W. Idaho St. hawks DVDs and clothing, action figures and gag gifts.

Oh, and new and used CDs.

Bunnell, 58, recently was named executive director of the Coalition of Independent Music Stores. Leading a national organization of about 60 businesses, Bunnell will preach that evolution is key to the success of hometown record shops, which have been battered by chain electronics stores, declining CD sales, increased digital music sales and filesharing.

Independent record stores are unique cultural centers for their communities - places to discover music, see live bands and exchange ideas. Even with business down this Christmas - as it was at most retailers - Bunnell saw heart-warming evidence that Boise still treasures its mom and pop record store.

"I can't tell you how many people came in, walked up to the counter and said, 'I'm here to support you, because you're a locally owned business,'" Bunnell says. "We've never seen a reaction so visible."

The Statesman sat down with Bunnell to talk about the future of record stores:

Q: Is it unusual for a record store owner in Boise, Idaho, to be named executive director of this Birmingham, Ala., organization?

A: A little unusual. Sure.

Q: So why is it happening?

A: Well, I've been really deeply involved in the running of the organization for years, and had a lot to do with kind of pushing the agenda forward the last few years. And as we restructured, I seemed to be the likely candidate. Since I'd been pretty involved in all the facets of the organization, it made pretty good sense that I could step up, since we made it not a full-time job. I still have a store to run.

Q: What's the biggest challenge facing independent music stores looking toward the future?

A: You mean beyond the current economy? (Laughs) Because that's the biggest challenge.

Q: Let's say a year or two from now.

A: Well, obviously, the market's changing. We're not denying that. A lot of sales have gone digital. I think the hard stuff (CDs and vinyl) is remaining relevant and keeping our business together in lieu of these sort of massive changes. A lot of these stores have seen these coming for many years, and we've been diversifying. We don't just sell new CDs these days. A lot of stores like myself, the new CDs are only half of our business now. But even at that, that's a dramatic change in the business model.

Q: When you say new CDs, you don't mean the other half is used CDs.

A: No, I mean the other half is everything else. Many of us sell books, and we sell DVDs, and we sell many used products. We sell a lot of vinyl these days. And I mean - I have a coffee shop. We've really all realized we needed to diversify.

Q: A couple of years ago, you told me you envisioned future record stores as boutique stores. Do you still see that? Or do you think pure diversification is the way to stay alive?

A: Well, I think to a degree, both. I still think the independent record store has cultural importance in a lot of these towns. I think that's crucial that there are meeting places for diverse cultures that can feel at home and feel like you're sharing an art, if you will, and ideas.

Q: As more people get music digitally - which you can do from home in front of a computer - how can record stores maintain themselves as vibrant meeting places where that cultural exchange of ideas can occur?

A: Well, part of it is diversity of products and approaches. Some of them need to get a little bit more into show business, as we all have. I mean we all do a lot of in-stores (free concerts) now. We're meeting places, still, for developing artists. A lot of that didn't happen to the degree it happens now, in the past, I mean we really try to stay tied to our local music scenes. We stay tied into the touring music scene. We stay very tied into artist development. We have stronger ties to the independent label community than we used to, which is where the real birthplace of new artists is, of course.

A lot of the majors (major record labels) are in pretty serious trouble. They're becoming sort of catalogue warehouses, if you will, because there's not a lot of real hardcore artist development happening there except maybe at the very top of the Billboard charts... .

Q: Are independent music stores in a reactionary position in that as the music industry feels its way through this time of change, record stores have to wait to figure out what the next business model is? Or will the Coalition, under your leadership, take its own ideas and run with them?

A: Well, we've been taking our own ideas and running with them. I mean, like I said, the Coalition's grown into a lot more than it used to be. Distributing unique products, I think, has helped everybody. As far as the identity of these stores, I mean, they're all different. That's what makes it real interesting. Because they have their unique personalities. And I think as far as the business model, I don't think there's any one stamp that says, "Here's what we're going to be." Some people will become a little boutique, if you will, and some people will remain this sort of overall place where unique cultural products are sold.

