$9.99 for a new CD release, yes it has happened

I was looking for new release by Joss Stone at Borders. $7.99!!! Great female R&B vocalist. Think Tracy Nelson meets Eva Cassady.

The music industry is finally figured out how to remove it's head from it's _ss!

The situation with UMG, Universal Music Works, may spell death for the smaller music retailers. Is Universal a savior? I don't know but the next couple of months will be very interesting. Universal is trying to save it's rear end with no regard fo rthe rest of the music industry. Here's the story as best as I can tell it:

Consider the record store owner. Best Buy, Walmart, Circuit City, etc. have been selling CD's as a loss leader for a long time and beating up on the record stores in the process. For the individually owned store, which in my opinion offers the most interesting array of music, every UMG piece in inventory has instantly been devalued. Previous wholesale prices were $12.02 and the buying public will only be willing to pay $9.99 (Actual MSRP is $12.98). Couple this with Universal demanding 25% of a store's bin space and 33% of its merchandising and marketing opportunities. This is by contract with Universal. If the store doesn't sign up to these demands their wholesale price will be significantly higher but the MSRP will still be $12.98. The small, independent record store is really in a squeeze right now.

The previous price structure:
Wholesale-12.02 Retail-$18.98

Current price structure:
Wholesale-$9.09 Retail-$12.98

We have a really good record store in my area. Anyone would love to shop there since almost everything you could want is at your fingertips. I estimate the current inventory at over 40,000 CD's. I'm certain that this new price structure will put a lot of pressure on them to sell the existing inventory at a loss. That's not going to happen for long.

If you crunch the numbers, the retailers, musicians (royalties) and developing artists are taking the biggest hit. If this continues look for retailers to focus marketing on acts that have the best chance of selling huge volumes of CD's. That spells Britney, et al.

The coming Christmas season has historically accounted for 40% of annual music sales. The way this will play out depends on the other four major record labels. If they cut prices similarly and have no contractual demands for bin space and marketing then UMG will necessarily follow suit and the small store will survive. If not, then the small stores will likely focus on the indie labels (maybe a good thing) or go out of business. If the strings are attached with every major label the way UMG has done we may all be buying our music online only.

I appreciate things being cheaper but not at the expense of selection. Even though I don't own a CDP I am worried. Just food for thought. The next few weeks will be very interesting.

OK for those of us who are not in the know, what is a UMG and why should I care?

Isn't it Universal Music Group?

I wonder how this will play out for the used cd dealers and Columbia House? I'll suport my local CD Plus. They carry a good selection.....I check Wal-mart, then buy at the local if it is the same price.....How is the new Rodney Crowell?

This is because Hi-Rez is flushing the market. I got some great deals on Hybrid SACDs at below $14. I tried to share the info here but it was censored.

I work in books and when they do that both the Publisher and Vendor share the discount. I dont think they would leave their stores out in the cold like that.

Bundee1,

I suppose that the publishing industry is pretty ruthless at times also. There was no offer made to credit his inventory to the new wholesale values. The information I've provided was shown to me by the record store owner. He's not going to sign up. I should also mention that about 17% of his inventory is currently UMG. In fact, the local paper (Gannett) did a write up on this too. I've tried to be factual and only see one error I made which was calling them Universal Music Works rather than Universal Music Group.

I remain opotomistic about the remaining record labels following suit but being kinder in their demands. This can be a very good thing but I still worry about the individually owned stores. We'll just have to wait and see.

Will he sell at the inflated price until his inventory runs out?

about time

the cost to reproduce versus selling cost has never been worse than the cd market - shame on them
unfortunately its the record company making the big bucks
putting out crap product and blaiming it all on the music public "burning" everything.
my daughter is part of the problem (no - it's simple economics she can't fork out $18 for music so she goes to mp3s - plus her attention span is only 2 months of burnout on anything she listens to)

sorry Charles, I buy plenty of music - but I really have to dig these days for any new quality product
(the bands exist - they just don't push the ones with talent and potential)

but now that I have a fancy Nottingham turntable
I'm mostly kissing the huge markup on cds a big and cold goodby

can't get that vpi cleaner fast enough

Lugnut, in talking to a Sam Goody store manager this weekend (we've been friends for years), she confirms what you have said, plus the contract for Universal also demands free storefront advertising. Innocent and unaware me didn't know that all those displays up front are paid for by the big music companies; I thought they were made by the parent company/owner. In order to get the reduced CD wholesale price, stores must also lose advertising dollars as well. And if they don't sign the contract, we music buying people still want the cheaper list price, reducing store margin.

That's a pretty sick game they are playing...

not bad