Dec. 17, 2013 -- While Beyonce surprised fans with an unexpected new album release last week, retailer Target made its own unexpected announcement when it said it would not sell the album in its stores.
The musician's eponymous "Beyonce" album was released at midnight on Friday, Dec. 13, exclusively on iTunes, and that move has apparently irked Target.
In a statement, Target explained why it was not carrying the new album:
"At Target we focus on offering our guests a wide assortment of physical CDs, and when a new album is available digitally before it is available physically, it impacts demand and sales projections. While there are many aspects that contribute to our approach and we have appreciated partnering with Beyonce in the past, we are primarily focused on offering CDs that will be available in a physical format at the same time as all other formats."
Can Erbil, an economics professor at Boston College, said Target is "upset and maybe a little jealous" about the market power of iTunes as the initial exclusive distributor of Beyonce's album.
"Companies are competing to capture the consumers with the highest willingness to pay along with the ones who cannot wait even a day, and have to have the album as soon as it is out," he said. "These 'premium customers' are captured by iTunes now."
Target may or may not be right about the air already being squeezed out of the "Beyonce" balloon. On Monday, Apple, which owns iTunes, said that the album was the fastest-selling album ever in the iTunes store worldwide, with 828,773 albums sold in its first three days. The album also broke the U.S. first-week album sales record, with 617,213 sold, reaching No. 1 in 104 countries.
"Even if iTunes doesn't charge a markup, it is effectively diminishing Target's customer pool," Erbil said. "The whole saga is a very interesting marketing reality show starring Beyonce, iTunes and Target. Beyonce's move is new, but the motivation behind it seems to be good old microeconomic theory, flexing its market power muscles."
Lauded for its secrecy and clever marketing, Beyonce's fifth solo album, with its 14 new songs and 17 videos, immediately captured the attention of fans. Later this week, brick and mortar stores are expected to begin selling the album, with the exception, of course, of Target.
When asked if Target's decision not to stock the album was a bad one, Kenneth Perkins, Morningstar equity analyst, said Target likely made a calculated decision not to sell it, using data from Target's exclusive past partnership with Beyonce.
For Beyonce's last release in 2011, Target sold an exclusive version of "4" that included six additional tracks. That album included such hits as "Run the World (Girls)." To market that album, in a TV ad for Target, Beyonce said, "I put so much into my new album, and only Target gives you all of it."
"Target probably didn't see the return on the investment they had made to try and lock these things up," Perkins said. "It costs money to make these sales."
Musical artists such as Katy Perry and Garth Brooks have made similar exclusive agreements with Walmart in selling "deluxe" or "special" editions of their albums.
Perkins said the goal of musical artists and labels is typically to sell their albums in as many outlets as they can, but with more people shopping online, Amazon and iTunes have a monopoly-like power over other e-commerce sites. But the goal of retailers like Target is to get people into its stores to increase foot traffic and overall revenue.
It's possible that Target will regret its decision if sales continue to skyrocket for Beyonce's album, Perkins said.
"I wouldn't underestimate the buzz around this sort of stuff. It sold well, and if more people are talking about it online, it becomes something more and more people are interested in," Perkins said.
He added that the album is only a few days old, and holiday gifts of the album will likely add more fuel to the flame.
"It will probably get some good holiday buzz around it," he said.
A publicist for Beyonce did not respond to a request for comment.