Technology - USA TODAY

CD prices hit sour note with retailers, buyers
Mon Dec 8, 7:18 AM ET

By Michael McCarthy, USA TODAY

The free-falling music industry is finally playing a song that consumers want to hear during this holiday season: lower CD prices. Retailers have lowered the average price of CDs by 2% this year to $13.42, and cuts will accelerate in this quarter, says market researcher NPD MusicWatch.

Major retailers such as Wal-Mart, Best Buy and Circuit City are selling some new releases for less than $10, a price not seen consistently in a decade.


Universal Music Group, the world's biggest music company with artists such as Eminem (news - web sites), Shania Twain and Jay-Z, has cut wholesale and suggested list prices on most new releases by 24% to 31% for retailers who agree to certain conditions.


But holiday shoppers will need to check around to get the best deals, because prices are still all over the map. Consumers can find a $6 price difference on the same CD. The lowest prices are often limited to promotion periods, before they're jacked up. Many niche, classic or classical CDs are still listed as high as $18.99. The lowest CD prices are found online, before shipping and handling; the highest are often at bookstores.


The online-piracy-ravaged music business needs to woo music fans back into stores - particularly now. The holiday season generated a third of the U.S. music industry's $12.6 billion in sales last year.


Music executives blame rampant piracy and file sharing across "peer-to-peer" networks, such as Kazaa, for a staggering 31% sales drop in the last three years. Piracy now costs artists and record labels $700 million per year, according to Forrester Research, and the industry has started suing individual users who share files.


But lost in the furor about piracy is the fact that many consumers are buying less music because they believe CD prices are too high. Some have shifted their entertainment dollars to competitors, such as DVDs and video games.


"Many consumers perceive CDs as less valuable than they used to be," says Josh Bernoff, music analyst for Forrester Research. "They're livid over having to pay $18 for a CD with only two good tracks."


James Larson, manager of the independent Sounds music store in Manhattan's Greenwich Village neighborhood, thinks a move toward lower prices is overdue. "A lot of customers are coming in and asking about it (Universal's plan)," he says. "There's no reason why CDs should be $20; that's ridiculous. This will deter them from burning" (their own CDs).


Thanks in part to the UMG program, bargain hunters have been able to find Jay-Z's million-seller, The Black Album, for as little as $9.99 on sale at Circuit City. Other releases, such as Bon Jovi's This Left Feels Right, Sheryl Crow's The Very Best of Sheryl Crow and Ludacris' Chicken N' Beer have sold for as little as $9.88 at Wal-Mart and $9.99 at Best Buy and Tower. When they revert to non-promotional, everyday prices, these CDs typically sell for $11.99 to $13.99.


Shoppers have not seen the magic number of $9.99 this often since the price wars of the early 1990s, music experts say. The number of units selling for less than $10 has almost doubled, to nearly 9% in October vs. 5% in the fourth quarter of 2001, according to music tracker Russ Crupnick of NPD MusicWatch


"There's a lot of action in pricing from retail. There's more records on sale for $9.99," notes Alain Levy, chief executive of EMI Music.


The retailers also face increasing competition from legal online downloading. Apple's pace-setting iTunes online store has sold 17 million songs and counting, for 99 cents per tune. Wal-Mart, Microsoft, Sony, Dell and Hewlett-Packard have launched or are planning their own digital stores. Online music will account for 11% of sales in three years, and 33% by 2008, Forrester predicts.


All this activity brought down the average price for full-length CDs. From Jan. 1 to Oct. 31, the latest figures available, the average dropped to $13.42 from $13.73 in 2002, according to Crupnick.


Nearly 1% of the drop came in October, as CDs aimed at the gift season began to roll out. Since the bulk of Universal's lower-priced CDs didn't hit the market until November, Crupnick predicts holiday shoppers will see "some fairly significant price cuts" in the next few weeks. CD prices are dropping across nearly every type of retail outlet (see chart).


By contrast, the average list price for CDs during their introduction in 1983 was $21.50 and as high as $14.02 in 2000, according to the Recording Industry Association of America (news - web sites) (RIAA).





A slight bounce

Meanwhile, the combination of moderating prices and an improving economy - and maybe better albums - is sparking a modest rebound in sales for retailers. Album sales have risen in 10 of the past 12 weeks, with 20.6 million sold in the Thanksgiving week ending Nov. 30, according to Nielsen SoundScan.

But the industry still has a long way to go. Album sales in the USA are 5.0% behind last year: 549.6 million albums have been sold, vs. 578.8 million in the same period in 2002, according to Nielsen. During the first half of 2003, shipments to retailers plummeted 10%, according to the RIAA, which blames "music piracy on peer-to-peer networks and illegal CD copying" for most of the drop.

An end to the bleeding for the $28 billion global music industry might be two years away at the earliest. Informa Media Group, a researcher in London, predicts global sales will fall for the fourth year in a row in 2004, before the industry begins to grow again in 2005.

At least cheaper CD prices might do more for music sales than the RIAA threatening school kids for downloading songs on Kazaa.

