Music Industry Drops CD Prices â€" Too Late

Last Updated Mar 19, 2010 3:06 PM EDT

Universal Music Group announced it will drop its CD prices -- remember those? -- to be between $6 and $10. It is an initiative called Velocity, and it is a great gesture that is approximately three to five years too late.

From Billboard:

Beginning in the second quarter and continuing through most of the year, the company's Velocity program will test lower CD prices. Single CDs will have the suggested list prices of $10, $9, $8, $7 and $6.

To accommodate the lower pricing, UMG labels also plan to step up deluxe versions of albums that can sell at higher prices for the more devout music fans and collectors. UMG is also banking that the lower price points will at the least be offset by increasing CD sales volume.

Will the move push noticeable units? I severely doubt it. As many know, Apple has officially been the number one music retailer for going on two years. Second place has toggled between Target and WalMart.

All three also have something in common: The "magic" $9.99 price point. What I find humorous is that music analysts have known for years about the appeal, but the four major labels still continued to try to charge consumers up to $18.99 for CDs. To use a term appropriate for March Madness, this announcement is the result of a triple press: Urban and tech-savvy listeners flocked to iTunes, suburban listeners went to Target and rural listeners shopped at Wal-Mart. And, eventually, most everyone came to iTunes.

Worst, the "exclusive" music found on iTunes or in WalMart or Target usually leaked to other stores with embarrassing results. For instance, here's Rolling Stone on one of the first exclusive deals, The Eagles 2007 double CD "Long Road To Eden":

When the Eagles announced that they would exclusively sell their new double album Long Road Out of Eden for an entire year at WalMart (and their own Web site), fans across the nation - especially those in WalMart-less towns like New York City and Los Angeles - wondered how they'd get their hands on copy without journeying to the retail giant. But then we heard whispers that people were finding the new "exclusive" album at small mom-and-pop record stores and, remarkably, big chains like Virgin Megastore. We investigated these claims and discovered that the CDs are indeed being sold outside of Wal-Mart. Not only that, it didn't take speakeasy tactics to secure a copy; some stores were boasting the album by the dozen in front display cases, where new releases are usually showcased (see above, a shot from a New York City Virgin Megastore boasting a price sticker of $18.99).

The WalMart price for the 22 songs? $11.99, equal to the average double CD on iTunes. Wal-Mart has many issues culturally, economically and corporately, but in this case it's simply following a trend which the music industry itself was well aware.

From Billboard:

Yet merchants have long clamored that lower pricing will prolong the life of the CD, which is down 15.4% so far this year. Album sales were down 18.2% last year, and 19.7% in 2008, when CD sales totaled 360.6 million, as opposed to the 706.3 million units CDs scanned in 2000.

It's commendable that the largest music conglomerate, as well as other music companies, has realized that 25% of something is better than 50% of nothing. The problem is it should have happened at least three years ago. When it comes to CD sales, hopefully they're not expecting a miracle -- because there won't be one.