Sticker Price Scrapped for Universal CDs

[mikenycLI]

So much for the price reduction, and proof, FINALLY, that Best Buy is calling the shots, these days !

Courtesy of washingtonpost.com...

Sticker Price Scrapped for Universal CDs

By Frank Ahrens

Washington Post Staff Writer
Wednesday, September 24, 2003; Page E01


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.

The music industry in the past few years has suffered double-digit percentage declines in CD sales, which it blames on Internet music-file sharing through sites such as Morpheus and Kazaa. In an attempt to boost sales of CDs, often priced as high as $18, Universal Music launched its lower-priced CD plan, called JumpStart, on Sept. 3.

"While delivering a great value to the consumer is the primary goal behind JumpSTART, we believe that, at this time, the goal can be reached without including the MSRP [manufacturer's suggested retail price] in the sticker we plan to put on our product," reads a Sept. 17 letter from Universal Music and Video Distribution to retailers.

The $12.98 sticker was eliminated because of two factors, Universal Music sources said: Retailers balked at CDs arriving in their stores with price tags already on them, and Universal Music believed that it could not legally discuss lowering prices with retailers before the announcement -- meaning that objections were not heard until afterward.

The language of the new sticker is being debated within Universal Music, sources there said. It may say something like "Great Music, Great Price," or "Revolutionary New Price," the sources said.

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.

Universal's top three retail customers are Best Buy, Wal-Mart and Target.

The big five music firms -- Universal, Warner Music Group, Sony Music Entertainment, BMG Entertainment and EMI -- say they do not discuss pricing with retailers before such plans are implemented, to avoid the appearance of collusion. Last October, the five companies paid $143 million to settle a class-action lawsuit alleging CD price fixing in the 1990s, though the companies did not admit guilt.

Although some objected to receiving CDs with $12.98 stickers on them, almost all of Universal's top 30 retailers agreed to the company's shelf-space demands by the Sept. 19 deadline, company sources said.

http://www.washingtonpost.com/wp-dy...-2003Sep23.html

[MK]

Too bad. A half step back, but at least the prices are still getting cut.

I was at Best Buy yesterday and picked up the latest Outkast for $10.98. Good deal, but I noticed the non-sale Best Buy pricetage was pegged at $17.98 or so, which is still pretty high. Even though it's a double-CD set, Outkast had priced the album as a single disc. A Sandinista for our times, I suppose (with just as much filler surrounding the great stuff).

[Ron]

Here's my favorite bit:

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.

Suffer customer "enmity" should the retailer sell the CD at a price *higher* than the MSRP? Yes, I would think so. This also is cute:

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.

Wow. To get the wholesale price break retailers gotta give UM stuff 33% of floor space used by the majors. Why, this sounds an awful lot like extortion.