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CDs Get Cheaper As Labels Get Creative To Beat 2002 Slump Print E-mail
Monday, 17 June 2002
Walk into any good used CD store in Los Angeles and you’ll find the real music enthusiasts routing through the bins of discs looking for their next fix.

And much like a good rock of crack, their fix is $5 to $7, not $20. For the first time in modern music history, the music industry is realizing that they need to deal with the value of their prerecorded media. DVD-Video discs are selling at a record pace thanks to innovative content and bountiful added values that make a $24 DVD-video disc actually worth $24 to consumers. Before the music industry can really decide over its next format (SACD or DVD-Audio) it needs to solve two pressing problems right now. The first problem is the CD is no longer worth $20 and the second problem is much of the music being pushed through traditional venues is simply lousy.

A recent RollingStone.com article cites labels starting to sell CDs as cheap as $6.99 to promote developing acts such as John Mayer and The White Stripes. RollingStone.com goes on to highlight labels like Island/Def Jam and Interscope/Geffen/A&M who are paying rebates to record stores as high as $3.50 per disc. This model allows retailers to drop the price of the disc thus reducing the risk of the music consumer when considering investing in the music of a new artist. The rebate model is not a new one – having been used recently by the automotive industry to protect the car dealer’s profit margin by making all of the money to be made on the sale of a car available in a factory-to-dealer incentive.

With the imposing threat of "hey man – I’ll rip a CD of that for you" the music industry knows they are in trouble and lowering the prices of CDs for good new artists is a good way of dealing with it. At the same time, the Big Five need to start making hard decisions about support for a new music format – either DVD-Audio or SACD – complete with better sounding stereo and surround sound capabilities so that users have a reason to spend closer to $20 on a disc.

One law remains – as Dick Clark is famous for saying… "if it is in the grooves. It is in the grooves." Rapper Eminem’s new album, The Eminem Story, is a good example. The people wanted the CD so badly that they were willing to take seriously illegal actions to get it. Interscope cranked up production and sped up distribution to have one of the biggest successes in an otherwise stinky year for music. The lesson is - if you want to sell CDs for $16 in 2002 make sure the music doesn’t suck. If you want to sell a disc for $16 or more next year and beyond – it better have more added values like high resolution stereo and surround sound much like a DVD movie has different audio tracks, commentaries, trailers and more.

Sources: RollingStone.com

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