The business of Record Store Day

April 19, 2013, 1:00 PM UTC

FORTUNE — In 2007, Michael Kurtz, the president of a coalition of independent record store chains, invited a group of store owners to participate in a think-tank discussion in Baltimore. Tower Records, one of the biggest music retail chains in the world, had recently shut down. Tower’s shuttering was widely viewed as the symbolic final defeat of brick-and-mortar music retail at the hands of online piracy and digital retailers like the iTunes Music Store. “There was all of this negative media saying record stores were irrelevant,” Kurtz says, and he wanted to figure out how to change that. Chris Brown of Bull Moose, a small chain based in Maine and New Hampshire, suggested that they look to Free Comic Book Day, which had done a lot to raise the profile of struggling independent comic shops, as the inspiration for an event that would bring music buyers out to stores en masse. The first Record Store Day (RSD) took place the following year on April 19.

RSD, which has been held on the third Saturday in April ever since, has become a secular high holiday for independent record stores, their patrons, and the musicians and labels that supply them with product. Labels from majors such as Warner Bros. and Island on down to tiny indies issue special editions of LPs, CDs, and memorabilia that are only sold through participating stores, which only need to be independently owned and follow by a relatively simple set of rules in order to qualify.

All of the offerings are produced in strictly limited runs, and many of them get done up elaborately. A reissue of Wu-Tang Clan member GZA’s classic 1995 solo album
Liquid Swords
available this Saturday comes as a four-LP boxed set in packaging that doubles as a chess board, complete with wooden chess pieces. Dedicated collectors line up in front of participating stores the night before Record Store Day, carrying lists of their top selections from the more than 300 items avalilable. Many shops go all-out with live performances by bands and their own exclusive RSD offerings.

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Kurtz says the original goal of Record Store Day was to get independent music retailers some much-needed positive press (which it did), but as the event’s grown in popularity it’s come to be as important to participating shops’ bottom lines as the holiday season. “It’s the biggest sales weekend for record stores now,” Kurtz says, adding that for some stores they’ll do a month’s worth of typical sales on just the one day.

Matt Bradish, owner of Underground Sounds in Ann Arbor, Mich., says those numbers are about right. Underground has been open since 2001 and has been an RSD participant from the start. He says that last year his store did about three weeks’ worth of sales, and given the nearly 50% increase yearly increase in their RSD business, he expects to do a month’s worth this year. “It’s astounding,” he says.

Record Store Day not only brings in money for the participating retailers, but for the labels and, especially, for the few remaining vinyl pressing plants in the country. Last year the total number of items produced for RSD was over 600,000, most of them vinyl singles and albums. “We started out with $30,000 in vinyl purchases six years ago,” Kurtz says. “This year it’s over $7 million. We relaunched the vinyl business.”

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For a very small number of individuals, the event offers a payday as well by reselling exclusive releases on eBay (EBAY). The more highly sought-after releases can go for hundreds of dollars apiece online, and some (like one of a run of 100 seven-inch singles of the Cure’s “Friday I’m In Love”) can sell for nearly a thousand. Kurtz admits that reselling runs against the spirit of Record Store Day but says that by his own estimate only one half of 1% of RSD sales are flipped. (Stores that take their exclusive stock to eBay are barred from further participation.)

Apart from the fact that some of the exclusive releases (such as a reissue of Linkin Park’s
Hybrid Theory
) could be considered less than essential by music lovers, the practice of reselling is one of the few serious criticisms of an event that’s been embraced by music aficionados worldwide. This Saturday over 2,000 stores will be participating in the event.

Record Store Day is especially popular in France, where as Kurtz says, “the idea of supporting your local humanities in any way is a very important thing to do.” In January he was flown to France to be made a chevalier of the Ordre des Arts et des Lettres. As he’ll proudly tell you, it’s the same order that made David Bowie and Bob Dylan members.