MUSIC INDUSTRY Largest recording company to slash wholesale CD prices

Traditional music retailers have been suffering.
LOS ANGELES (AP) -- The world's largest recording company said Wednesday it would slash wholesale CD prices in a bid to revive lagging music sales, which have dropped 31 percent industrywide in the last three years.
Universal Music Group said it would cut the suggested sale price on a majority of its CDs by $6 to $12.98. The company hopes retailers will follow its lead and drop their CD prices to around $10 or less. The price changes would go into effect by Oct. 1.
"We expect [this] will invigorate the music market in North America," UMG Chairman and CEO Doug Morris said in a conference call Wednesday.
Response not clear
It was not immediately clear how retailers or other record companies would respond to the move, which comes as music sales are picking up on the Internet with Apple Computer Inc.'s breakthrough 99-cent-a-song offering. Company officials said they had not discussed the pricing strategy with retailers, who would be notified formally today.
Officials at the National Association of Recording Merchandisers did not return calls Wednesday.
Kevin Milligan, vice president of merchandising at Torrance, Calif.-based record retailer Wherehouse Entertainment Inc., said he had not received notice from UMG, but that in general, the move is good news for consumers.
"Whether it will ultimately be good news for retail? I think it's still up in the air," he said.
Traditional music retailers such as Tower and Wherehouse have been suffering as large stores such as Best Buy, Target and Wal-Mart Stores Inc. can afford to sell music at a loss, covered by sales of more profitable items.
UMG's current wholesale price for a CD album is $12.02, with a manufacturer suggested retail price of $18.98. Under the new pricing structure, the wholesale price would be $9.09. The wholesale price for CDs by a handful of performers, including Eminem and Shania Twain, would be about a dollar more, said Jim Urie, president of Universal Music & amp; Video Distribution.
Cassettes
The company also said it would cut wholesale prices on cassettes and change the suggested retail price to $8.98. Latin recordings and multiple disc packages or CD box sets would not be included in the pricing change.
"Our new pricing model will enable U.S. retailers to offer music at a much more appealing price point in comparison to other entertainment products," Urie said. "We are confident this pricing approach will drive music fans back into retail stores."
Officials at EMI, BMG and Warner Music Group declined to comment. Sony Music Group officials could not be reached immediately.
UMG also said it would no longer give retailers co-op advertising or discounts, which are common in exchange for favorable product positioning at stores.