CDs are quickly going the way of the 8-track, and any plan to revive plummeting sales is only a temporary measure. Still, Universal Music Group will be giving it a shot, as Billboard reports that the record label will be experimenting with CDs priced at less than $10. Beginning in the second quarter of this year, some CDs will even be priced as low as $6.
The new pricing plan will mean that retailers will make only a 25 percent profit margin. Still, UMG hopes that this reduced profit will be outweighed by a greater volume of sales. Universal Music Group Distribution CEO Jim Urie optimistically said, "We think [the new pricing program] will really bring new life into the physical format."
While most CDs will be sold for a lower price, Universal also unveiled plans to step up its production of deluxe editions. By including bonus materials for a higher price, the label hopes to entice collectors and serious music fans to prop up its new model.
Music industry executives were understandably uneasy about the UMG's plan. After all, this will likely set a new standard that other labels will have to follow. A senior distribution executive at a competing major reportedly asked, "Why does Universal feel the need to get below $10?" Is that a rhetorical question, or do you really want us to answer that?
This new pricing program is based on a test by the popular American retailer Trans World Entertainment. The company began testing $9.99 CDs in over 100 locations, reporting that this increased their sales by over 100 percent. One source claimed, "Things are not going to get better for CD sales unless the price point is addressed. One thing that the Trans World test shows for sure, $10 will drive sales and traffic."
This isn't the first time that labels haven't reduced CD prices, and previous initiatives haven't managed to reinvigorate the dying medium. Still, with iTunes setting a $9.99 standard for new albums, the industry is hoping that matching digital prices will be the answer they've been looking for.
Of course, if this latest plan doesn't work, the industry can always follow Bonnie "Prince" Billy's successful bottle-stopper model.
The new pricing plan will mean that retailers will make only a 25 percent profit margin. Still, UMG hopes that this reduced profit will be outweighed by a greater volume of sales. Universal Music Group Distribution CEO Jim Urie optimistically said, "We think [the new pricing program] will really bring new life into the physical format."
While most CDs will be sold for a lower price, Universal also unveiled plans to step up its production of deluxe editions. By including bonus materials for a higher price, the label hopes to entice collectors and serious music fans to prop up its new model.
Music industry executives were understandably uneasy about the UMG's plan. After all, this will likely set a new standard that other labels will have to follow. A senior distribution executive at a competing major reportedly asked, "Why does Universal feel the need to get below $10?" Is that a rhetorical question, or do you really want us to answer that?
This new pricing program is based on a test by the popular American retailer Trans World Entertainment. The company began testing $9.99 CDs in over 100 locations, reporting that this increased their sales by over 100 percent. One source claimed, "Things are not going to get better for CD sales unless the price point is addressed. One thing that the Trans World test shows for sure, $10 will drive sales and traffic."
This isn't the first time that labels haven't reduced CD prices, and previous initiatives haven't managed to reinvigorate the dying medium. Still, with iTunes setting a $9.99 standard for new albums, the industry is hoping that matching digital prices will be the answer they've been looking for.
Of course, if this latest plan doesn't work, the industry can always follow Bonnie "Prince" Billy's successful bottle-stopper model.
