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Universal lowers wholesale CD prices to bring down retail prices

Posted at 09 December 2003 01:10 CEST by Seán Byrne
While fighting piracy with lawsuits does not seem to be helping to bring users back into the shops, Universal is trying a plan which music lovers have been asking for all this time:  Lowering wholesale CD prices.  As a result, retailers have lowered CD pricing by an average of 2% this year to $ 13.32 on average according to MusicWatch.  Some major retailers are even selling some new releases for less than $ 10 down from around $ 17 and over; prices not seen since the early 1990's, although many are for a promotional period only.  The world's largest music company Universal Music Group has cut prices on new releases by 24% to 31% to retailers who agree to certain conditions.   The music business is aiming to bring music fans back to the stores as a result of a 31% music sales drop over the past three years.  Many consumers are complaining that album CDs are not worth the $ 18 to $ 20 a pop and others are moving to legal services such as iTunes where they only purchase the tracks they like.  Apple's iTunes has sold 17 million 99 cent tunes and growing; thus retailers are facing competition with the legal download services and not just the free P2P networks.  Currently, about 11% of all music sales are from online music purchases and this figure is expected to reach 33% by 2008.   Despite Universal's lowered prices, there are many retailers unhappy with Universal as they claim that Universal is trying to tell retailers how to sell and price their music.  Other retailers claim that lowering CD prices will only benefit the larger retailers that rely on other means of making profits as cheap CDs are not profitable.  Some retailers such as circuit city will not offer pass on the cost savings to customers until the sell off their existing stock at the old pricing.  Finally, the remaining "Big Five" music companies - Warner, Sony, EMI and BMG have not yet made any effort to following Universal and reduce their prices, but are instead tracking how consumers respond to Universal's price cuts before making decisions.  GristyMcFisty submitted the following news from Yahoo via our  news submit : The free-falling music industry is finally playing a song that consumers want to hear during this holiday season: lower CD prices. Retailers have lowered the average price of CDs by 2% this year to $ 13.42, and cuts will accelerate in this quarter, says market researcher NPD MusicWatch. Major retailers such as Wal-Mart, Best Buy and Circuit City are selling some new releases for less than $ 10, a price not seen consistently in a decade. Universal Music Group, the world's biggest music company with artists such as Eminem, Shania Twain and Jay-Z, has cut wholesale and suggested list prices on most new releases by 24% to 31% for retailers who agree to certain conditions. But holiday shoppers will need to check around to get the best deals, because prices are still all over the map. Consumers can find a $ 6 price difference on the same CD. The lowest prices are often limited to promotion periods, before they're jacked up. Many niche, classic or classical CDs are still listed as high as $ 18.99. The lowest CD prices are found online, before shipping and handling; the highest are often at bookstores. The online-piracy-ravaged music business needs to woo music fans back into stores - particularly now. The holiday season generated a third of the U.S. music industry's $ 12.6 billion in sales last year. Music executives blame rampant piracy and file sharing across "peer-to-peer" networks, such as Kazaa, for a staggering 31% sales drop in the last three years. Piracy now costs artists and record labels $ 700 million per year, according to Forrester Research, and the industry has started suing individual users who share files. But lost in the furor about piracy is the fact that many consumers are buying less music because they believe CD prices are too high. Some have shifted their entertainment dollars to competitors, such as DVDs and video games. "Many consumers perceive CDs as less valuable than they used to be," says Josh Bernoff, music analyst for Forrester Research. "They're livid over having to pay $ 18 for a CD with only two good tracks." James Larson, manager of the independent Sounds music store in Manhattan's Greenwich Village neighborhood, thinks a move toward lower prices is overdue. "A lot of customers are coming in and asking about it (Universal's plan)," he says. "There's no reason why CDs should be $ 20; that's ridiculous. This will deter them from burning" (their own CDs). Thanks in part to the UMG program, bargain hunters have been able to find Jay-Z's million-seller, The Black Album, for as little as $ 9.99 on sale at Circuit City. Other releases, such as Bon Jovi's This Left Feels Right, Sheryl Crow's The Very Best of Sheryl Crow and Ludacris' Chicken N' Beer have sold for as little as $ 9.88 at Wal-Mart and $ 9.99 at Best Buy and Tower. When they revert to non-promotional, everyday prices, these CDs typically sell for $ 11.99 to $ 13.99. Shoppers have not seen the magic number of $ 9.99 this often since the price wars of the early 1990s, music experts say. The number of units selling for less than $ 10 has almost doubled, to nearly 9% in October vs. 5% in the fourth quarter of 2001, according to music tracker Russ Crupnick of NPD MusicWatch "There's a lot of action in pricing from retail. There's more records on sale for $ 9.99," notes Alain Levy, chief executive of EMI Music. Read the rather long full article here.   It is about time a music label has tried experimenting with dropping CD prices.  Let's hope that Universal's approach proves successful and tempts the other music labels to follow.  This is the best time to promote lower CD prices as a good portion of CD sales come from consumers purchasing albums as Christmas gifts.  Original CDs do look better as a stocking filler than a plain-looking CD-R.    Discuss and read more about legal online music services and P2P networks on our Music Downloads, P2P & Legal Issues Forum. Source: Yahoo Technology News

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There are 7 comments

Sherrif
CD Freaks Senior Member
Posted on: 09 Dec 03 01:58
    With the outright condemnation of all music lovers as being pirates and the subsequent jackboot tactics employed by the RIAA, it would be cynical to believe this would entice all but the "real" pirates back to the fold and in fact has already seemingly degenerated into a wholesale/retail shitfight...for myself, it will be a looooooong time before I step into a music store to purchase a cd album and when I do it better be full of "good music"....until then I'll be putting together my own, occasionly bending over and exposing that part the RIAA and music companies have been telling us to kiss for a long time.............. :X
    Crabbyappleton
    MyCE Resident
    Posted on: 09 Dec 03 02:06
      Me too Sherrif. I keep reading more and more about how crooked these labels are and I just don't feel right by buying the products that support their existence. It is time for a change in management. :r
      icepax
      Waiting on Activation
      Posted on: 09 Dec 03 05:27
        Stop complaining you too! Oh heck, today's music is bad anyway...Keep complaining! :B
        zulu9812
        CD Freaks Junior Member
        Posted on: 09 Dec 03 11:41
          I still ain't gonna buy copy-protected Cds. no matter how cheap they are. 2 examples: Iron Maiden are my favourite band. I love Iron Maiden. But the new album ('Dance of Death') was copy-protected, so I sent it back to the web store, who gave me a refund. Dido's new album is priced at only £6.99. I like the artist in general, I like both singles released so far - but I ain't gonna buy the album. Why? Because it's copy-protected. I would buy it at this price if it wasn't copy-protected. The record companies are going to have to stop trying to make it illegal not to buy their product (!) and actually give the customers what we want.
          Seán
          Senior Administrator & Reviewer
          Posted on: 09 Dec 03 22:44
            I never thought of the copy-protection. If Universal copy-protect their CDs with copy protection, it is as good as being greeted by the shop staff saying "You can buy our low price CDs, but don't even think about copying them!". Oops as usual, if the prices are attractive, there must be a catch. :r
            JJJB
            CD Freaks Member
            Posted on: 10 Dec 03 19:24
              Here in the states there are no Copy protected discs.So unless I really want to keep the disc.I just buy,burn and sell sometimes for more than I bought it for.:B
              squinty
              CD Freaks Member
              Posted on: 10 Dec 03 22:36
                Incorrect, there are a few that are protected in the states. Also, you're last statement offends me. It's those type of attitudes that give the people doing legal backups a bad name.

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