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MAPPING OUT THE FUTURE
Who'll Be The First To Sound The Charge?
Now that the FTC has made public their findings in the Minimum Advertised Price (MAP) investigation, the question now is: "What's next?"

Well, that depends on whom you talk to. The FTC has stated they believe consumers will be saving between $2-4 per CD after MAP goes away. But, many in the retail industry truly believe that retailers (even those that used "loss leader" pricing before MAP policies were enacted) have become very used to seeing a profit on CDs over the last five years and will not be as quick to go back to bargain-basement prices. Others, however, are not so optimistic.

Newbury Comics' Mike Dreese has never made a secret of the fact that he would be immediately targeting certain titles for dramatic price decreases with the demise of MAP. Considered one of the brightest retailers in the country, Dreese has always been outraged by MAP policies, feeling that he was being punished for what he perceived as other retailer's inability to run their businesses at a profit.

But who'll make the first national move? It most likely won't be a music specialty retailer. That's the segment that has the most to lose in a price war. They can't make up their margins on other lines of merchandise (although with in a price war, these retailers will now all be forced to take new lines to make up the difference). It makes more sense that someone like Wal Mart, Circuit City or Best Buy would get the most out of losing money on a CD in order to sell something else. (Newbury, by the way, also carries tons of other merchandise, including anything from candies to tongue studs, to Doc Martins.) Best Buy insiders have been very vocal that they are not eager to enter into a price war. But Circuit City and Wal Mart have not offered any such assurances. So far, mum has been the word. If anyone does intend to wage war, what would it serve them to tip their hand in advance?

But price wars are the retailers' worries. What about the major record groups? They'll still be making the same profit on a CD that they always have, no matter what anyone sells it for. So what do they have to worry about? The civil suits, of course. The signing of the FTC's "consent decree" could be construed by some to be tantamount to a confession of guilt to price-fixing. And you can bet that if some enterprising law firm doesn't already have a "consumer group" to represent in a class-action suit against the majors, they'll just as soon create one today in order to get in the middle of a possible multi-million dollar settlement.

So the waiting game to see what's going to happen begins in earnest. The FTC will now take 30 days of "public comment" on the matter. Then ignore it (their minds were made up from the beginning). Retailers will then start getting memos from the Big Five telling them that MAP is no longer in effect. But if someone breaks a MAP policy before then, you can expect absolutely no enforcement from the majors. MAP is dead. Long live price wars.

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