Is $10 dollars the right price for a CD?

[Don]

By Ed Christman, N.Y.

http://www.billboard.biz/bbbiz/content_ ... fccecca01b



The Universal Music Group could rewrite U.S. music pricing when it tests a new frontline pricing structure, which is designed to get single CDs in stores at $10, or below.

Beginning in the second quarter and continuing through most of 2010, the company's Velocity program will test lower CD prices. Single CDs will have the suggested list prices of $10, $9, $8, $7 and $6.

To accommodate the lower pricing, UMG labels also plan to step up deluxe versions of albums that can sell at higher prices for the more devout music fans and collectors. UMG is also banking that the lower price points will at the least be offset by increasing CD sales volume.

Most new releases will carry the new price points, although there will be the occasional exception, UMG sources say. At deadline, it was unclear exactly when the program would begin, because Universal Music Group still hadn't relayed that information to accounts.

"We think [the new pricing program] will really bring new life into the physical format," Universal Music Group Distribution president/CEO Jim Urie said.

25% profit margin

Retailers should respond well to the new price points. But the level of their acceptance will likely depend on the profit margins that the new UMG wholesale prices afford. According to sources, the new pricing structure will carry a 25% profit margin, which means that $10 list CDs will wholesale for $7.50; $9 for $6.75, $8 for $6, and so on.

Consequently, retailers who buy from wholesalers will likely be less enthusiastic about the move.

Newbury Comics CEO Mike Dreese gives the initiative "two thumbs up." But he adds that the industry still needs the other major labels and independents to make similar pricing moves for overall CD sales in order to be positively impacted.

"We are happy to see that a major music vendor has made a decision to lower his price substantially, because it's what the customer wants today if we are going to see a viable CD business," Trans World Entertainment CEO Bob Higgins said.

Reaction from industry

On March 16, executives at the other majors were nervous about the UMG move, calling around to accounts for information on the move. Privately, some appeared annoyed by the move. "Why does Universal feel the need to get below $10?" a senior distribution executive at a competing major asked.

Yet merchants have long clamored that lower pricing will prolong the life of the CD, which is down 15.4% so far this year. Album sales were down 18.2% last year, and 19.7% in 2008, when CD sales totaled 360.6 million, as opposed to the 706.3 million units CDs scanned in 2000.

In response to declining sales, the majors and indies have responded by lowering catalog pricing across the board -- either formally, like Sony Music Entertainment's Accel program does (Billboard, Sept. 5), or through promotional vehicles like UMG's XL promotion -- to bring wholesale cost price down to the $7-$8 range. Frontline pricing, however, still remains a mixed bag, with UMG main wholesale price point at $10.35; Sony at $10.50, EMI at $12.04 and the Warner Music Group at $12.05.

Between all the retail circulars touting hit titles at $9.99, and iTunes selling albums at that same price point, it became conventional wisdom among merchants that $10 is the magic price point that will induce consumers to buy more CDs.

The new UMG pricing structure for CDs won’t impact its digital pricing; the company plans to keep its current pricing for digital.

Pricing programs

UMG was the first major to address declining sales when it initiated Jumpstart pricing in September 2003, which put frontline pricing at $10.35. But the other majors condemned that move and refused to lower prices until years later.

As CD sales continued its decline, merchants began renewed requests for the labels to respond yet again beyond the catalog pricing moves, JumpStart and Accel. In the last few months, Trans World Entertainment began testing the $9.99 price point in over 100 stores, while Wal-Mart has been telling the majors to release shorter albums at lower prices more frequently.

The Trans World test -- in which most independents and every major except for the Warner Music Group participated -- produced units sales increase of more than 100%, according to label executives who participated in the tests. The Trans World test helped sell the new pricing model to the Universal labels, sources say.

On the reluctance by other majors to so far address the $10 retail price point issue, one source says, "The definition of idiocy is doing the same thing over and over and expecting a different result. Things are not going to get better for CD sales unless the price point is addressed. One thing that the Trans World test shows for sure, $10 will drive sales and traffic."

