Vinyl sales have been increasing steadily over the last couple of years. With this increase comes a surge in private resale activity on sites such as Discogs, Ebay or in Facebook groups.
But how lucrative is it really? A short analysis.
From Stax to stacks: the vinyl resale business is attractive to many (photos: getondown, discogs, Google images)
Many private investors are looking for ways to put their hard-earned money to work hoping for higher returns than a low-interest bank account would get them. Some go into the stock market, others into real estate. The more venturesome invest in crypto-currencies, such as Bitcoin or Ethereum. Lately, new vinyl releases are also becoming the object of financial speculation. People buy or even pre-order limited vinyl releases in the hope of selling the sealed records for a profit after a short time.
I buy vinyl occasionally in order to listen to the music and for DJing purposes. However, I have also sold records at a profit before. There are a couple of things a prospective investor might want to keep in mind before jumping into the vinyl market.
1. Most vinyl records lose resale value right after purchase and never fully recover their retail price.
This is actually true. In my personal experience, 80 - 90% of all the vinyl releases lose value after purchase and never fully recover it. This is due to the extreme overkill of vinyl releases of all kind. Remember: price reflects supply and demand. The total demand is often much smaller than the total supply.
2. The number of reissues has been increasing drastically over the last couple of years.
Everybody who regularly checks webstores and catalogues will confirm that the supply of vinyl reissues keeps growing steadily. Except for the biggest classics of any genre, these reissues tend to cause a decrease in the prices of the original release as well. Not only do reissues have an effect on the resale pricing of the original, but by now it has become common practice for different labels to release identical reissues of the same album within a couple of weeks.
There are many examples, but I will focus on Ras Kass' Soul On Ice. The record originally appeared in 1996 on Priority Records. A popular record, the album fetched up to 65,60€ on Discogs at its peak.
In 2016, Blackhouse Records made an expanded reissue in three different variations: 100 in black, 150 in blue translucent, and 150 in blue/white splatter. None of the records has been able to achieve a sustained increase in resale value. However, they did cause the value of the original to decrease. It is currently available for as little as 20€.
To make matters worse, Priority has announced yet another reissue of Soul on Ice this summer. As a result, none of the editions of this record will have an attractive resale value in the future. Those who pay retail prices for copies of this record expecting to make a profit later on will lose money.
Good music, terrible investment: Ras Kass' Soul On Ice (photo: Discogs)
3. Copyrights owners can make reissues whenever they want.
Competing in a vastly expanding market, many labels advertise limited editions. Some even promise to never make a second edition. But bear in mind that it is exactly that: a promise. In reality, copyright owners can make reissues of their releases whenever they want, at the quantity and at the price they want. Most labels will make reissues if there is sufficient demand. Depending on the size of the label, this decision could end up in the hands of just one individual.
4. Useful tips for successful record speculation.
Due to the extreme volatility in the vinyl market and the above-mentioned uncertainties, I strongly warn against vinyl speculation of any sort. However, if you feel you must try it, make sure you remember the following tips:
Find records that are truly limited and cannot easily be reissued.
In most cases, 1.000 records is not an attractive limitation. Try to aim for editions of 350 or less. Beware of editions in various colours, as the total number of records determines the value.
Try to find records with illegal content. Some of you may know that certain records contain uncleared samples. Oftentimes, these uncleared samples come to the attention of the copyrights owners after the first edition, making a legal reissue virtually impossible. An example would be La Boom's superb Atarihuana. The artists and their management tried to clear a sample on the song "Cheers" by Gary Portnoy after the vinyl was already distributed. A legal agreement failed and there will never be a reissue of this album including "Cheers". The record sells for up to 169€ on Discogs.
La Boom's Atarihuana: too good to be legal (photo: Discogs)
The same is true for popular mash-up records. These are usually titled "Rapper X VS Soul Singer Y". These projects are almost never fully-licensed. Therefore, legal reissues are pretty much impossible.
When investing in vintage records, research the copyright situation. If members of a band have passed away and there are disagreements over the estate amongst the heirs, it can take decades for reissues to see the light of day.
Please be aware that popular bootlegs can appear at any moment. Since some of these bootlegs come in full-colour sleeves and sound quite good, they can pose a significant risk to the expected resale price of the original.
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Cheers,
Stefan