Music is getting less expensive as CD prices ease to about $10

Universal started cuts, big retailers went further

October 07, 2003|By BOSTON GLOBE

CD prices started to inch down last week, hovering around $10 for a new release at many stores, putting music at a similar price point on the entertainment meter as a movie ticket or a takeout pizza.

The lower prices were the advance guard of wholesale price cuts announced early last month by the world's largest record company, Universal Music Group. As they have in the past, the mass merchandisers -- Wal-Mart, Best Buy and Circuit City -- went even further, advertising select CDs at prices below what Universal was charging them.

The cuts are just starting to ripple through record stores, and already there are indications that price does matter to consumers, even as CD burning and Internet file-sharing services make music available for free. CD sales have perked up in recent weeks. Industry officials say the increase was due more to a surge of new releases than to the price cuts, but some retailers say the lower prices and the music industry's legal crackdown on file sharers are starting to breathe life back into stores.

Gary Arnold, senior vice president of entertainment at Best Buy, said his chain's customers are willing to pay for music if it's priced right. "The consumer has given us the message that CD prices should be coming down," he said. "That hasn't happened with CDs until now."

Jim Urie, president of Universal music and video distribution, said consumers won't see the full effect of his company's price cuts until mid-November, when existing store inventories turn over and retail prices for most Universal CDs fall from the $17-$19 range to around $13, slightly less than what a new DVD costs.

"Music sales needed a jump-start," Urie said. "We needed to get people back in stores and into the habit of paying for music."

CD sales grew rapidly through the 1990s before peaking at 942.5 million units in 2000, according to the Recording Industry Association of America. Sales have been sliding ever since, dropping to 803.3 million units last year. They fell another 8 percent during the first nine months of this year, according to Nielsen Soundscan.

In addition to cutting its prices, Universal eliminated payments it had been making to retailers for cooperative advertising and product placement, pledging to increase its own advertising spending this month. To receive the price cuts, retailers had to agree to continue to devote about one-third of their space to Universal products. Most went along, although Virgin Megastores so far is refusing to participate.

A survey of stores in the Boston area last week found prices for the new Sting CD, Sacred Love, ranging from $9.84 to $14.99.

Wal-Mart, Best Buy, and Circuit City were all selling the CD below its wholesale cost. The mass merchandisers devote a relatively small amount of their overall space to CDs but account for about 80 percent of CD sales. The retail giants often use low prices on new music releases to pull customers into their stores.

Record stores in malls, where the rents are the highest, tended to charge the most.

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