Q: Like the Record Exchange.

A: Yeah. A pop culture marketplace, if you will. It sounds like kind of a tired name already, but it's truly what these stores are becoming.

Q: But it also means you're going to survive.

A: Exactly.

Q: Looking back a couple of years, there was - and still is - worry about record stores and where they fit in. Do you feel better today than you did a few years ago when the downloading frenzy started?

A: I feel about the same. I think physical goods now, depending on the release, are still 50 to 70 percent of the life of many releases. Unless you're a fool, you don't throw away part of the business that still survives and is healthy. I mean these stores are going to become the last place to find music! The big boxes (such as Best Buy) are getting out. As the industry got tough and the business got tough, we're seeing big boxes reduce inventories. There's no catalogue left, with very few exceptions.

Q: You're talking about CDs.

A: Yeah. I'm talking abut hard goods. I mean who else is really supporting this industry now? The hard goods industry? I mean there's a billion people supporting the digital goods industry, because everybody's in love with it. But what about the 70 percent of the business that's still out there in hard goods? Why are we screaming doomsday because some people couldn't handle the change in the market? I mean it's certainly changing, I'm not going to deny it. Of course, yeah, new-release sales have gone down, but at the same time, catalogue sales are remaining reasonably healthy in these stores. And the price of all that catalogue is getting cheaper, which is part of something that people don't realize. There's been a lot of reduction in the price of CDs over the years. But it's not one unified effort, so nobody's really aware of it, because there's certainly no marketing effort going on very well - like the labels saying "Hey, we're selling all this stuff for under $10!"

Q: Right. People don't realize you can go get that $9.99 album.

A: I know. We looked the other day at how many pieces we have on sale, and a lot of it through price reductions here, and there's 3,400 titles we had on sale here. That's a lot! That's a lot of stuff that we've been reducing the price on.

Q: What will ThinkIndie.com, the Coalition's online MP3 store debuting this month, be like?

A: We hope to reflect the sort of culture and values of an independent record store with an online experience - which is hard, admittedly, to do. But we'll have record-store clerks from across the country choosing music and writing reviews. We're trying to involve these indie stores in the look and feel of the online store and the actual content.

Q: What will be the price of a song at ThinkIndie.com? How will it work?

A: The basic track price will be $1.11, although we still plan to offer $9.99 album pricing. To create a source of revenue for independent stores and offer a superior product, we've had to make a slight adjustment to the typical 99-cent song price you'd see at iTunes. But we're also selling higher-quality audio. Our MP3s will be 320 kbps, whereas typical MP3s sold are lower quality than that.

Q: Is the idea you're going to compete head-to-head with iTunes? Or is the idea you're going to carry quirky alternative and indie-leaning music that you can buy digital downloads of?

A: Just like if you study independent record stores' bestseller charts, they're not the iTunes chart, obviously. Our bestsellers chart every week never resembles the Billboard Top 40. So I would assume an independently leaning Web site selling music should be a little more interesting, and the bestsellers will look like those charts do, not like the Billboard charts or iTunes. I think we're looking for a little different clientele.

Q: So part of the success of ThinkIndie.com will be in cultivating that clientele that takes pride in shopping at an indie record store in the first place.

A: Exactly. Part of the model is that there's an affiliate model, so we're trying to encourage independent stores to let this digital solution be their digital solution. And as they do, they will receive a revenue stream.

Q: So it doesn't have to be a Coalition member, it can be any record store?

A: Uh-huh. We're hoping the marketing will be helped by all the links from all these independent stores that will link into this Web site, basically. It's one Web site, but the issue of paying the independent stores is just a technological one. We can ID addresses and associate them with stores. The store will get a percentage.

Q: How many titles do you imagine the online story carrying?

