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.
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.