In an initiative to revive falling sales, BMG is to introduce a three-tier pricing structure for CD albums in Germany from this August. Under the new pricing system, some CD albums could be available
In an initiative to revive falling sales, BMG is to introduce a three-tier pricing structure for CD albums in Germany from this August. Under the new pricing system, some CD albums could be available in three different configurations and pricing.
The low-cost band applies to new releases only and will be set at a suggested retail price of €9.99 ($12.29). Products categorized in this format will look like home-burn CDs; they come with no artwork and the titles and track-listing will be printed on the CD label.
At a suggested retail price of €12.99 ($15.98), the mid-range price band applies to catalog CDs and new releases; these discs will come with artwork. The major will also offer a "luxury" version of catalog and new releases €17.99 ($22.14) which come with a DVD feature.
In Germany, CDs cost €15 ($18.40) on average and catalog CDs are generally priced at €12.99 ($15.98).
By taking these steps, says BMG Germany/Switzerland/Austria (G/S/A) president Maarten Steinkamp, the company plans to boost sales of CDs in Germany by 25%.
"We will test with a number of local products a variable pricing system in Germany with the view to give consumers a choice," Steinkamp tells Billboard.biz. "If successful, we will roll this out to other [product]. We have been and are talking to our retail partners about this initiative," he adds.
Some German retailers remain sceptical of the initiative. "At first glance, this appears to be an interesting approach," comments Albert Wagner, owner of Berlin retailer L&P. "Yet, in the absence of any details as to how this plan is to be put into practice on the retail level, it is very difficult to assess its ramifications," Wagner adds. "Effectively, it means that retailers will need more shelf space as they will have to sell three different configurations of one and the same release. This goes against the current trend of cutting back on shop space for CDs."
BMG's low-price band would face chart eligibility problems. Under current German chart rules, CDs selling for €9.99 ($12.29) are deemed ineligible for inclusion in the national albums chart.
Sony Music G/S/A president Balthasar Schramm says that he had been talking to competitors for some time on developing new products to revitalize the German recorded music market. One of those steps included the Sony and Universal-developed Pocket It! CD, which sells for €2.99 ($3.67). The miniature CD will be followed in September by new formats, including budget-price offerings with various premium features, Schramm says.
The German record market is understood to have contracted by 10% in the first half of the year. According to domestic labels body BPW, the trade value of shipments in the German market fell 19.8% during 2003 to €1.65 billion ($2 billion).