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"I applaud the move. Wherehouse Music does not live off of co-op. We can’t. If anyone heard something from this announcement that is not optimistic, I think it is clouded by short-sighted views of the industry."
——Lew Garrett, Wherehouse Music
RETAIL RESPONDS TO UMG
PRICING ANNOUNCEMENT
For the Most Part, They Like It, As Wherehouse’s Garrett, Indie Leader Van Cleave Support Move
Retail’s been asking for lower prices from the major record labels, and yesterday they got what they wanted… Of course, as the old saying goes, be careful what you wish for.

Although the lower list prices were welcomed, it came at the expense of co-op dollars for price and positioning and rebate programs  (see hitsdailydouble, 9/3).

Industry perception has always been that retail makes their margin on co-op dollars, but Wherehouse Music’s Lew Garrett disagrees: "I applaud the move. Wherehouse Music does not live off of co-op. We can’t. If anyone heard something from this announcement that is not optimistic, I think it is clouded by short-sighted views of the industry."

Although the other four members of the Big Five distributors did not comment on the record, one industry exec at another major music group opined, "Somehow we’ve got to get back to capitalism. This paradigm is obviously broken where retailers break even on product and make margin on co-op."

Best Buy’s Joe Pagano said simply that they don’t comment on pricing issues or their business relationships.

CIMS Prexy Don Van Cleave said this does not imperil the indie sector: "I don’t really want to put a negative on this until I live with it. I love the idea that front-line prices will be $12.98. I think my guys are totally willing to market their records without co-op dollars. I just want to make sure their margins don’t shrink with the lower price point."

[Ed. Note: Since reviewing UMVD's letter detailing the new pricing plan, Van Cleave has expressed "grave concerns" about it. To read what he really thinks, click here.]

And if others follow, will the FTC wake up and take notice? Says one industry insider: "The FTC hardly ever worries when people collude to lower prices."

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