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After another year of depressing compact disc sales, the world's largest recording conglomerate is dropping suggested retail prices for most new releases to under $10, but some skeptics say it's too little, too late.
Beginning April 1, Universal Music Group will launch a program called "Velocity," which recommends reducing profit margins on albums from artists like U2, Lady GaGa and Kanye West to 25 percent, down from 35 percent, in an attempt to revive struggling CD sales.
Last year, overall album sales were down 8.5 percent from 2008, according to the Nielsen SoundScan report. With digital album sales increasing more than 16 percent last year, CDs are left to take the blame for the shortfall, the report said.
While UMG cannot force the decreased prices on store owners, Andy Schneidkraut, owner of Albums on the Hill in Boulder, said those that do not embrace the change will look like the "bad guys" to consumers who see the price drop at larger companies that can afford to take a hit.
"They're suggesting I lower my prices to customers at a rate of around 10 percent, but they are not lowering my cost at an equivalent rate," Schneidkraut said. "It's going to drastically decrease my profit on CDs and that's the majority of my merchandise, unlike WalMart who depends on more than just music to survive."
UMG representatives, through an e-mail, said they didn't have time to comment.
The program also reduces wholesale prices, but not as drastically as the decrease in retail prices, meaning that store owners are not reaping the same savings as consumers.
"The price drop is not going to increase sales enough for me to hold a steady profit because not only am I now paying more percentage-wise for the product and selling it for less, but this will devalue the products that I currently have," Schneidkraut said.
In 2003, UMG lowered suggested retail prices to $13 from between $17 and $19 in hopes of salvaging CD sales. But Schneidkraut
With the average album online also costing about $10, this price adjustment would put CDs back in direct competition with iTunes and other Internet companies. But students at the University of Colorado said the convenience of digital music may be too enticing to ignore.
Graduate student Josh Swan said if a CD and its equivalent digital album were the same in price and content, he would buy the online version because the music will go straight to his iPod anyway.
"The last CD I bought was Tool's '10,000 Days' because it had 3D images on the pages of the book," Swan said. "That's something you can't get online."
Aside from the speed and convenience of digital music, many online music sources -- a mixture of legal and illegal sites -- are providing music for free, making it impossible for CD prices to beat the Internet.
Some students said they still care about the rich quality of traditional music formats, but it's not CDs that they're after. Creative art, unique sound and historical significance are putting vinyl back in high demand -- leaving CDs stuck between the convenient and clear sounds of digital music and the classic styles of LPs.
In contrast to faltering CD sales, LP album sales increased 33 percent in 2009 from the previous year, improving at a rate doubling that of digital albums, according to the Nielsen SoundScan report.
Ryan Riech, a Michigan State student visiting CU for spring break, offered his thoughts as he downloaded music on his laptop Monday at the University Memorial Center.
"There's nothing special about a CD anymore," he said. "Vinyl has that timeless quality. On the other hand, online music offers the option to pick and choose each song and not pay for what you don't want. What do CDs offer? Nothing special."