A: The difficulty has been --- I mean we've approached everybody. We've approached the major label groups. We've approached all the indie label groups. There's been a lot better reception at the indies than the majors, who try to throw up road blocks. They're all experimenting with varying price points, and they're not quite sure where this thing is going to land, either. They're all unhappy with some of the powers that be in that marketplace.

Q: You would think that with iTunes sort of having them over a barrel, that they would welcome an alternative. Any way to screw iTunes a little!

A: You'd think! (Laughs)

Q: Right now, ThinkIndie.com is your big project as executive director of the Coalition. What are your big challenges after that? Will you be flying to Birmingham 10 times a day?

A: I'll be doing some traveling. Obviously, the goal is to keep us all in business, No. 1. And it is a changing marketplace. We've done really well by sharing ideas and strategies. More than almost anything in this Coalition, the real benefit of it has been that we all can get together and share ideas that have worked for each other, because we're not in competing marketplaces. So everybody opens the doors to what they've tried and what's worked and what hasn't, and suppliers and pricing, and we share a lot of ideas without having to worry about somebody competing with us in the same room.

Q: What have been a couple of the big success stories out of the Coalition over the years?

A: I think diversifying products has been one of them. Some of us who have had gift departments have actually taken many members by the hand and walked them through gift shows and boutique shows.

Q: "This is a KISS doll."

A: Exactly. "You. Can. Sell. This." (Laughter) You may not think you can, but you can!

It's hard for me to remember the Record Exchange not having a lot of gift stuff.

A: Well we were a little ahead of the curve there. We opened a coffee shop/gift shop in the early '80s.

Q: Why were you ahead of the curve? Was it pure genius or a little bit of accident or a little of both?

A: We just saw a lot of products by going to shows that we thought we could certainly sell in this market, because no one else was really serving that clientele with those kind of unique products. At first a lot of it was novelties which we just thought were amusing. And then it branched out into apparel and other things. Rock books, magazines, things that nobody else was really doing a very good job on.

Q: Are most of the members of the Coalition much like the Record Exchange in that they are an important cultural part of the cities they're in?

A: I've visited most of the stores now across the country, and I'd say, yes, the majority of them are. They really have a cultural niche in each one of their markets. I mean they're an important center for things - many of them in urban centers but not necessarily. They're still a place where people visit, they cultivate, they feel at home. And hopefully they feel entertained and they learn something and they still appreciate what a good record store clerk is.

Q: What is a good record store clerk?

A: Well, It's somebody with a wide breadth of knowledge, I think, of a lot of music genres, and somebody that may be just damn opinionated and tries to tell you what they think is the best thing around. Or if you can relate to one kind of music, they've got another clue for you, they've got another door for you. I think that's the culture, really. They're gatekeepers.

Q: Was Jack Black a good record store clerk in the movie "Hi Fidelity"?

A: No! He was horrible! He would have been fired immediately! Too much attitude. (Laughs) That's some leftover from the '60s or '70s about how record store clerks have tons of attitude. We would have canned his ass immediately.

Q: You've been very active in Downtown Boise over the years. What's your perspective on how things are Downtown right now?

A: I think all of retail and everybody in the restaurants, in particular, are suffering the economy, and I think that's the overriding theme right now. It's hard to escape. We've lost a lot of restaurants Downtown. I think the rest of them are probably OK, but who knows. It's getting through this economic bump that's going to be the hard part for us more than even the cultural shift of our business.

Q: It's like a double whammy.

A: Yeah, it is a double whammy. So it's hard, it's tough. We were down for Christmas. I admit it. You bet. I'd say most of retail was down for Christmas. We sort of saw it coming and did appropriate things to try to keep our costs down.

Q: Do you have a sense of stability, though, as far as a record store, and for similar record stores? A lot of Mom and Pop stores went out of business in that last few years. Has the carnage ended?

