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“This test will seek to address these issues by offering a greater selection at sharper pricing, creating an even more compelling physical entertainment option for music consumers.”
——UMGD’s Jim Urie
UMG TAKES THE $10 "VELOCITY" CHALLENGE
Becomes First of the Big Four to Go After the Theoretical “Sweet Spot”
UMG announced this morning that it will test a program, dubbed "Velocity," which features a $10 MSRP on a broad selection of top-line CDs in the U.S. The test will begin in the second quarter.

The music group, which has been releasing albums in more than one version of late, notably including Lady Gaga’s The Fame and The Fame Monster, says it will also offer companion versions of these lower-priced CDs containing additional content for dedicated fans at a higher price point.

“After extensive consumer research and conversations with our retail partners, we found that there is a large segment of consumers who want to purchase CDs, but have been holding back due to a difficult economy and the value proposition of physical media,” said UMGD President/CEO Jim Urie. “This test will seek to address these issues by offering a greater selection at sharper pricing, creating an even more compelling physical entertainment option for music consumers.”

The roll-out for the newly minted pricing plan is set to begin testing with selected titles in the second quarter, starting with MCA Nashville’s Laura Bell Bundy. By Q3, Urie tells us that virtually every new release by UMD’s owned labels will have both a "Velocity" configuration and a deluxe, which will either have a DVD, extra tracks or enhanced packaging with varying, higher wholesale prices.

The Velocity configuration will come at four different price points: $7.50 wholesale for a $10 MSRP, $6.75 for $9 list, $6 for an $8 list and $4.75 for $7. Rumors that the product would be sold “one-way” are not true. However, although UMD is not calling the product “stickered,” the MSRP will indeed be printed on the spine for the CDs. 

Urie explains that this is not a reaction to Trans World's $9.99 test store results. “We’ve been looking at doing something of this nature for years,” he says “But the TW results were indeed eye-opening.”

He says that retail reaction has been very enthusiastic. Charlie Anderson, CEO of Walmart supplier Anderson Merchandisers, issued a press release praising the new plan.

“Last week, Warner Bros. recording artist Blake Shelton came out with a "six pack" (six songs sold for $6 at Walmart), and now Unversal Music Group is endorsing the same concept by offering a wide range of music for under $10. I applaud them. We all know this is where the music industry must head.”

Trans World’s Ish Cuebas said they are still gathering the facts concerning the plan. “But at first blush, we think it’s a good thing. We have been fighting for years to get to this price point and I think that the Trans World test results opened the labels' eyes.”

UMD needs to see a 30% gain for the plan to work. That seems like it might be a workable number if we are to believe the lift of more than 100% reported by both TW and UMD at the 118 TW test stores.

Now, the question is, will the rest of the Big Four join the ranks?

In his column posted Feb. 26, our in-house pundit I.B. Bad noted: “Retail mavens believe that if any or all of the Big Four distributors react to these results by lowering the wholesale price of CDs, they’ll be forced to compensate for the resulting razor-thin margins. Specifically, they expect to see the current trend of albums containing fewer tracks to intensify.”

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