Universal To Slash CD Prices
On Wednesday, Universal Music Group announced that on October 1st, it would cut the suggested retail price on a majority of their CD catalog by $6 to $12.98.
UMG currently wholesales CDs at $12.02. The current average suggested retail price is $18.98. On October 1st, the wholesale price on most titles (excluding the most popular) will drop to $9.09. The bigger selling artist would have a wholesale price around $10.00.
UMG also plans to slash wholesale prices on cassettes so they can offer them at a suggested retail prince of $8.98.
The hope is that the already suffering retailers will drop prices even more, so that CDs will average about $10 each. That may be a tough sell since major CD retailers are struggling to make ends meet at the moment. Some are on the brink of following The Wherehouse into bankruptcy.
"Whether it will ultimately be good news for retail? I think it's still up in the air," Kevin Milligan, vice president of merchandising for Wherehouse Entertainment Inc., told AP.
Another big blow in the short run to retailers, UMG said it would no longer give retailers co-op advertising or discounts in exchange for favorable product positioning in stores.
But this may end up being a smart move on UMG’s part. AP reports that the San Francisco based consumer marketing research firm, Odyssey, conducted a survey earlier this year that found “53 percent of U.S. consumers age 16 and older said they did not buy more cassettes and CDs because they have become too expensive.
"This is something that the industry has failed to address ... You could make downloading music go away tomorrow and the industry would still face challenges," the managing director of Odyssey, Sean Baenen, told AP. "All the data suggests that quality and price are major factors to the equation."
All speculation aside, time will tell if this move will help UMG return to a nice bottom line. .