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Universal Has Great Idea Five Years Too Late

Posted by on March 23, 2010

According to an article that our friend Ed Christman at Billboard wrote recently, the Universal Music Group (which includes Interscope and Universal, among other labels) has decided to experiment with dropping the prices of the majority of their CDs to $10 or less. In other words, they’re going to start charging for physical CD’s the same thing a download costs in what UMGD chairman/CEO Jim Urie says will “bring new life into the physical format.”

The physical format needs all the life it can get. CD sales are down 15.4% from what they were at this point in 2009, and that’s nothing compared to the free fall they’ve been in since 2000. In fact, sales have fallen from 943 million that year to just 374 million in 2009. While reducing CD prices is a good move, it’s definitely coming too late. Aside from the obvious fact that file sharing and illegal downloading have killed music sales, a few years of having iTunes and Amazon downloads for $9.99 has conditioned a lot of music buyers to make the switch to digital.

The article stated that retailers are hesitantly embracing Universal’s move. It will probably result in more sales, but the profit margin is thinner that it had been for them. Many of them, particularly the big box retailers (Best Buy, Wal-Mart, etc.), had already been losing money on CDs already by pricing them at $10 to get people to come into their stores. UMG plans on making up the money in the price reduction by having more higher-priced deluxe editions of albums come out, as well as money from increased CD sales. Hopefully this will work since we don’t want to see the record store go away. But neither the labels of retail stores did anyone any favors a few years back when it was commonplace to walk into a CD store and see an album cost $18.99.

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Categorised in: Label Moves