Universal Music Group slashes CD prices
Record company hopes 30% reduction will help revitalize languishing market

By AMY HARMON
THE NEW YORK TIMES

Battered by online piracy, Universal Music Group, the world's largest record company, said yesterday that it would cut prices on compact discs by as much as 30 percent in an aggressive bid to lure consumers back into record stores.

The deep price cut -- the only one to apply to new CDs since the format was introduced in the early 1980s -- represents a gamble by Universal that more consumers will buy more CDs once the price dips below $13. It also reflects the profound degree to which Internet file trading has managed to undermine the music business, Universal executives said.

"We are in the middle of a terrible situation where our music is being stolen," said Doug Morris, chairman of Universal, which includes labels such as A&M and Island Def Jam and artists such as Eminem, Elton John, Shania Twain and U2. "We need to invigorate the market, and as an industry leader we felt we had to be bold and make a move."

Under the new pricing scheme, Universal would lower its wholesale price on a CD to $9.09 from $12.02. The company said it expected retail stores to lower CD prices to $12.98 from between $16.98 and $18.98, and perhaps to as low as $10. When CDs first arrived on the market they cost $15.98, and have climbed from there.

The result could be a broadening of the music market, which has contracted as prices have increased. Music consumers have complained for years that CD prices are too high, and many people who copy music without paying for it online cite high prices as the main reason.

"Music is not supposed to be an elitist product," said Josh Bernoff, an analyst at Forrester Research. "We're not talking about Lexus here. It's better to have more people buying music at a lower price than to have it priced out of the market."

But the move will put even greater pressure on Universal's profit margins at a time when the company is struggling.

And some music-industry analysts caution that high prices and piracy are not the only reason CD sales have dropped off.

Some of the research on older consumers shows that "not finding what they want is more of a reason for not buying than pricing," said Russ Crupnick, an analyst with NPD Group, a market research firm. "They still need to put out content that's appealing to people," he said, referring to the record companies.

Whether price cuts will revitalize the company's sales will depend largely on how retailers pass them on to consumers. A spokesman for Tower Records said no one was available to comment last night, but large retailers have traditionally sold new CDs at a discount from the suggested list price.

Universal also plans to shift tens of millions of dollars in advertising revenue from in-store promotions to television and print ads featuring the $12.98 price in an effort to drive consumers into stores.

Several other major record labels said they had no comment on Universal's price cuts.

But industry analysts said it was likely that others would follow the company's lead.

Universal, which is owned by Vivendi Universal, sees the price cuts as part of a larger strategy to discourage people from copying music using file-swapping programs such as KaZaA.

Unfortunately, those who steal music are getting it for free and will not care about the reduction in price.

Unfortunately, those who steal music are getting it for free and will not care about the reduction in price.

IceNine said:

not necessarily. i'd be inclined to buy CD's for an artist i'm only mildly interested in (or am checking out) if they were $5 cheaper.

Unfortunately, those who steal music are getting it for free and will not care about the reduction in price.

fuck this shit. buy vinyl.

Handclapsfingasnapz said:

FUCK vinyl buy your tunes on 8-tracks.