Labels Balk at Wal-Mart Pricing

Responding to the overall decrease in physical music sales over the past several years, retail behemoth Wal-Mart, the leading distributor of music nationwide, seems to be entertaining the idea of a broad cut in CD prices. Higher-ups in Bentonville have confirmed a five-tiered pricing scheme, where the top 15-20 selling titles would retail for just $10. Other current releases would sell at $12, while catalog titles would go for anywhere between $9 and $5, based on popularity.Responding to the overall decrease in physical music sales over the past several years, retail behemoth Wal-Mart, the leading distributor of music nationwide, seems to be entertaining the idea of a broad cut in CD prices. Higher-ups in Bentonville have confirmed a five-tiered pricing scheme, where the top 15-20 selling titles would retail for just $10. Other current releases would sell at $12, while catalog titles would go for anywhere between $9 and $5, based on popularity.

Wal-Mart’s divisional merchandise manager for home entertainment, Jeff Maas commented on the possible price change. “When you look at sales declines with physical product, and you have a category declining like it is, you have to make decisions about what the future looks like,” he said. “If you have a business that is declining and you want to turn it around, it really takes looking at it from all angles.”

With 22 percent of the overall market share, Wal-Mart has a powerful bargaining position against the record labels, who would shoulder more costs under the new pricing schemes. And although negotiations on the new deal have not yet taken place, music industry officials have already begun weighing in, speculating on the possibility of a take-it-or-leave-it stance by the retailer. Indeed, many foresee that labels will have to choose between the hit in costs and Wal-Mart discontinuing their sales entirely. “Do we give up 20 percent of our business (i.e., Wal-Mart) in order to not lose the entire business?” one executive asked.

Without discounting the possibility of such and outcome, Maas instead chose to focus on the benefit for the consumer. “The customer votes every single day in our stores,” he said, “and based on what they want is how we merchandise our stores.” So save your nickels and dimes, America: you might just be able to afford that new Whitesnake release after all.