Yesterday, Vivendi Universal's (NYSE: V) Universal Music Group announced plans to reduce the manufacturer suggested retail price (MSRP) on virtually all top-line CDs to $12.98. The plan, which will slash MSRPs by roughly 25%-30%, could be implemented by retailers as soon as October 1.
You only wonder why it took so long.
It's hardly a secret that most people would rather buy the artist's creation than scrap together a bootleg. But walk into any Best Buy (NYSE: BBY), Circuit City (NYSE: CC), Target (NYSE: TGT), or Walmart (NYSE: WMT), and 50 Cent's Get Rich or Die Tryin' will cost you about $15. At Tower Records or Best Buy's Musicland, the same CD will cost you $18.
Let's face it , when a CD can be burned for a quarter or downloaded through file sharing programs such as Neo Napster and Kazaa, that $18 price tag severely tests one's preference for legality. Whether or not theft undermines the pricing power of record companies is almost irrelevant; file sharing is a reality against which record companies ultimately have little defense.
Universal's bold move is good news for everybody. Lower priced CDs should drive sales, while music listeners can legally own music at a more competitive price.
As the largest music company in the world, Universal Music accounts for almost 30% of all record sales in the U.S., including those by the likes of Eminem, Nelly, No Doubt, U2, Stevie Wonder, and Shania Twain. The new pricing will also apply to Universal Music's catalog of older recordings, including those by Jimi Hendrix, Bob Marley, James Brown, Nirvana, and John Coltrane.
Universal Music, with $6 billion in annual revenue, is not part of Vivendi's merger deal with General Electric's (NYSE: GE) NBC announced Tuesday.
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