Universal lowering CD prices - Carpenters affected?

[amit1234]

As I'm sure some of you have heard, Universal Music is lowering the list price of CD's beginning in October. From what I can remember, new releases will be sold for $9-10 ($10 if the CD is coming from a superstar artist; $9 if not). Catalog albums will also be sold for $9.00 while compilations like "20th Century Remasters" will be selling for $6-$7.

Since the Carpenters will obviously be affected by this (since A&M Records falls under the Universal umbrella), how do you think the Carpenters will be affected by this?

I, for one will be completing my Carpenters collection on CD now that prices have come down to a decent level.

Anyone excited or just me?

 

[amit1234]

BTW, when I say "how do you think the Carpenters will be affected", I'm speaking in terms of sales. Does anyone here think their catalog will be affected?

 

[phoenixfan4]

I for one am really excited to see this price reduction for CD's taking place. It's been long overdue. The record companies have been making tons of money on the backs of all of the fans and the artists for far too long now. I haven't purchased a CD in over 10 months simply because I can't justify the cost of an album versus filling the gas tank of my car. It's not that I'm cheap or poor, it has just been a matter of priority between what is necessary and what is 'fun' in the way of a purchase.

I will certainly start buying the CD's much more frequently now that the price is coming down to a reasonable level. I know of at least 5 CD's that I have been wanting to buy and once I see that the prices have indeed gone down - I will start filling out my CD library post-haste.

I just hope that this doesn't affect the artists' income too severely. They shouldn't be penalized for something that they really have no control over.

Until next time.

 

[engineer]

It was my understanding that Universal's prices would be lowered to $13.99 for a suggested retail price, not $10. That's down from a suggested retail price of $18.99, so it's still pretty substantial!

Dan

 

[Harry]

I held off buying most of the Carpenters Remasters until I found them at a reasonable price. By shopping around and waiting for sales, I found nearly all of them at around the $10 price point. If memory serves, the great bulk of them were considered mid-line units, with the exception being the tan album. I remember it had a higher price than the others, and was one of the first that I bought - just to get that original mix of "Superstar." And of course for that extra few dollars, I also seem to have bought a vowel. (There's an extra "E" in the word Carpenters {spelled CAREPENTERS} on the label!)

If these all get lowered to a sale price of $8 or so, then there's no excuse for everyone not completing their collection.

Harry
...hoping Japanese prices come down too!, online...

 

[amit1234]

It was my understanding that Universal's prices would be lowered to $13.99 for a suggested retail price, not $10. That's down from a suggested retail price of $18.99, so it's still pretty substantial!

Dan

engineer - I'm pretty sure that the suggested retail price is being reduced from $18.98 to $13.98, however, that means that the actual product will be retailing between $9-10.

Here are some articles/press releases I found which back this up:

From: UMG Corporate Communications
Sent: Wednesday, September 03, 2003 12:12 PM
Subject: A MESSAGE FROM DOUG MORRIS AND ZACH HOROWITZ

Dear Colleagues:

Today we are making a major announcement which we wanted you to hear about directly from us. We have made a decision to significantly reduce our CD prices in the U.S. starting in the 4th quarter. On virtually all top line CDs, we will lower the wholesale price from $12.02 to $9.09,
with a Manufacturer Suggested Retail Price of $12.98 (eliminating the $16.98, $17.98 and $18.98 equivalent MSRPs). With this new pricing
model, we believe that most retailers will be able to offer our music for less than $10.00, if they so choose.
This is an aggressive move - but the state of the business calls for bold actions. The stores and consumers have been telling us that CD prices
are too high. Because many music fans are getting music for free through online piracy, we believe that we need to lower prices to be more
competitive with the illegal market. We are also vying for consumer dollars and shelf space with more and more forms of entertainment media. Our new policy will enable music to be offered at a much more appealing price point in comparison to these other entertainment products.

As part of this initiative, we are also planning to significantly increase spending on direct-to-consumer advertising that will greatly raise awareness of our artists and their music as well as highlight our new, everyday low prices. We are confident this will help drive fans back to the stores and increase our overall sales.

If this new pricing initiative is to succeed, we will need a meaningful increase in our sales to offset the reduction in our wholesale prices. All of our research indicates that these new, everyday low prices can lead to dramatic increases in sales at retail. Since UMG is responsible for more than one out of every four albums sold in the U.S., we are uniquely positioned to implement this new strategy. Our size affords us the critical mass to really give this a chance and, hopefully, reinvigorate the retail business.

At the same time, we are ramping up our efforts to counter the illegal distribution of our music on P2P services. The technical countermeasures we are using to frustrate the P2P experience are working. The dangers of P2P services - including viruses and privacy issues - are being revealed as never before. This month, the Judiciary Committee of the US Senate will hold hearings alerting the public to the uncontrolled dissemination of pornography through P2P services. Oftentimes, a search by the name of a recording artist is the vehicle that leads unsuspecting music fans to pornographic images, including child pornography.

Additionally, in the weeks to come, the industry will begin its lawsuits against P2P users who are illegally distributing our music online. These suits will supplement the educational campaign we launched over a year ago. They will send a strong message that it is illegal to distribute our music online without authorization. And they will make it very clear that those who engage in these activities face serious legal and financial repercussions. The lawsuits, together with the educational campaign and the public awareness of the dangers of P2P use, will lead many to explore purchasing music legitimately again - both online and at retail. Reducing our prices at retail now will underscore that music is a great entertainment value.

And, of course, at the same time, UMG is aggressively making its music available online through an ever-increasing number of legitimate services. We continue to be the most innovative in our offerings and have priced our music so that online retailers can sell it for as low as .99 a track and $9.99 per album.

