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Apple Driving CD Prices

Filed in archive Entertainment industry , Marketing by Marc on February 14, 2007

Apple Driving CD Prices
Over half the 25 best selling CDs on Amazon.com are under $10. Credit Apple. iTunes' $9.99 album pricing is driving major retailers to be competitive in a weak market.

An anonymous record exec explains:

The biggest thing driving prices to $9.99 is iTunes. Physical retailers are pressuring the labels downward on price (of course, Wal-Mart is the biggest culprit) because they don't want to be undercut by iTunes 9.99 on all single albums. We're rapidly moving to a 9.99 world on the big sellers (the ones stocked in Target and Wal-Mart and Best Buy).

To accomplish this, I am told, particularly on new releases, the labels are doing what they historically did in the physical world and buying into "retail" programs -- in essence, paying for price and positioning or other marketing tools on Amazon by giving them functional breaks. And you'll note that 3 of the four examples you cite are EMI releases (CBR, Norah, Beatles). EMI is in such bad shape, they are doing whatever they can to move stuff. And with Corrine's appearance on oprahlinks and with Norah out this week, they are pulling out all the stops to make these records big stories (CBR went from 26 to I think 4 on the chart, mostly as a result of Oprah). The hope is that they can then go back up to normal price later with a "must-have" product.

The Shins record is on Sub-Pop so they likely have a lower suggested retail price anyway to begin with (probably $13.98) so it's not really that big a discount for an indie (likely only 10% off normal wholesale to get it down). Now Regina Spektor is a more interesting case. She's basically an unknown artist and they're trying to get some traction by giving the record away (and they're doing this more and more on new/unknown artists). So yes, there is pricing pressure, caused mostly by the success of iTunes and the falling physical sales market. Without iTunes, the downward pressure would be substantially less.


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