Sounds Weak

8 September 2003


Universal Cuts CD Prices -- Too Little, Too Late

Universal Music, the biggest record company, has announced that it is cutting the price of its CDs in stores by almost a third. The company admitted that it will require hefty increases in sales to make up for the revenues lost, but also pointed out that pricing was a major deterrent to young people buying more music. Universal has identified the problem, but the cut won't make file sharing go away.

If a company is going to be able to make it in the music-selling (as opposed to music-playing) business, Universal is it. It's almost as large as than second biggest Warner Music and #3 BMG put together. It has Dr. Dre, Eminem, Ashanti, and Elton John as current artists, and its catalog includes Ella Fitzgerald, the Who, Jimi Hendrix and Nirvana. In other words, they have the product.

What they don't have is kids buying CDs in the numbers they used to. CD's sell for $16-$18 a pop; quite a chuck of after-tax change for someone working a minimum wage McJob. All the more so when that same teenager can go home and download most of the new stuff for free (illegally) thanks to the internet.

The key to this is understanding what kids who download music do with the file once they have it. Many have MP3 players, and that's the end of it. But most still burn the tunes onto recordable CDs to take with them in the car or in their personal stereo. In other words, the CD is still a viable (if fading) medium for distribution. The problem is that a pirate CD that cost a buck or two is a much better deal than a legit disc that took four hours of labor to pay for. The band is the same, the songs are the same, so kids can't be bothered to spend the extra.

Throwing teenagers in jail won't help (although in some cases, it can't hurt). Illegal downloading is more common that pot smoking and locking up rap pirates will be as ineffective as busting pot heads has been in cutting marijuana use. No, the answer for Universal is to cut prices to less than $5 each. It's still more, but it's in the ball park of illegal downloads. Unfortunately, that might not be profitable, in which case, the bad times in Recordland continue.

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