UMG CUTS CD PRICES!!
- Thread starter Rudy
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There's a whole generation who've grown up downloading and are conditioned to believe it's their right to do so. Suing some bewildered 70-year-old grandparent isn't going to change that. New CDs have been priced artificially high, so the industry has created the incentive to download and/or buy used discs.
I live in a small town but can find a promo or used copy of almost any new title just by waiting a week or two after it is released.
Has anyone noticed the impact on music artists?
I suspect so many are constantly on tour because they've got to offset the lost revenue from record sales. (no comlaints from me)
Last week Fleetwood Mac was in town. There was lots of advertizing, but the show was far from a sell-out. There also were few tickets for sale on the street prior to the event. (we passed it up rather than pay $60 apiece)
I think it's because the scalpers --- who usually buy huge numbers of tickets -- didn't want to get stuck taking a huge loss on tickets they'd have been unable to sell for at least face value.
Better to stick the box office with the loss, they were thinking.
Contrast this with last summer's Eagles' show. It sold out with tickets priced at $95 apiece. An hour before the show scalpers were getting $200+ apiece, but by a few minutes after start time the price had dropped to $10 per ticket (which is what we paid).
I think some of these "final" tours are a lot like the 'going-out-of-business' sales some of the furniture stores are having.
Neither ever end.
JB
I live in a small town but can find a promo or used copy of almost any new title just by waiting a week or two after it is released.
Has anyone noticed the impact on music artists?
I suspect so many are constantly on tour because they've got to offset the lost revenue from record sales. (no comlaints from me)
Last week Fleetwood Mac was in town. There was lots of advertizing, but the show was far from a sell-out. There also were few tickets for sale on the street prior to the event. (we passed it up rather than pay $60 apiece)
I think it's because the scalpers --- who usually buy huge numbers of tickets -- didn't want to get stuck taking a huge loss on tickets they'd have been unable to sell for at least face value.
Better to stick the box office with the loss, they were thinking.
Contrast this with last summer's Eagles' show. It sold out with tickets priced at $95 apiece. An hour before the show scalpers were getting $200+ apiece, but by a few minutes after start time the price had dropped to $10 per ticket (which is what we paid).
I think some of these "final" tours are a lot like the 'going-out-of-business' sales some of the furniture stores are having.
Neither ever end.
JB
The latest news from a Radio Industry newsletter, R&R:
UMG Drops Price-Sticker Plan
Universal Music Group's decision to lower suggested retail price on nearly all of its CDs to $12.98 was announced before anybody asked the retailers (UMG reportedly believed that debating the plan with record stores would raise antitrust issues), and now the label group has dropped its plan to send CDs to stores with a $12.98 sticker already in place. The price retailers pay for CDs was lowered with the consumer price break, but store owners are worried that they won't be able to make money if the price is set in stone, and they don't want to risk alienating customers by pasting on a higher price.
©2003 R&R, The Daily Digest of the Radio Industry
Harry
UMG Drops Price-Sticker Plan
Universal Music Group's decision to lower suggested retail price on nearly all of its CDs to $12.98 was announced before anybody asked the retailers (UMG reportedly believed that debating the plan with record stores would raise antitrust issues), and now the label group has dropped its plan to send CDs to stores with a $12.98 sticker already in place. The price retailers pay for CDs was lowered with the consumer price break, but store owners are worried that they won't be able to make money if the price is set in stone, and they don't want to risk alienating customers by pasting on a higher price.
©2003 R&R, The Daily Digest of the Radio Industry
Harry
What surprise? The price plan is still there - they just are not going to sticker the product.
jimac51
New Member
The idea of a "suggested list price" sticker was a bad one for all sides. Let the store do what they always have done in the past. A later-mentioned item to the pricing system is that if the artist in question is "superstar" status-meaning that the projected title is supposed to reach the Billboard Top 15-that title will be a buck higher at cost(about $10.10 each for a box lot purchase) and will remain a buck higher till the album drops out of the Top 15(no mention of the up-and-down flucuations that occur during the holiday period of new release saturation). In other words,they won't be 12.98 list price and,once again, big stores like Best Buy,WalMart & Target who can take the loss and spread it around the store can afford to "loss leader" those titles. Mac
jimac51
New Member
An update on this topic,since this is the week that UMD put the pedal to the metal on the new list pricing. First up-rapper Ludachris(sic). His last album,first week sales-280,000. Project sales this week,after Tuesday figures-400 to 425,000. Now factor the time of year and the popularity of this artist,I think first week would optimistically amounted to 350,00 at the old higher price-so a potential increase of 50 to 75,000 pieces is conservative but shows that UMD may be on the right track. Also,this artist has a strong sales base in inner city mom&pop stores besides the suburban chains,so they have an opportunity to be in the game. BTW,this artist probably has a slightly higher cost than the nine dollar cost quoted in some articles because Universal will keep it a bit higher(about a buck at cost)while it stays in the top tier of the chart. Mac
Well, here it is. We got our first batch of CDs containing the new-priced items this week. Now, when reading this post, please keep in mind that our store is a fly-speck compared to a big store in a big city. Our entire CD department is just a few hundred titles. But we're in the exact same shape as the big boys -- sales down for "whatever" reason.
