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CD prices set to take a plunge

Written by Lars-Erik_Olson on December 31, 2001 to .

NEW YORK - CDs priced at $9.99 may soon be a standard offer at music stores as U.S. retailers slash prices in bid to battle the scourge of online music piracy.

  “It looks like it will be another year of flat CD sales and I think to some degree that’s got to be attributed to the fact that there’s so much music available online,” Tom Adams, president of consulting firm Adams Media Research said.

“I also think (the price cutting) is also as much to do with the fact that the economy is terrible and holiday sales were off overall,” he told Reuters.

  The situation in the U.S. is similar in most other markets, and this same development is expected to affect retail prices worldwide.

  Alternative media such as the increasingly popular DVDs also successfully won consumer interest in the U.S., dampening sales of other entertainment products, analysts said on Thursday.

  Although the once popular music copying service Napster service has been idle since July, analysts say the Internet song-swapping has just kept evolving, pushing retailers and recording companies into the cold.

Price wars beginning?

  Just to show how edgy the retailers have become, popular music retailer HMV already has a sale offer on its Web site dubbed the ’02 Blowout Sale’, while rival Virgin – part of Richard Branson’s Virgin Entertainment Group – calls its markdown blitz the ’Red Sale.’

  Virgin, which has a megastore in Times Square, is offering CDs priced as low as $3.99, with more other popular hits priced at $9.99.

  Discounts of up to 80 percent is a far cry from the average prices of newly released CDs of $17.99 to $14.99, a step which analysts said is bound to stifle profits for both retailers and recording companies.

  “The record company is going to make their profit one way or another on a per CD basis, but they need to reevaluate their business model on the whole because it’s clear that these free online services have gutted a large part of their market,” said Kenneth Freundlich, an entertainment attorney in Los Angeles.

  If a CD sells for $13, a record company takes in about $8, of which it deducts artist, publishing royalties and manufacturing, promotional and marketing costs.

  The artist generally makes between 50 cents and 75 cents per CD, while the record company clears between $3 and $4 per CD. The artist has to pay back advances paid by the record firm, further cutting the artists’ royalty, which often dwindles to nothing, according to music industry insiders.

  “(We) believe music software CD prices may soon permanently decline to $9.99 given weak sell-through of new artists and continued Internet piracy that appears unstoppable,” Peter Caruso, a retail analyst at Merrill Lynch said.

  “I think we are in for a slow transition to a very different model for the audio distribution business where a lot more happens online through legitimate services like those being launched now,” said Adams.

  “I think that will be a growth business which ends up generating revenues for rights holders and probably to some extent at the expense of CD sales,” he added.

  Among the recently launched legitimate online music services is Pressplay, an online music joint venture between Sony Corp. and Vivendi Universal.

  Pressplay’s debut (backed by Sony and Vivendi Universal) on December 19 came on the back of a test launch for a similar service called MusicNet, backed by big record labels, including AOL Time Warner’s Warner Music Group, Bertelsmann AG’s BMG Entertainment, and EMI, along with Internet media delivery service RealNetworks.

  EMI owns a 43 percent stake in British books and music retailer HMV Media Group.

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Amen! Is there anything else to say?

well the money greedy record bosses finally saw the light. music for people not for money!

Good news! Unfortunately I’m sure this won’t reach Sweden, where CD prices are among the top 5 most expensive in the world (I’ve read).
On the contrary, EMI’s Swedish CEO constantly announces that prices are too low here. Duh.

CD’s are not twice as much in Europe than they are here in the USA. They may be a little more in certain countries, but my experience shows that they are about the same or cheaper.

Sweden in the top 5 for most expensive CD’s? I don’t think so! The “regular” prices of 149, 159 & 169 SEK that are common in the CD stores in Sweden (Ahlens, Mega, Skivhusset) are right in line (or even a little cheaper) with the $15-$17 the major chains in the US (Tower, Warehouse, Blockbuster). However, it seems as though it’s a lot easier to find good deals in Sweden though. For instance, the double CD sets like “Ultimate Dance Party”, “Ultimate Svensk”, etc. I was able to find for about the price of a regular CD (149-159 SEK). In the US, these types of compilations are typically only 1 CD with only 12-15 tracks total, not 37-40 like in Europe, yet both are priced similarly. In addition, I was able to find a lot of great CD’s in Sweden for less than 100 SEK ($10)! These were typically “older” releases, but not “that” old, typically (2-5 years). Overall, I ended up buying about 25 CD’s in Sweden but my average cost was about $9 per CD! No way I could have done that in a US CD shoppe.

We in the US can also pay outrageous prices for imports, if not well informed. The big on-line retailers like Amazon & CD now are slowly bringing their import prices down but they are still WAY above what you’d pay by ordering directly from a European seller. Keep in mind, most of regional on-line Euro shops’ prices include VAT, which will be deducted if shipped to the states. Granted, you have to pay a bit more for shipping, but you should still realize substantial savings.

Yes, Anom, you have a point there. But it’s mostly only applicable in the US, where the music has sucked for years. There are still good CD’s released in Europe frequently. 2001 saw great new releases from Roxette, E-Type, Scooter, U2 and Depeche Mode (well, the last 2 were released in the US, but you get my meaning... European Bands). If the US record execs would wake up, it may help their own asses. However, even with that said, the prices are still too high and people will just not pay that much when the material is available on-line for free. Especially when everyone knows that the record companies and record stores take 95% of the profit from a CD sale and the artist ends up with next to nothing.

Good Idea. What about Germany??? :)

well if you buy them from BMG club they have sales like unlimited $1.99 CD sells...and some CD sales of 80% off...


” US music HAS been horrible for quite some time now!!!!!!!!!!!
THANK GOD FOR ROXETTE!!!!” Well I don’t know what you mean. I am sick of people saying negative things when he/she doesn’t know what he/she’s talking about!!

Try these artists on for size.....
Sarah Brightman
The Go-Go’s
Mariah Carey
Cyndi Lauper
Insane Clown Posse

and not to mention the overy too popular
N Sync
Backstreet Boys
Britney Spears

There have been many artists everywhere (Abba & Roxette = Sweden)....Janis Joplin = USA...etc etc I really don’t want to list all I know ;) NYWS as you can see (if you download the music of the ones I’ve mentioned) they’re music is quite good...but then N sync, BSB and Britney’s is crazy music... :-S Britney lip syncs too much!! :-O

Hm and 9.99 isn’t that much cheaper...if you go to Best Buy or Circiut City they charge 11.99 for all the new releases....and they stay like that for many months and then go back to 13.99, but really it’s not that much money...downlaod music takes forever!!, not everyone has a computer, some people are loyal fans, and some people just like to have THE CD with the BOOKLET in their I rest my case..

Scotty J


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