A: I think the major wave of carnage has ended. I think a lot of the stores left are strong and have strong bases, and they're good business people. I don't think there's any more fear among record stores right now than the restaurant business.

Q: That doesn't make me feel very good! (Laughter)

A: Well I think everybody's pretty worried right now. I mean it's not good. People are watching their wallets very tight. We are not food. We're not transportation. We're a luxury item, if you will, and that's hard. People watch their wallets and then they watch everything that they don't absolutely have to have in their life. Although I would argue that music is a necessary part of everybody's life, but ...

Q: Has the accessorization of music, the fact it's now on a commercial or a ringtone or in a videogame -

A: - Well, I can tell you where that came from. Because radio isn't any good anymore! Let's face it, people used to discover music on the radio. Remember the radio? Before unregulated purchase by multinational corporations turned it into a homogenized mess? Thank God for the Web, because that's where a lot of people find their music now. At least they're finding it. But we lost radio! To a large degree, we lost radio. And that's a pretty sad thing.

Q: What I was going to ask is if the accessorization of music has helped or hurt record stores in the long run.

A: Right now, it's helped. After radio died, sure, at least it's something. It's some way that people are discovering music. So how could I say that it hurt it if they're discovering music somehow? And that can be television shows and "Rock Band" and Web sites and everything else. It's something. It's some way. The dedicated music fan has still managed to find a way to find new music. And that's a good thing.

Q: Is the dedicated music fan becoming more extinct?

A: I think there's a lot of competition for that person out there. There's a lot of ways to spend entertainment dollars these days. So I think that's been part of it, too. There never used to be a game industry that's worth billions and billions and billions of dollars every year. I mean that's a huge competitor of the music industry. The whole thing about that, though, is it just scares me, because I just see that potential for music to be more and more diminished in people's lives, and I think that's a sad thing. Music just becomes background on a TV commercial? How much passion can you have for that?

It's harder and harder for these artists to make money now. File sharing has hurt the income stream of artists, and that's the damn truth, and nobody wants to face it. The things they used to make money on are now being stolen. So you've got to find income streams if you're going to remain an artist. I mean people don't walk into a department store and walk out with half the shirts, you know what I mean?

Q: How do you envision the Record Exchange's role in Downtown Boise in five or 10 years? Or is it a day-by-day thing right now? Because it is an important cultural part of Downtown.

A: The one thing that we saw this Christmas which was a really positive sign: I can't tell you how many people came in, walked up to the counter and said, "I'm here to support you because you're a locally owned business. As much as we've touted our independence for 32 years, we've never seen a reaction so visible, and so many people, just person after person that get to that cash register and go, "I want you to know why I'm here." It was like, wow. I like to think of that spreading across the country and everybody understanding what it is to keep a culture in all of these cities alive. And that takes independent stores who are the birthplace of all that kind of free thinking and the right approach to their communities.

I think finally people are waking up to the fact that if you don't support those stores, they will go away. Because they're watching them go away. And hopefully, that light's going on in more heads these days. These people, they have to understand they're voting with their pocketbooks. I mean let's face it, either independent stores will make it or not, and it depends on those people who get it to support them.

Q: What about CD prices in general?

A: We've seen, of course, price resistance forever and have been screaming at the labels to lower prices long before this economy hit. At the beginning of the year, we're doing further price reduction on our own. I'm done charging $18.99 for CDs in this store. I'm going to lop the top off those prices. I'm going to reduce the prices on anything that has a price point like that, because nobody's going to pay it. I mean it's ridiculous. Despite what the labels think things are worth or the artists think things are worth, the public is the people who are speaking. And they don't want to pay $18.99 for stuff.

Q: So what are you going to cap a CD price at?

A: Well, we're going to do what we can. The margins are not gigantic I only have so much power to slice the top of that margin off, because it's all on my back. I'm not going to get any support from anybody. But I'm hoping the public will respond with, "Thanks for trying to reduce the price of music." Which we've been trying to do for the last few years.

