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News: Wal-Mart Demands Price Cuts For CDs

March 25, 2008

In the latest issue of Rolling Stonemagazine, a major announcement was made concerning the biggest individual distributor of music in the economy today, Wal-Mart. According to sources, Wal-Mart has threatened to stop selling music if major record labels, especially the Big Four, Universal Music Group, Sony BMG, EMI, and Warner Music Group do not drop the prices of CDs to a minimum of $5. Although Wal-Mart has denied their threat to stop selling music, they have all but denied their longing for major record labels to drop prices further in the wake of a consistently decreasing success in the music industry, 12% alone this year so far.

Wal-Mart draws an estimated 127 million customers every week, that accounts for 16% of the total music business sales for CDs and other items. As cited in Rolling Stone, the store has proven its worth and power in the music market by the sales of the Eagle’s “Long Road Out Of Eden” album which was exclusively released through Wal-Mart in 2007 and its signing a deal with Journey to release a 3-CD pack in June of this year exclusively through Wal-Mart retailers. In addition Garth Brooks also had a hugely successful reign with his box set a few years back. So it’s no argument at all that Wal-Mart defiantly has the right to demand such control and cheaper pricings. These demands have caused fear for major labels for two reasons: 1.) other retailers, in an attempt to remain in the game, have begun to follow Wal-Mart’s lead, and 2.) the lower prices are far from beneficial for the labels and would require the loss of millions of jobs to accommodate for the loss of profits.

Now, for CD collectors and music lovers like myself who lack internet downloading, enjoy tradition, or lack an i-pod, this doesn’t sound so bad. Actually when looking at statistics, the younger crowd are responsible for the drop in sales thus the older population who are suffering from financial debt these days would benefit from lower prices. The disadvantage for these same people is that their favorite artists are suffering from it. The average artist receives a maximum of $.11 per CD now, imagine how that will drop with the profit. The artist, the label, and every other major power involved in the production will be greatly effected. The only thing keeping this from being a possible tragedy is that music downloading and dedicated customers of specialty stores like FYE and Barnes & Noble will even it all out in the end. The irony behind the whole issue is that Wal-Mart has demanded a price drop from their traditional $13.88-$10 price to a $10-$5 price in order to try to encourage more youth music lovers to buy full CDs and to discourage downloading and piracy as major sources of musical entertainment today. As cited by writer Steve Knopper in his article in the Rolling Stone, in the words of label owner Russ Solomon “That’s the real underlying problem of the industry: The kids have stopped buying records….Just reducing [CD prices] to $10 doesn’t solve the problem” (Knopper)*.

Although Wal-Mart is a controversial industry, it has made great strides in the music business and has continuously dropped their CD stock over the past few years. It is open to personal opinion whether the lowering price will end in Wal-Mart’s discarding CDs from their market anyways or if Wal-Mart has become so greedy that they will not only force a drop in price, but will also become much more picky when selling CDs on their shelves. Consistent 20% drops in floor space have made Wal-Mart a great, but unreliable market for the buying of traditional and classic music. Personally I’ve had to order from FYE just to get ahold of an older CD from 2003 from an artist Wal-Mart no longer acknowledges. Wal-Mart’s prices are great and they are very dependable for the collector, but only time will tell if they are asking for to much control and if such issues could lead to a downfall in the music iindustry.

 *Knopper, Steve.  “Wal-Mart Demands CD-Price Cut.”  Rolling Stone  April 3, 2008:  16

2 Comments leave one →
  1. Leeann permalink
    March 25, 2008 7:22 pm

    Excellent post and great look at this issue altogether. Something to think about, that’s for sure…not that we get any say in what happens in the end, anyway.:)

  2. bobby permalink
    March 27, 2008 3:40 am

    thats an interesting topic. i think if the prices go down it would help the cd industry, especially if they were cheaper than itunes prices. i personally think opening a cd and listening to it while reading the lyrics in the cd jacket for the first time is one of my favorite things to do. i use itunes for songs by artists that i wouldnt want a whole cd from, but would want one song or for older song that i wouldnt want to go back and get the whole cd of. i certainly dont want the cd industry to go away. good post, it made me think a lot

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