I just wanted everyone here at the Corner to know what it's like out here in the real world of mom-n-pop music retailing.
In this week's shipment, all of the Universal product, which used to be $18.98 list, is now designated at $12.95 list. Our cost on all these items (including the Ludacris and some much older stuff) is $10.59. As yet, there doesn't seem to be any difference between old and new...A several-year-old Eminem album is costing the same as the Ludacris.
At this point I don't know if our distributor (Alliance Entertianment) is just using one price to keep it simple, or if the price of new stuff will be lower in coming weeks.
Now here's the bad part...the list price has dropped six dollars, but under the old prices, we'd have paid $11.79 or so for new releases, and $12.93 after the first week or two. So our average drop in price at the "store" level is only about $1,75. And there's no way we can sell at the magic "$9.99" price that's been heavily promoted in the media. Our store is not big enough to use CDs as loss leaders.
At the old prices, we'd sell new releases for $13.88 or occasionally $12.88. Older titles (not midline) are usually $14.88 to $15.49. At the new prices, we need to sell at about $12.49 or at the very least, $11.99 to make enough money to keep an inventory. So the consumers are STILL going to think they're getting ripped off.
The handwriting is on the wall. Once Wal-Mart and Best Buy and Target get hold of these and beating each other to death trying to "out price" each other, it's bye-bye to all the small stores. The consumer will be the big winner price-wise, for awhile at least. But the heart and soul of music will lose, along with thousands of small stores.
Don't get me wrong -- I'm all for the price drop. But when you erase the profit margin for the dealers in the process, what's the point?
I just wanted everyone here at the Corner to know what it's like out here in the real world of mom-n-pop music retailing.
In this week's shipment, all of the Universal product, which used to be $18.98 list, is now designated at $12.95 list. Our cost on all these items (including the Ludacris and some much older stuff) is $10.59. As yet, there doesn't seem to be any difference between old and new...A several-year-old Eminem album is costing the same as the Ludacris.
At this point I don't know if our distributor (Alliance Entertianment) is just using one price to keep it simple, or if the price of new stuff will be lower in coming weeks.
Now here's the bad part...the list price has dropped six dollars, but under the old prices, we'd have paid $11.79 or so for new releases, and $12.93 after the first week or two. So our average drop in price at the "store" level is only about $1,75. And there's no way we can sell at the magic "$9.99" price that's been heavily promoted in the media. Our store is not big enough to use CDs as loss leaders.
At the old prices, we'd sell new releases for $13.88 or occasionally $12.88. Older titles (not midline) are usually $14.88 to $15.49. At the new prices, we need to sell at about $12.49 or at the very least, $11.99 to make enough money to keep an inventory. So the consumers are STILL going to think they're getting ripped off.
The handwriting is on the wall. Once Wal-Mart and Best Buy and Target get hold of these and beating each other to death trying to "out price" each other, it's bye-bye to all the small stores. The consumer will be the big winner price-wise, for awhile at least. But the heart and soul of music will lose, along with thousands of small stores.
Don't get me wrong -- I'm all for the price drop. But when you erase the profit margin for the dealers in the process, what's the point?
This is actually part of what forced my uncle out of business...and all of us out of jobs back in 1999. We were a "master distributor", meaning we stocked ALL of the catalog products of one manufacturer, and sold to distributors at the same price they could buy from the factory. He'd done this since 1960. I joined in 1982. Since 1982, they'd been through three different owners. The first two were just like the latest comedy routines...incompetence beyond belief. The last one, though, was already an established company in a similar industry, looking to add more products to their product line. Initially it was all well and good. But as time went, on we started noticing a few things.
1) One price increase cut our profits on many series 10-15%. We lost part of our discount when they 'restructured' the pricing. The next increase tweaked it even a little more.
