In a bold move to help combat illegal downloading and revitalize CD sales, Universal Music Group (UMG) is to drop its frontline pricing in the U.S. to $12.98 from $18.98, Billboard Bulletin reports. UMG is also cutting out cooperative-advertising funds to retailers.
"If you look at what's going on, it's the first time that there has ever been an industry impacted by illegal activities," says UMG chairman/CEO Doug Morris. "Thousands and thousands of jobs have been lost, and it is an untold story that no one has rallied behind. It is one of the saddest things I have ever seen."
As the market leader, UMG decided to "step out and invigorate the market. It is a bold and audacious step," Morris says. The move will allow merchants to sell UMG titles for $9.99 and still make a profit. The company is also changing its midline list price to $9.98 from $11.98, except for classical and Latin product.
New titles coming out starting Oct. 7 will carry the new list price. Catalog titles will have the new pricing as of Sept. 29, although the company won't officially drop catalog list prices until Jan. 1, in order to allow retailers time to sell old inventory.
The pricing changes go to the heart of the current business model, changing it in profound ways. In order for the move to work, UMG needs an uplift in sales, says Jim Urie, president of Universal Music & Video Distribution, although executives at the major decline to specify what type of increase is needed, or how the changes will affect company revenues.
Universal's research on the $12.98 list price "seems to indicate that it will result in a dramatic increase in sales," says UMG president/COO Zach Horowitz. "We hope we are right," Morris adds.
"If you look at what's going on, it's the first time that there has ever been an industry impacted by illegal activities," says UMG chairman/CEO Doug Morris. "Thousands and thousands of jobs have been lost, and it is an untold story that no one has rallied behind. It is one of the saddest things I have ever seen."
As the market leader, UMG decided to "step out and invigorate the market. It is a bold and audacious step," Morris says. The move will allow merchants to sell UMG titles for $9.99 and still make a profit. The company is also changing its midline list price to $9.98 from $11.98, except for classical and Latin product.
New titles coming out starting Oct. 7 will carry the new list price. Catalog titles will have the new pricing as of Sept. 29, although the company won't officially drop catalog list prices until Jan. 1, in order to allow retailers time to sell old inventory.
The pricing changes go to the heart of the current business model, changing it in profound ways. In order for the move to work, UMG needs an uplift in sales, says Jim Urie, president of Universal Music & Video Distribution, although executives at the major decline to specify what type of increase is needed, or how the changes will affect company revenues.
Universal's research on the $12.98 list price "seems to indicate that it will result in a dramatic increase in sales," says UMG president/COO Zach Horowitz. "We hope we are right," Morris adds.
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