And a lot of these stores, how are they going to survive? There's a lot of innovation going on. These stores are evolving into something else. We're about to close for a remodel in January. It's only for a couple of days, but I'm going to refixture part of the store and I'm going to integrate new and used products in the store.

Q: So used CDs will sit in the same bin as new ones?

A: I think that's the future. I think it's about who has the goods and who has the price. And we've certainly got the goods. And I don't think a lot of people have seen that new CD prices have gotten cheaper. And they won't shop in the new CD sections anymore because they're convinced everything is at $18.99. And I think the new buyer is assuming that they can't find some of these products that we have used. We have a huge used selection out there.

Q: Have other stories in the Coalition already integrated?

A: They have. So far, the reaction has been good. Each one of those buyers is seeing the benefits of the other side of the inventory. The new buyer is seeing that, "Oh, I can buy this used at $10 cheaper." And the used buyer is seeing that a lot of these catalogue pieces that they wait to show up - they wanted to pay $8.99 for it used - but look, it's $8.99 new! But they don't know that. So you've got to kind of force them to see that inventory and go "Oh, this record's now $8.99 new."

Q: Vinyl sales have bumped up the last two or three years. Is that a significant revenue boost?

A: It's nice to have a new area of growth. (Laughter) And it's still a small portion of the business, but it's a portion that's exciting. It's nice to see some of these reissues happening and the quality of some of the reissues are treated with respect. And then this growth in USB turntables has really been a cool thing, too. I can't tell you how many turntables we've sold. So that they can plug them into a computer and get the best of both worlds. You can buy that nice piece of vinyl and they get to load it onto their devices at the same time.

Q: Does it sound more like vinyl when you take it from vinyl and import it, or does it just sound like a typical MP3?

A: Well, it becomes a digital (MP3) file, what can I say? (Laughter) But at least you still get to use it if you like portable music. At the same time, you've got this kind of precious object. Which is, of course, the thing that I never have understood. Maybe because I'm too practical. But buying things called files doesn't give me anything, that if my music tastes change, that I can sell. I can spend 10 dollars for a record and it's a file and I can ignore it, or I can spend 10 dollars on a record, and when I'm done I can go sell it for two or three dollars and get something else. That always made more sense to me. (Chuckles)

Q: How important are used CD sales to you?

A: I love that secondary market. We started as a used vinyl and 8-track store. We love selling used music. Not only does it help support us a little better because the margin's a little better -

Q: You started the original one as just a used vinyl and 8-track store?

A: Yes, I did.

Q: How dated can you make yourself sound?

A: (Laughter) That's what I'm saying is all of these stores, including this one, have evolved. And we continue to evolve into whatever is necessary. If we need to become lifestyle stores, we will, and if we need to sell used products, we will, and if we need to sell digital products, we will. Because we like being in the music business. This is where the passion's left. It's not at Walmart. This is where people are still passionate about what they do even if it's selling products. They really are passionate about it. It's the only place left. And that really speaks for itself. You want to go someplace where people are passionate about this art form and they care about it and they live it and they breathe it? Or do you want to buy it from a clerk in an orange smock?

Q: You sound confident that the Record Exchange will be around 5 or 10 years from now.

A: I'm a fighter. We've been here a long time. (Chuckles) What do we need to do next?

Q: Will you still be owner 5 or 10 years from now?

A: I don't know. We'll see. At some point, I may want to take a step or two back.

Q: There's no exit strategy? No selling to the employees?

A: (Laughter) Who knows about all that at this point. I'm not really thinking that way yet. I still like what I do. I never get up in the morning and say, "Oh my god, I have to go to work." It just doesn't happen.

Q: You get up in the morning and say, "God I hate file sharing! OK, now I gotta go to work."

A: (Laughter) Well, yeah, I do say that!

Michael Deeds: 377-6407