2) Because this was a larger company, they were able to offer their direct-buying distributors a "stock plan" price where they could deduct 10% if they placed an order over $1500. For some of the national distributors with 400 stores, meeting a $1500 level each day was not a problem. So, we end up selling to fewer customers, usually rush shipments since we stocked the items.
3) They started marketing directly to our customers. I noticed our largest one dropped completely off in sales...found out one of their guys had gone in with the song and dance about the 10% deal and they stopped buying. We ended up going to them and giving them the "stock plan" for any order they placed, plus free shipping (they were local). Got the business back.
4) Other national chains got the same deal (as above) and started going direct. The factory's excuse? "Oh, we thought you'd handle the little guys." Ummm....OK, you take our best customer and we lose 10-15% of our business. Now you take away the other national guys, each maybe another 10-20%...and leave us with maybe 25% of what we used to have???
5) They didn't come right out and say NOT to buy from us, but their marketing angle was, "Buy these five brands from us...oh, and since you're already getting the discount, why not add on THIS one as well!" (Which was the one WE carried.)
There were a few other major reasons his company went out of business, but basically, we were pinched out on price. Sales fell too fast, and we got stuck with way too much inventory. (Had to order anywhere from 10-16 weeks in advance, if not more.) Spiraled out of control, in other words. So the "big guys" got all the good price breaks, and little old us got the short end of the deal.
Hits a little too close to home, IMHO.
1) One price increase cut our profits on many series 10-15%. We lost part of our discount when they 'restructured' the pricing. The next increase tweaked it even a little more.
2) Because this was a larger company, they were able to offer their direct-buying distributors a "stock plan" price where they could deduct 10% if they placed an order over $1500. For some of the national distributors with 400 stores, meeting a $1500 level each day was not a problem. So, we end up selling to fewer customers, usually rush shipments since we stocked the items.
3) They started marketing directly to our customers. I noticed our largest one dropped completely off in sales...found out one of their guys had gone in with the song and dance about the 10% deal and they stopped buying. We ended up going to them and giving them the "stock plan" for any order they placed, plus free shipping (they were local). Got the business back.
4) Other national chains got the same deal (as above) and started going direct. The factory's excuse? "Oh, we thought you'd handle the little guys." Ummm....OK, you take our best customer and we lose 10-15% of our business. Now you take away the other national guys, each maybe another 10-20%...and leave us with maybe 25% of what we used to have???
5) They didn't come right out and say NOT to buy from us, but their marketing angle was, "Buy these five brands from us...oh, and since you're already getting the discount, why not add on THIS one as well!" (Which was the one WE carried.)
There were a few other major reasons his company went out of business, but basically, we were pinched out on price. Sales fell too fast, and we got stuck with way too much inventory. (Had to order anywhere from 10-16 weeks in advance, if not more.) Spiraled out of control, in other words. So the "big guys" got all the good price breaks, and little old us got the short end of the deal.
Hits a little too close to home, IMHO.
jimac51
New Member
Mike is absolutely right on this and,as a former AEC customer,and part time Northeast One-Stop sales person,I commiserate with his situation. Profits eroded as configurations changed from vinyl to tape to CD-not unlike what happened to the auto industry and the dealer as cars became more high-tech and expensive-the dealer had less to play with,but the consumer still thought they got ripped by the dealer,not the manufacturer. I said in my initial post that the people benefitting from this deal are the big guys(mall operators Trans World and Musicland also benefit because they won't look like complete thieves pricing their stuff a couple of bucks above list and then putting them on "sale" for the new list prices). What has been interesting about this whole story is that Universal went to mass media outlets with this story. This info did not come out of press releases to retail companies or through Billboard-it came from CNN,USA Today and your local paper,radio & TV,and none of them went looking for the story,it was placed in their hands. So millions of people are told that CDs are going to cost ten bucks and you aren't selling them for ten bucks-what are you ?some kind of pinko dirty Green Party member? Can you imagine Procter & Gamble doing this about Charmin? If P& G announced that Charmin is going to cost a buck now,what would chains like Safeway do? Maybe stop carrying Charmin or everything else but Charmin that P&G makes till they shut up and let them decide the price. Another nail in the coffin of the little guy. Meanwhile,I was just in the local Best Buy last night and it was a joke-a two foot "Blues" section in disorder and an aisle sign for the PBS "The Blues" series,claiming to have the titles in stock that correspond to it(there are many,like the Ken Burns "Jazz" series a while back)-they had two-count 'em-two-copies of the box set,and it wasn't 'cause of a giant rush to get them all. Outside of the white boys and maybe a B.B. King title,they probably aren't going to stock the rest ,no matter what. Store help-pathetic,as usual. Mac
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