Since Clay Aiken signed with Decca Records, a part of the Universal Music Group, I have been interested in how they approach the ever-changing music recording business. It seem that UMG, the largest business group and family of record labels in the recording industry, is not afraid to try new and innovative ways to be the leader in the recording industry.
Universal Music Group recently unveiled a plan to test CD sales at $10 or less per unit. It’s a price that music fans have been demanding for years. Naming the program “Velocity,” UMG hopes that consumers will go out and buy CDs.
CD sales have fallen off in recent years while digital downloads have seen significant growth. The music site, Ars Technica projects that digital music sales will pass that of CDs by mid-to-late 2010.
Universal Music Group is taking steps to bolster their flagging CD sales. They are reducing the price per album, so that consumers will be spending anywhere between six and 10 dollars — a figure that is more competitive with digital services like iTunes.
The decision is a gamble for UMG: the price change lowers the company’s profit margin by shifting the wholesale price from $10.35 to about $7.50. Rolling Stone reports UMG is betting on increased sales volume to make the change profitable.
Jim Urie, Universal Music Group Distribution Chairman/CEO said:
“We think it will really bring new life into the physical format.”
The response to this new plan is mixed. There are many people who are excited to see lower physical CD prices. Lee Simmons from the internet site, Bizmology says that since it costs just pennies to manufacture a single CD, it is about time to see the lower price.
For some reason, the other major labels seem hesitant to try the new pricing. Simmons states that some of the label execs are even annoyed with the idea. However, they have not come up with another idea for stopping the decline in CD sales.
Will the lower price of a physical album entice consumers to purchase? It worked for retailer Trans World Entertainment, which saw sales jump 100 percent during a $9.99 test plan that partnered with Sony, UMG and EMI. With music sales already down 15.4 percent from just last year, success for UMG could signal a broader change from the other major labels
According to an industry observer at Billboard:
“The definition of idiocy is doing the same thing over and over and expecting a different result. 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.”
If the price of CDs is lowered by all the labels, I might be visiting the CD section of stores more often. It is such a good feeling to walk out of the store with a brand new CD in your hands. It feels good to slip it into the console of the car and listen as you drive home. Now, if they can only come up with an easier way to open the CD case!!