CD prices unlikely to reflect US fall

By SIMON HENDERY

The cost of CDs in this country seems unlikely to drop, despite a move by the world's largest recording company to slash prices in North America.

Universal Music Group is cutting wholesale CD prices by up to 30 per cent in the US and Canada in a bid to revive music sales which have fallen by 31 per cent in the past three years.

Universal said this week it would cut the suggested retail price on most of its CDs by US$6 ($10.50) to US$12.98 ($23) from October 1.

It hopes retailers will price their CDs lower still, at around US$10 or less.

The company's big pool of artists includes Hayley Westenra, Eminem, Elton John, Shania Twain and U2.

The managing director of Universal Music NZ, Adam Holt, said the company would review its prices following the American move but New Zealand had always been one of the cheapest places in the world to buy CDs.

Strong retail competition in New Zealand - led by The Warehouse, the country's largest music retailer - meant local consumers were not paying much above the lower US$12.98 retail price Universal was advocating.

"There's a lot of work to be done, but, certainly, we are looking at it pretty closely," Mr Holt said. "We share the same problems as the US, so if it works for them it gives a good hint of a possible way forward."

Brent Gleave, manager of online retailer smokecds.com said the American move could make it cheaper for retailers to import titles directly, which in turn would pressure recording firms to slash wholesale prices here.

"It would be very welcome because cheap CD prices in this country are basically being carried by retailers," said Mr Gleave, who also owns independent record label Capital Recordings.

"If all CDs were $25 and retailers could make a decent mark-up out of selling them for $25, our music industry would be in a really good place right now."

The recording industry blames the sales slump largely on illegal music swapping over the internet.

But industry critics say record companies have long ignored the effect on sales of high CD prices. They also contend artistic quality has deteriorated.

"This is something that the industry has failed to address ... You could make downloading music go away tomorrow and the industry would still face challenges," said Sean Baenen, managing director of Odyssey, a market research firm in San Francisco.

"All the data suggests quality and price are major factors to the equation."

Revenue from album sales fell from US$14.6 billion in 1999 to US$12.6 billion in 2002, according to the Recording Industry Association of America.

- Additional reporting: Agencies