"Universal's price break isn't always reaching consumers"

I don't know if this was posted yesterday, but this seems to back up one of my rants a few days ago.

Ballyhooed price cuts elude CD consumers
Randy Lewis, Los Angeles Times
Wednesday, December 10, 2003
©2003 San Francisco Chronicle |

With great fanfare, Universal Music Group last month dramatically cut the prices it charges retailers for its CDs in hopes of boosting lagging sales. But the impact on consumers who go to stores this week to buy the latest hit albums from Jay-Z, No Doubt or G-Unit will vary dramatically depending on where they shop.

Universal, the parent company whose labels include Interscope, Geffen, A&M and Island/Def Jam, said in announcing the price cuts that it hoped reducing wholesale prices about 25 percent across the board would level the playing field between traditional record stores and mass merchandisers such as Best Buy, Wal-Mart and Kmart. Those giants now dominate the record business and often are given special discounts because of the huge quantities of music they sell.

But Universal's price break isn't always reaching consumers, for a couple of reasons. Some retailers are still selling Universal CDs for roughly the same price at which they sell all their CDs to pump up their profits in a business where, stores claim, they make just a few cents on a CD that sells for $14 or $15.

In other cases, smaller retailers who get their CDs through intermediaries called one-stops don't get Universal's discount -- that goes to the one-stop, which may or may not pass it along to the record store owner.

Also, although Universal said its discount would be universal -- applying to its new releases as well as the older albums in its vast catalog - - some retailers say it ain't necessarily so.

"It's an uneven test," says Joe Nardone Jr., vice president of the Music Monitor Network, a group of 105 independent record stores across the country. "What I hear is that we're getting inconsistent cooperation across the industry."

Nardone also is vice president of the 11-store, Pennsylvania-based Gallery of Sound chain, and says his company is aggressively supporting Universal's discount plan, selling UMG titles for around $10 to $11, compared with $13 to $14 for other labels' CDs.

The net effect, he adds, is that he's selling more CDs now, but on average, consumers are spending less per purchase than they did before the discounts took effect.

Nardone says the industry likes to blame the ease of downloading music from the Internet for many of its economic problems, but he suggests that "some days too much is made about accessibility of music and not enough is made about price and what people put on their records."

 

"Isn't always?" I haven't seen a single price break anywhere yet. Heck, even the company store on the Uni lot - which sells a piss-poor selection of Universal Music product - hasn't lowered their prices one dime.

 

I haven't seen any price reductions on any UMG product, either.

 

Maybe they were unable to devote the amount of display space that Uni requires to get the price breaks

 

We're seeing some price drops up here but no that significant.
For example, if a CD had an MRSP of $18 before it would be on sale for $13. With a new MRSP of $15 the "Sale" price is the same....$13.

 

Which is definitely blackmail now that Universal does not do co-op advertising with retailers since the "price lowering" started. They're basically forcing them to give them rack space for free that they used to pay for, in order to get the lower wholesale price. Which isn't that much lower, particularly on superstar artists.

 

This suspiciously sounds like what happened to the audio equipment retailers back in the late 80's and this is why each retailer usually only carries one premium high-end manufacturer. Not a good sign IMO.

 

I mainly buy used CDs, but I've heard that some previous $18.98 A&M reissues (Brasil '66's "Equinox" album stands out, as I ranted heavily against the $18.98 price) have now dropped to more reasonable levels. (I've seen this at Amazon.)

I think you'd see the price cuts more if Universal were playing fair. They're not. The policy still favors the big retailers, especially if the mom and pop stores can't abide by Universal's policies.

The idea behind it is good, but the way it's being implemented sucks. Univer$al should act unilaterally, and other labels should follow suit. That much activity would see prices start to ease overall. I just have a feeling Universal is going to decide it *doesn't* work (despite their flawed implementation) and raise prices back up again.

 

i think I posted this last week, but the day the story came out about the price breaks, the big box stores had flyers gushing about new releases for $9.99.....since then?.........ZIPPO! Everything is back up to $13-$15 for UNI cd's. Xmas gouging!