Posted by Mark Mulligan on March 18, 2010
At last! One of the majors finally takes the brave but long over due move to slash CD prices (UMG has announced it will be reducing prices to just $10 for frontline CDs in the US). There have been experiments with CD price drops for the last few years. Finally we see some marketplace movement.
The simple fact is that CDs are perceived to be too expensive for many consumers. CD price changes will bring some much needed momentum back to CD sales but – and it’s a crucial ‘but’ – it won’t halt the decline. Instead it will slow the prolonged demise. The CD is a dying music product format, but it has some life left in it because downloads haven’t generated the format replacement they were expected to. With all previous music formats the successor format was firmly in the ascendancy by the time its predecessor was in terminal decline (see chart below). So until the online marketplace gets its act together there’s a stay of execution for the CD. And the labels need this breathing space, because the core impact of online’s under performance is that the CD paradoxically remains the bedrock of revenue.
There’s still more distance to go with CD pricing though. The next crucial step is tiered products with a basic product at c $5, the standard at $10 and the deluxe at $15. We’re some way off that becoming reality, but it will - and must - happen some time in the next few years if maximum extended life is to be squeezed out of the shiny little disc.