[steveo777]

I bought a pack of 5 coasters at the dollar store the other day for $1.

$10 won't work because by the time big labels take their cut and figure in promotional expense, etc., there's nothing left for the artist.

Just sell albums and tracks as digital downloads unless there is something like a Walmart deal.

[TRAGChick]

I bought a pack of 5 coasters at the dollar store the other day for $1.

$10 won't work because by the time big labels take their cut and figure in promotional expense, etc., there's nothing left for the artist.

Just sell albums and tracks as digital downloads unless there is something like a Walmart deal.

We're gonna sell "Catch The Storm" at $10.00 / CD....as well as the Singular Track rate of .99 per Track at iTunes, etc.

But...then again.....we're Independent....we can do WHATEVER THE HELL WE WANT! \~/

[Don]

I bought a pack of 5 coasters at the dollar store the other day for $1.

$10 won't work because by the time big labels take their cut and figure in promotional expense, etc., there's nothing left for the artist.

Just sell albums and tracks as digital downloads unless there is something like a Walmart deal.

As of November, 2008, Wal-Mart has embarked on a plan to continuously reduce shelf space for CDs. Despite the store being the second largest music retailer in the US, the sale of CDs only makes up 2% of the store's overall business and they have steadily worked away from it to the point where they may just offer digital media only.

Think about it. After Foreigners release, has any other 80s Rock artist been offered an exclusive deal over the last year? It looks more and more likely that the avenue to easy money for Legacy artists is about to come to a close and they might have to go back to earning it the hard way, by promoting themselves heavily and actually putting out a quality product.

[steveo777]

I bought a pack of 5 coasters at the dollar store the other day for $1.

$10 won't work because by the time big labels take their cut and figure in promotional expense, etc., there's nothing left for the artist.

Just sell albums and tracks as digital downloads unless there is something like a Walmart deal.

We're gonna sell "Catch The Storm" at $10.00 / CD....as well as the Singular Track rate of .99 per Track at iTunes, etc.

But...then again.....we're Independent....we can do WHATEVER THE HELL WE WANT! \~/

Yes, keep the big labels out of it. Fuck 'em.

[mikemarrs]

8.98 sounds like a good price

[Babyblue]

I bought a pack of 5 coasters at the dollar store the other day for $1.

$10 won't work because by the time big labels take their cut and figure in promotional expense, etc., there's nothing left for the artist.

Just sell albums and tracks as digital downloads unless there is something like a Walmart deal.

We're gonna sell "Catch The Storm" at $10.00 / CD....as well as the Singular Track rate of .99 per Track at iTunes, etc.

But...then again.....we're Independent....we can do WHATEVER THE HELL WE WANT! \~/

I have to get your CD Nora.

[Andrew]

Mass-shift titles, yes, absolutely.

But indie's like myself could never afford to do that price.

[Rip Rokken]

As of November, 2008, Wal-Mart has embarked on a plan to continuously reduce shelf space for CDs. Despite the store being the second largest music retailer in the US, the sale of CDs only makes up 2% of the store's overall business and they have steadily worked away from it to the point where they may just offer digital media only.

Think about it. After Foreigners release, has any other 80s Rock artist been offered an exclusive deal over the last year? It looks more and more likely that the avenue to easy money for Legacy artists is about to come to a close and they might have to go back to earning it the hard way, by promoting themselves heavily and actually putting out a quality product.

I know about a quarter of the space they still have is strictly for AC/DC's Black Ice. Is it worth getting?

$10 is a great price for CD's and I'd definitely go for that. Some are coming out at $7.99, and Heart's new CD is priced at $8.99 on Amazon pre-order. Remember those horrid days of $17.99 CDs with 2 decent tracks on them? LOL The public has spoken!

For indie CDs like Andrew mentioned, charge what you can and still make a profit.

