Why doesn’t the music industry lower prices?
That’s the question John Marmaduke, CEO of Hastings, asks in the new issue of Billboard.
(This one I could find on the magazine’s sucky web site; the piece, an opinion column, is here.)
Hastings is a music and movies retailer in the south and west. Marmaduke has evidence that lower prices would mean higher sales:
Our everyday interaction with customers in our multimedia stores shows they still shop our music departments with enthusiasm and an increasing appetite for CDs priced for less than $10. […O]ur under-$10 business is up by double digits, while our over-$10 business is down by double digits. The difference is more than 30 percentage points.
Our recent merchandising experience had mid-lines increase fivefold when the price was lowered from $10.99 to $5.99. This makes a compelling argument: How much of the rapid decline in CD sales is a function of mispricing compared with digital cannibalization?
Emphasis added. If I may translate his bureaucratese, he’s saying people aren’t buying CDs because they are priced too high relative to digital downloads. (ITunes sells most albums for ten bucks; you can find some but not all CDs for that in many big box stores, and even fewer in traditional retail outlets like Hastings.)
There are some interesting forces at work in the music market. Sony can price a movie DVD anything it wants, right? But in the music world, artist contracts sometimes restrict what the company can wholesale a CD for. Marmaduke:
[L]abels need to rewrite their new and renewing recording contracts so that they can quickly adjust the price to maximize market demand, which will increase the artist’s exposure. Imagine how frustrating it is for a multimedia retailer like Hastings to see the videogame and DVD industries reducing prices within weeks if unit volume declines below the sales plan to maximize market share, while the music industry blames its contracts for lack of pricing action.
Again, to translate, he’s noting the phenomenon where recent movie and videogame releases can often quickly be found in the bargain bins. This isn’t entirely unknown in the music biz—that’s what cutouts used to be about, and there are bargain lines from most labels. The problem, besides the contracts that might tie the labels’ hands, is that what the music industry thinks is a bargain and what you or I might think are a bargain are two different things.
There are a lot of logistical problems in his proposal: The industry has a long and proud history of screwing artists out of royalties, so it would be very unlikely that a manager would give a label carte blanch to discount his or her artist’s product.
And what if they did start lowering practices to match demand? Wouldn’t fans just illegally download the new Coldplay album—or rip a friend’s copy—and then wait a few weeks for the price to come down?
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The unspoken story here (although I think most people have probably seen it once or twice, and the music business complains about it regularly), is that music is easy to get - free - and yeah $15 for a convenient CD with nice art or a little time spent browsing online.. a lot of people are going to spend the time. The marketing strategy has to stop pretending they can eliminate this factor and start catering a little more to the “easy music” generation. We copy music from friends, download from legal (and illegal) sources, we listen to and record radio music. If the industry wants to make CDs more relevant again, well first of all they need to talk to the radio companies and use a bit of muscle to encourage them to play a little more variety.. after all when I’ve heard the same 4 songs played 10 million times I’m going to be sick of a station’s music and unfamiliar with other titles, but that’s an entirely different matter. If they want to lure in their customers I think it is absolutely true that the prices should come down. Even more to the point, I would really like to see more artists jumping on the “do-it-yourself” bandwagon, promoting and selling their music online. Offering a few free downloads, 2 songs at the very least, for listener s before they decide to pay, and the satisfaction of knowing your money is going to artists.
Thos are all excellent points. One of the interesting things about watching the music business implode is that so much of what needs to be done is obvious, but competing interests (both inside the corporations and in the artists’ sides) clash and the result is paralysis. A significant amount of short-term thinking in the retail, radio, label and artists/manager/agent camp has effectively frozen an entire industry.