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Sticker Price Scrapped for Universal CDs

Less than a month after Universal Music Group said it would try to lure music buyers back to stores by placing $12.98 stickers on most of its compact discs, the company acknowledged yesterday that it would not specify a price, bowing to pressure from major retailers such as Best Buy.

Instead, Universal Music -- the largest of the music industry's five big companies and home to acts such as Nelly and U2 -- will put stickers on CDs saying they are priced lower without stating a price, though Universal Music believes that retailers will price them near $13.

Retailers generally have applauded the move to lower CD prices but are concerned that profit margins would be excessively squeezed if they sell CDs for $12.98, even though Universal Music also is lowering its wholesale price to retailers.

I applaud this move from multiple viewpoints. It's good business to lure customers back with lower prices. It's good for consumers for the obvious reasons. And it's good for markets because it's a simple solution that is entirely voluntary. Sure, the retailer gets final say on what a product is priced, but they'll cut them to be competetive.

Shortly after the Sept. 3 announcement, Universal Music sent a letter to its retailers, saying it would place the $12.98 sticker on most of its new CDs beginning around Oct. 1. In addition, the world's largest music company, which accounts for about 30 percent of all music sales, would lower its wholesale price to $9.09 per CD, from $12.02.

To get the lower wholesale prices, however, retailers had to commit to certain conditions by Sept. 19, such as giving the lower-price Universal Music CDs 27 percent of total store space or 33 percent of the space occupied by CDs from major labels.

Most retailers opposed the $12.98 sticker for a number of reasons. One was that if retailers put a higher sticker price on a CD that already has a $12.98 MSRP on it, the retailer could suffer from customer enmity. Other less-obvious objections were raised, said Universal sources, such as retailers saying they might be able to price such CDs for less than $12.98.

© 2003 The Washington Post Company

It all begins today! Here is a list of the US labels owned by UMG:

Geffen Records
Interscope Geffen A&M
Island Def Jam Music Group
Lost Highway Records
MCA Nashville
Mercury Nashville
Motown Records
Universal Classics
Universal Records
Universal Music Enterprises
Universal Music Latino
Universal South
Verve Music Group

An international list of labels can be found here, but the price changes don't affect the international market. The press release is here. A few quotes:

Universal Music Group (UMG) announced today an aggressive plan to significantly reduce the cost consumers pay for CDs by decreasing its wholesale prices and by instituting a $12.98 Manufacturer Suggested Retail Price (MSRP) on virtually all top line CDs in the U.S..

UMG will introduce a new pricing policy with the aim of bringing music fans back into retail stores and driving music sales. The program, which will begin in the fourth quarter of 2003, will eliminate $16.98, $17.98 and $18.98 equivalent MSRPs. UMG believes retailers will begin offering the lower priced CDs to consumers as soon as October 1, 2003.

As part of this new policy, UMG’s labels plan to significantly increase their direct-to-consumer advertising to raise music fans’ awareness of the artists and their music.

Concurrently, UMG will also reduce its wholesale price on cassettes so its MSRP for top line releases will be $8.98.

UMG’s roster includes such renowned artists as Ashanti, Mary J. Blige, blink-182, Bon Jovi, Mariah Carey, Sheryl Crow, Dr. Dre, Eminem, 50 Cent, Enrique Iglesias, India.Arie, Elton John, Diana Krall, Nelly, No Doubt, Puddle of Mudd, Reba McEntire, Stevie Wonder, Sting, t.A.T.u., Texas, Shania Twain and U2. The new pricing policy will also apply to UMG’s historic catalog of recordings which includes artists such as ABBA, Louis Armstrong, James Brown, Eric Clapton, Patsy Cline, John Coltrane, Ella Fitzgerald, Jimi Hendrix, Billie Holiday, Antonio Carlos Jobim, Bob Marley, Nirvana, The Police, Rod Stewart, The Who, Hank Williams and the Motown catalog, which includes The Four Tops, Marvin Gaye, The Supremes and The Jackson Five.

Other artists worth mentioning:

Interscope (Beck, Chris Cornell, Days of the New, Garbage, Nine Inch Nails, Primus, Weezer...)
Def Jam Group includes -among other labels- Island Records (Portishead), Def Jam Recordings (all things mainstream hip-hop), American Recordings (Johnny Cash, Danzig, Slayer, System of a Down...), and Roadrunner Records (Fear Factory, Jerry Cantrell, Machine Head, Obituary, Sepultura, Slipknot, Type O Negative...).

This is excellent news. A LOT of artists I enjoy will have their CDs priced less. Just the thought of all the cheaper Coltrane is making me happy. Unfortunately, the price cuts won't include box sets or Latin recordings.

Universal's current wholesale price for a CD album is $12.02, with a manufacturer suggested retail price of $18.98. Under the new pricing structure, the wholesale price would be $9.09.

The wholesale price for CDs by a handful of performers, including Eminem and Shania Twain, would be about a dollar more, said Jim Urie, president of Universal Music & Video Distribution.

The company also said it would cut wholesale prices on cassettes and change the suggested retail price to $8.98. Latin recordings and multiple disk packages or CD box sets would not be included in the pricing change.

Copyright © 2003 The Island Packet

Posted by Drizzten at October 01, 2003 01:05 AM