Battered by online piracy, Univer-sal Music Group, the world's largest record company, said on Wednesday that it would cut prices on CDs by as much as 30 percent in an aggressive bid to lure consumers back into record stores.
The deep price cut -- the only one to apply to new CDs since the format was introduced in the early 1980s -- represents a gamble by Universal that more consumers will buy more CDs once the price dips below US$13. It also reflects the profound degree to which Internet file-trading has managed to undermine the music business, Universal executives said.
"We are in the middle of a terrible situation where our music is being stolen," said Doug Morris, chairman of Universal, which includes labels like A&M and Island Def Jam and artists like Eminem, Elton John, Shania Twain and U2. "We need to invigorate the market, and as an industry leader we felt we had to be bold and make a move."
Under the new pricing scheme, Universal would lower its wholesale price on a CD to US$9.09 from US$12.02. The company said it expected retail stores to lower CD prices to US$12.98 from between US$16.98 and US$18.98, and perhaps to as low as US$10. When CDs first arrived on the market they cost US$15.98, and have climbed from there.
The result could be a broadening of the music market, which has contracted as prices have increased. Music consumers have complained for years that CD prices are too high, and many people who copy music without paying for it online cite high prices as the main reason.
"Music is not supposed to be an elitist product," said Josh Bernoff, an analyst at Forrester Research. "We're not talking about Lexus here. It's better to have more people buying music at a lower price than to have it priced out of the market."
But the move will put even greater pressure on Universal's profit margins at a time when the company is struggling. And some music industry analysts caution that high prices and piracy are not the only reason CD sales have dropped off.
Some of the research on older consumers shows that "not finding what they want is more of a reason for not buying than pricing," said Russ Crupnick, an analyst with NPD Group, a market research firm.
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