UMG has consistently re-written the way business is done in the music industry. We have broken all records and set the bar for what a music company can accomplish. We are once again making a bold step with this move. The willingness to take a chance is what makes our company's culture so special.

______________________

Universal Slashes Its CD Prices In Bid to Revive Music Industry

By Ethan Smith


In a dramatic move designed to jump-start sales, Vivendi Universal SA's Universal Music Group cut the suggested retail price of nearly all its CDs to $12.98, a drop of as much as 32%. In practice, many of its CDs will now sell for just $9.99.

The price-slashing is sure to roil the already unsettled music business and challenge other major labels to follow Universal's lead. The Vivendi unit is the world's largest music company, with nearly 30% market share in North America.

Executives at competing labels appeared to be caught off-guard and even incredulous about the announcement. "They are basically forever changing the record business today," said one. "It's a massively bold move; it's the kind of move we as an industry need to be making."

Consumers have long complained about the high price of compact discs. Many have made their displeasure plain by curtailing their music purchases and downloading songs free from illicit online services instead. Music buyers also have griped that DVD movies are often cheaper than music CDs.

Universal's top executives presented the plan as a central element of what they hope will be a revolution in the industry, which has been plagued by piracy, falling sales and other troubles. The CDs affected by the cuts currently carry suggested prices of $16.98 to $18.98, with the lion's share at the high end of that range, the company said.

"We're going to reinvigorate the record business in North America," said Doug Morris, Universal Music's chairman and chief executive. He said the price cut is part of a broad strategy that includes aggressive legal and technical assaults on online music piracy, and improved legal online music services. "We are making a very bold, strategic move to bring people back to music stores," he said.

The move is akin to the price cutting by AOL Time Warner Inc.'s Warner Bros. in the DVD market a few years ago. That prompted consumers to start buying DVD movies on a major scale instead of just renting.

The new CD pricing, set to take effect by the beginning of October, affects almost all of Universal's offerings, new and old, from Ashanti to Abba to Louis Armstrong. Only classical and Latin-music titles and multi-CD boxed sets are excluded. The music giant is achieving the price reduction by lowering the top wholesale price it charges retailers to $9.09 from $12.02. Wholesale prices on a handful of top-selling artists will be $10.10.

The company also will do away with so-called cooperative advertising -- direct payments it and other music companies have made to retailers to pay for local ads. "Co-op advertising was a misnomer," said Jim Urie, president of Universal Music & Video Distribution. "It was money that went to the retailers; they didn't cooperate in any way."

Instead, Universal will raise its own advertising budget "significantly." "We want to make people aware of the new price to drive them to the stores," said Zach Horowitz, Universal Music's chief operating officer.

The company set the target price after conducting a year's worth of market research that involved testing various prices, and concluded that the $12.98 suggested maximum was the "sweet spot" for shoppers. In practice, Mr. Morris added, retailers will be able to make a profit even at $10.

Mr. Morris denied that high retail prices had driven consumers to the illicit online file-sharing networks in the first place. Instead, he suggested that the price cuts were necessitated by the widespread online piracy. "If you had Coca-Cola coming out of your faucet for free, the Coca-Cola Company would be in trouble," Mr. Morris said. Mr. Horowitz added that the rampant piracy "doesn't change the underlying value of the music."

Nonetheless, Mr. Morris and his lieutenants admitted that shoppers believe CDs have been overpriced. "Retailers tell us stories about consumers going to the bins, picking up an older title, seeing that it costs $18, and putting it back," Mr. Urie said. "Now they'll see that it's $12, $11 or $10." He also conceded that DVDs have made music offerings look overpriced.

The new strategy has no bearing on the pending merger of General Electric Co.'s NBC with several Vivendi entertainment units, as Universal Music isn't included in that transaction. Vivendi has said it doesn't plan to sell the music unit now because music valuations are too low in the wake of the continuing sales plunge.

To offset the 30% cut in its wholesale revenue, Universal needs to see a commensurate increase in sales volume. Mr. Morris declined to specify the exact volume increase he was aiming for, but added, "If we meet the [target], our margins will be better." A lot is riding on the anticipated bump in volume. "This is our new pricing policy," Mr. Horowitz said. "We need an increase in sales to make it permanent."

It wasn't immediately clear how other major music companies would respond, and officially they declined to comment. Speaking privately, some executives at competing companies characterized the move as too radical, and predicted it would demand an impossibly large increase in sales volume to offset the squeeze it puts on profit margins.

Retailers praised the price cuts. Lloyd Greif, president of Greif & Co., an investment-banking firm handling the sale of Tower Records, said, "Anything that brings customers through the door who wouldn't otherwise have come through the door is a positive development for a retailer like Tower." He added that he expected the lowered prices to boost impulse buying.

Joe Nardone Jr., owner of the 11-store Gallery of Sound chain in Pennsylvania, said such a price cut was all but inevitable, though he expressed shock at the elimination of co-op advertising, which retailers rely on to promote their stores. "Prices had to come down for this to be a business," he said. Mr. Nardone added that being able to profitably price CDs at $9.99 would likely allow him to compete with mass merchandisers such as Best Buy Co. and Wal-Mart Stores Inc., which often take a loss to sell CDs at that price, making up the difference on sales of higher-priced goods. Even if those merchants now sell CDs for $8.99, he said, $9.99 is a "magic" psychological cutoff for consumers.

 

[PJ]

Like Harry I Shopped Around for Special Promotions / Sales to Obtain Remasters on CD

Ideally Universal Worldwide will Lower CD Prices for All Releases , Catalogue Sales Should Increase Significantly over Next Year

Certainly Consider More A&M Artists Catalogue Releases With Lower Prices

Peter