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Talkin' 'Bout My CD Prices

September 05, 2003

Universal Music Group's decision to slash its compact disc prices 25% by Oct. 1 probably comes too late to reverse the free-downloading habit that pervades teen and young adult culture. Even so, the cuts might win back enough older music fans to keep the retail music industry hobbling along. The only way to find out is if other companies quit carping at Universal -- which has almost one-third of new music sales in the United States and whose acts include Eminem and Shania Twain -- and follow suit.

Music executives have claimed for years that Internet downloading, not exorbitant pricing, was the cause of slumping sales. But CD pricing has always been about maximizing profit, not attracting new buyers.

When the CD replaced vinyl in the early 1980s, manufacturing a compact disc cost less than pressing an LP record. Executives, however, raised prices as fast as possible and quit producing vinyl records just as quickly. Once consumers started replacing their old vinyl, music companies sold not only new recordings but also their huge backlists -- think Beatles, Frank Sinatra, Nat King Cole.

Since that industry bonanza, much has gone wrong. In their hunt for Britney Spears-sized jackpots, music executives failed to cultivate offbeat new bands, leading consumers to complain about bland offerings. The rise of chain radio stations has erased the independent and locally owned stations that catered to regional tastes and played music because a programmer or DJ liked it. The quality of popular music fell as CD prices rose, up to $18.98 for a single pop disc. In the last three years, industrywide sales have plummeted 31%. Powerhouses like Universal, Sony, BMG and EMI are scrambling.

The response of the Recording Industry Assn. of America, the music business' trade and lobbying group, has been to launch a legal blitz against high school and college students who download large numbers of songs. Downloading unquestionably is illegal and ethically wrong, but the industry seems to be using an Abrams tank against slingshots.

The music industry's long-term future is probably in digital online sales. A new study by Forrester Research estimates that on-demand subscriptions and downloads could bring in $270 million this year and $1.4 billion in three years. But Universal's price cut may encourage the return to record stores of baby boomers, Gen-Xers and audiophiles. The CD remains small, reliable and user-friendly for fans who don't want to bother with downloading songs whose sound is compromised by being compressed into a computer file. The silver disc may get new life from higher-resolution Super Audio CD and DVD-Audio formats.

The Beatles and Rolling Stones sang about revolutions, but who knew it would end up being the studio suits fighting at the cash register for their existence?

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