CD prices to drop

[mgraham333]

Universal Music slashes CD, cassette prices

By Michael McCarthy and Theresa Howard, USA TODAY

NEW YORK — In a move that could lower music CD prices across the board, Universal Music Group (UMG), the world's largest music company, will cut the suggested retail price for its top-line CDs to $12.98 from the current $16.98 to $18.98, effective Sept. 29.

The cut by the company, which has contracts with artists such as Eminem, 50 Cent, Mary J. Blige and Shania Twain, is an effort to revive sales, which have dropped 30% industrywide over the past three years. U.S. sales in 2002 dropped 8% to $12.6 billion, according to the Recording Industry Association of America (RIAA).

"We expect this will invigorate the music market in North America," said Doug Morris, UMG chairman and CEO. "This will allow retailers (to sell) for $10 or less if they so choose."

The wholesale price on most CDs will drop to $9.09 from $12.02, with some top artists, such as Eminem, at $10.10. UMG expects retailers, who set final prices, to start selling CDs for about $12 on Oct. 1 and hopes they will go as low as $10.

"We've tracked this carefully. There's no question: The consumer responds when we get to that sweet spot of $11 to $12 per CD," says Jim Urie, president of Universal Music & Video Distribution. Executives at the other four major music companies — Warner, EMI, BMG and Sony — declined to comment.

In addition to the price cuts, UMG will replace ad subsidies for retailers with more ads for its own products to lure music fans back into stores. The company also is cutting the suggested retail for cassettes to $8.98.

The price cuts are also the music industry's latest attempt to slow illegal file sharing by consumers. The RIAA has served more than 1,300 subpoenas to identify traders and expects to file lawsuits as early as this week. Record companies are losing $700 million a year to piracy, says Josh Bernoff, media and entertainment analyst at Forrester Research.

Forrester released a study Tuesday predicting an even bigger drop in CD sales as Internet music file-sharing keeps gaining ground on the flagging CD, CNN.com said.

"It's disgraceful that people are losing their jobs and stores are closing," Morris says. "As the leader in the industry, we feel we should pave the way with a plan that, if it's successful, will become permanent."

It remains to be seen whether the cuts will be enough to persuade young consumers to buy CDs. Discounters such as Wal-Mart already discount CDs to about $13.

Michael Goodman, an analyst with Yankee Group, warned that if retailers refuse to pass on their full savings to consumers, "They could exacerbate a bad situation."

And Bernoff warns that lowering prices will not solve the long-term problem of file sharing: "This price reduction may stem the tide of losses in the short term. But in the long run, the only solution is to provide music online for people who want music online. That's the future, not CDs."

Source: USA Today

Maybe now the industry will realize it was their illegal price fixing that was doing more to kill the market than was file sharing.

Edited September 4, 2003 by mgraham333

[montg]

No more 18.98 prices for Verve Master Editions, I guess. Those prices were laughable, espeically compared to the RVG retail.

[David Ayers]

No more 18.98 prices for Verve Master Editions, I guess. Those prices were laughable, espeically compared to the RVG retail.

Maybe no more VMEs at all?

[.:.impossible]

$11 to $12 is definitely the sweet spot. Finally, the giant awakens.

[Chuck Nessa]

While this is great for the consumers, I'm sure lots of indie labels are scrambling to see how they might survive if this price structure becomes the norm. It has been tough selling new recordings when you have to compete with cheap OJC and RVGs, but this may be the final nail in the coffin for some operations.

A label like PI could be in deep doo doo. This will probably end the "major label" careers of a number of artists as well.

[.:.impossible]

It seems to me that a complete restructure may be on the horizon, regardless of price points. The value that a label like Pi brings to the table doesn't appeal to the larger segment that the giants are vying for.

I'm having trouble completing my thought. I'll have to revisit this thread. I would love to hear more from you on this Chuck, if you have the time.

[Rooster_Ties]

FYI, we have two competing threads on this very same topic. Suggest we take it to the longer of the two threads, which is here:

Universal Music to Cut CD Prices to Under $13

Good points made in this thread, perhaps they could be restated in the other one???

(Just an idea.)

[JSngry]

CASSETTES?

[BERIGAN]

CASSETTES?

oh yes, the Cassettes! Not quite as good as the Marvelettes, or the Exciters, but still good in their own right!

[JSngry]

Well, as long as it's not the Chordettes, I can live with it.

[Out2Lunch]

What about Weizen and his "Ripplettes"?