Wednesday, March 12, 2008

Wal-Mart wants tiered pricing for CDs

Wal-Mart is pushing the record labels to come up with a tiered pricing plan for CDs, according to an article from Billboard:
The major music companies have been resistant to lowering their price on CDs, but now they may be dragged to that point: Wal-Mart, the largest retailer of music with an estimated 22 percent market share, has proposed a five-tiered pricing scheme that would allow the discounter to sell albums at even lower prices and require the labels to bear more of the costs.
The tiers would be:
  • Top 15-20 titles: $10
  • Hits and current titles: $12
  • Top catalog: $9
  • Midline catalog: $7
  • Budget items: $5
The article quotes a Wal-Mart exec as saying:
"When you look at sales declines with physical product, and you have a category declining like it is, you have to make decisions about what the future looks like," he said. "If you have a business that is declining and you want to turn it around, it really takes looking at it from all angles."
The fascinating item is that there is apparently consideration of dropping music altogether, or at least cutting back to a couple racks, if the labels don't come around. This is a great case study of an industry in crisis. I'll bet there will be a bunch of MBA papers written on the music industry in a few years.

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