But retailers, not record labels, ultimately control pricing. That's why tempers are running so high over Universal's controversial "JumpStart" plan.


To see the full article go to http://story.news.yahoo.com/news?tmpl=story&cid=711&ncid=711&e=2&u=/usatoday/20031208/tc_usatoday/12060360

But lost in the furor about piracy is the fact that many consumers are buying less music because they believe CD prices are too high. Some have shifted their entertainment dollars to competitors, such as DVDs and video games.

It's nice to see a major paper point this part out

yeah, it is. I'm still not going to buy a cd though,

Boycotting the RIAA since 1999.

Too bad my interest in 99.9999% of the RIAA member companies CDs has dropped 100% (ok, I did buy 2 this year, but I'm a fan of Steely Dan & Weird Al Yankovic), otherwise I might give a rat's patootie about a miserable 2% price drop.

2% including consignment fees required by retailers?

If not, it doesnt mean sh*t then.

" All this activity brought down the average price for full-length CDs. From Jan. 1 to Oct. 31, the latest figures available, the average dropped to $13.42 from $13.73 in 2002, according to Crupnick."

"By contrast, the average list price for CDs during their introduction in 1983 was $21.50 and as high as $14.02 in 2000, according to the Recording Industry Association of America."

I like the way the industry picks and chooses which information to share. The average list price (according to the RIAA) in 2002 for a CD was $14.99.

Also, according to the RIAA's mid-year statistics for 2003, the average retail price paid for a CD between January 1 and June 30 of this year was $17.31.

So once again, either this story is fabricated... or the RIAA numbers are.

That's a bunch of boh ha..locally I haven't seen a cd below 17.00 in 5 years. Media Play here 5 years ago charged around 11.00 for a disc..the next year I went back and the budget cds were at 15.99 new titles were around 20.00. I looked at the prices (since I was going to purchase around 4 cds) and left without buying anything...I stopped buying RIAA discs 2 years ago (unless I find it used-and a good deal at that hehe)

If they have actually dropped prices 2% its an insult....

It's still RIAA-based crap. No dice.

RIAA crap? Wouldn't give ya a nickel for it.
~Code

All of the riaa's tactics are based upon a business model that does not apply in this case. They choose not to adapt to fundemental changes in the market for music. And now they scapegoat P2P for their shortcomings. The truth is they should have adapted in 98 when the new music economy emerged.

Now instead of trying to merge their business model into the present state they choose to try to take legal actions and fear tactics to bring customers back into their sales outlets.

Truth is, weak artists, the internet, and computer games are contributers to the downfall of the music industry.

Now the business is capable of hiring the best and brightest (you know, the Harvard MBA types), either they choose not to do so, or they ignore them. What they really need is a turn-around specialist from the business world who can turn one of the big businesses around. Someone who is willing to take advantage of the emerging technologies and use them to his advantage. My feeling is that they will not due to the posturing their industry group continues to do. Remember, Cary Sherman answers to the big four, he will do or say what they tell him to do.

I am a little suprised that Sony has not taken advantage of emerging technologies, but seeing that their last two hits were the walkman and the trinitron which both are at least 20 years old each, it is clear that they are not on a roll.

So for the time being we need to put up with the fear tactics of the riaa trying to sue people back into music stores, while they go round and round and down in the whirlpool to oblivion. Imagine the scene if the stagecoach makers sued the people of the time to prevent them from buying cars. As a matter of fact I believe somone did, a very old law in England did require that each car have a man with a light to walk ahead to clear the way at night. I kind of feel this way now with the riaa.

It looks like the Indies will need to lead the music into the next generation/design.

.. BOYCOTT 'EM!! Do not download or buy RIAA crack music. Whoever said that the major labels of the riaa are corporate crime syndicates was right on!! Get it used, or buy indie..

i boycott the RIAA myself, however i feel bad, i broke the boycott once, at a major superstore here, i bought an Iron Maiden cd for only 7 bucks brand new. thats a good deal any way you slice it.

Mtekk
I've been been boycotting right along side ya since 99 still going strong, and has anyone seen a mention that since they the RIAA wants to sue people people have been boycotting I seen no mention of it.

I don't give a rats hinny how much they drop their CD prices! They can stick it up their butts! Until they stop suing AND drop prices I'm still boycotting!

"Now the business is capable of hiring the best and brightest (you know, the Harvard MBA types), either they choose not to do so, or they ignore them."

It is the Harvard MBA types who killed the music business. These are the guys who believe in quarterly profits and don't know squat about artists and artist development. The great record men of the past weren't friggin' Harvard MBA's.

Last Sunday, I bought the long-awaited independent release by a local artist (www.kristinmccaig.com) at a music store for C$14.98 (US11.40). Next to it were the major label releases on "special" for C16.98 (21.95) or more. Shouldnt it cost less for a major label to market a CD?

Now lets see now. They put the prices down. Cream more off the top for themselves and leave even less for artists. Then when they feel their economy is stable again they put the prices back up.

They can go to hell.

Errata in my comment: C16.98 is US 12.95 - not 21.95 of course