[rockinfayrose]

The bigger question is if $10 is the right price for concert tickets? That's the ticket special at Live Nation for a list of select events including Sheryl Crow, Goo Goo Dolls, Chicago, to name a few...pretty unbelievable price even if these aren't the hottest acts in town

[steveo777]

The bigger question is if $10 is the right price for concert tickets? That's the ticket special at Live Nation for a list of select events including Sheryl Crow, Goo Goo Dolls, Chicago, to name a few...pretty unbelievable price even if these aren't the hottest acts in town

Shit, Arnel sold out a show in Reno with crazy assed ticket prices of like $60 +
I think people, if they want to see a show will pay good money to see it, short of outright gouging.

[rockinfayrose]

The bigger question is if $10 is the right price for concert tickets? That's the ticket special at Live Nation for a list of select events including Sheryl Crow, Goo Goo Dolls, Chicago, to name a few...pretty unbelievable price even if these aren't the hottest acts in town

Shit, Arnel sold out a show in Reno with crazy assed ticket prices of like $60 +
I think people, if they want to see a show will pay good money to see it, short of outright gouging.

I agree with that...Also, I'd pay more just to get a close view. Can't imagine what seats you'd get for $10 I paid a large amount for what I thought were good seats and Jon Bon Jovi looked like an ant

[steveo777]

The bigger question is if $10 is the right price for concert tickets? That's the ticket special at Live Nation for a list of select events including Sheryl Crow, Goo Goo Dolls, Chicago, to name a few...pretty unbelievable price even if these aren't the hottest acts in town

Shit, Arnel sold out a show in Reno with crazy assed ticket prices of like $60 +
I think people, if they want to see a show will pay good money to see it, short of outright gouging.

I agree with that...Also, I'd pay more just to get a close view. Can't imagine what seats you'd get for $10 I paid a large amount for what I thought were good seats and Jon Bon Jovi looked like an ant

You make a good point. If $10 tickets helped pack an arena to the gills you might not get close enough to see anything.

[stevew2]

The bigger question is if $10 is the right price for concert tickets? That's the ticket special at Live Nation for a list of select events including Sheryl Crow, Goo Goo Dolls, Chicago, to name a few...pretty unbelievable price even if these aren't the hottest acts in town

Shit, Arnel sold out a show in Reno with crazy assed ticket prices of like $60 +
I think people, if they want to see a show will pay good money to see it, short of outright gouging.

You ld pay Arnel 10 bucks to watch him drain the main vein fat ass

[Don]

The bigger question is if $10 is the right price for concert tickets? That's the ticket special at Live Nation for a list of select events including Sheryl Crow, Goo Goo Dolls, Chicago, to name a few...pretty unbelievable price even if these aren't the hottest acts in town

Shit, Arnel sold out a show in Reno with crazy assed ticket prices of like $60 +
I think people, if they want to see a show will pay good money to see it, short of outright gouging.

I agree with that...Also, I'd pay more just to get a close view. Can't imagine what seats you'd get for $10 I paid a large amount for what I thought were good seats and Jon Bon Jovi looked like an ant

You make a good point. If $10 tickets helped pack an arena to the gills you might not get close enough to see anything.

Yes but in Arnel case, it's all about getting a select group of people to those shows. I doubt the guy could charge the same money doing 20 or 30 shows over two months. He has to pick his spots. The other night in Vancouver, he didn't even sell out a 2000 seat theatre. His audience is very limited and requires the presence of Filipinos to be a success. Since he can only cater to a small portion of the North American public that way, he definitely has a glass ceiling sitting over him.

[Don]

There are artists that can demand $200 a ticket and have built up a fanbase who are willing to pay it but I think the trick there is not to over tour. If someone only tours every three or four years, it seems to make the experience of seeing them live more of a cherished moment and easier to spoil yourself on the purchase of over priced ticket, like other things we might over spend on once in a blue moon.

[Don]

I'm curious to see the price on Journey's next album. After the Wal-Mart deal, paying anything over $10 for one disc will seem like highway robbery. iTunes has pretty much established that price also for whole album purchases so there really is no going back for the music industry.

[Pelata]

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