Starting next month, music fans will rarely pay more than $10 for a CD published by Universal Music Group.
The record label announced that it will test across-the-board price cuts for the rest of the year, selling CDs for suggested prices of $6 to $10, Billboard reports. The lower prices will even apply to new releases, though there will be some exceptions. Jim Urie, UMG's distribution president and chief executive, said he hopes the price cuts will give CD sales a much-needed boost.
Though the so-called "Velocity" program is a trial run, it just might work. Trans World Entertainment, which operates FYE and other retail stores, recently began testing the $10 CD model at 100 stores. Sales doubled, and that's partly why UMG is trying out lower prices.
But so far, UMG is going it alone, as other major labels question the decision. Billboard says some executives were "annoyed" with the move, and others are nervous. Said one unnamed major label executive: "Why does Universal feel the need to get below $10?"
At the risk of sounding silly, I'm reminded of the story behind Subway's $5 foot-long sandwiches. It started when one franchisee in Florida tested the idea on a slow weekend, and sales suddenly went through the roof. But for a while, Subway executives scoffed at the idea, failing to see how a lower profit margin would result in bigger profits. Of course, you know the rest: Subway eventually tried the campaign nationwide, it became a huge success, and other fast food chains had to scramble to offer their own cheap deals. So, why does Universal feel the need to go below $10? Because it works.
It's not as if the move has no precedent. Full albums typically sell for $10 on iTunes, and with people increasingly relying on MP3s for their computers and portable devices, it's tough for CDs to complete. Yes, CDs carry extra costs, such as packaging and distribution, but those are small prices to pay if labels can get consumers to spend $10 on an entire album instead of $1 on a single song.
I applaud UMG's decision, because I actually still enjoy the concept of a whole album and prefer to have a lossless copy of my music stored away. If UMG finds success with this test, other labels will have to wake up and follow along.
