UMG SLASHES PRICING

In a move intended to stem illegal file-sharing and drive consumers back to retail, the world’s largest record company has instituted a $12.98 MSRP list price on all front-line CD product. The move also represents the end of all traditional retail co-op and discount programs, including price-and-positioning and rebates, long standards in the industry.

Beginning Oct. 1, the start of the Q4 selling season, all UMG albums, which ranged from $16.98 to $18.98, will carry the new list price, which means retailers can sell the albums for below $10. Wholesale prices will now drop 25%, from $12.02 to $9.09, except for a handful of superstar artists, two examples given were Shania Twain and Eminem, which will carry a $10.10 price-tag.

Said UMG Chairman/CEO Doug Morris in a conference call: "We believe that music is, and always has been, a great entertainment value. With this bold move, it becomes an even greater bargain that will drive consumers back to the stores and significantly bolster music sales."

UMVD President Jim Urie said the move will benefit consumers and the company’s retail customers, while invigorating the overall music industry. "Music fans will benefit from these price reductions. Our new pricing model will enable U.S. retailers to offer music at a much more appealing price point in comparison to other entertainment products."

As part of the new policy, UMG labels will significantly increase their consumer advertising to raise music fans’ awareness of the artists and their music, as well as the new pricing structure.

Added UMG President/COO Zach Horowitz: "If this bold and audacious move is to succeed, we need a meaningful increase in our sales. Low everyday prices will increase consumer purchases and this is the time to do something dramatic. Music is more popular today than it has ever been, but many that are acquiring it are not doing so legitimately. We have to keep people coming to the stores to support artists and music they love. Our size gives us the critical mass to give this strategy a chance. We want consumers to feel they have spoken and we have listened."

Classical and Latin product are not included, nor are albums released this month. All Sept. releases will kick in at the new price Nov. 1.

Morris pointed to the pricing decision as an important means to fight piracy, along with legitimate download services such as iTunes, BuyMusic.com and Rhapsody: "We’re being plagued by criminal behavior and fighting very hard to come up with a strategy to invigorate the music market. The consumer will get a tremendous value from this new pricing, and maybe I can even fill in some holes in my album collection."