Tuesday, March 8, 2011

A Plan To Help Retailers Stock More CDs

Record labels have a synergistic relationship with retailers that can't be denied. In the US, 50% of their revenue still comes from the sale of about 300 million CDs, which is a big amount by any stretch of the imagination. But with the major big box retailers of Wal-Mart, Best Buy and Target carrying fewer and fewer CDs in their inventory, it's even less likely that a consumer can find exactly what they want when they want it. This creates a fast downward spiral of decreasing CD sales that we're experiencing now.

Now I don't think there's anyone who believes that CDs sales are going to increase under any circumstances, but there are people that still buy them, and it might be possible to slow that spiral down. But how?

According to an article in the Financial Times, the UK retailer Tesco is trying to get the major labels there to implement a novel idea that might give the retailer some relief so it's it's able to stock more CD inventory. Instead of paying $11 to $13 dollars up front for a CD (in the US it's more like $8 to $9), they're asking to pay just 80 cents up front, with the remainder paid after the sale. The idea is that this amount will cover the actual manufacturing cost of the disc only, although that doesn't even touch the royalties, overhead, production costs and more.

A trial is now being made with Robbie Williams, and Tesco claims that sales are up 40%. That doesn't tell us much however, since the only way the program would make a difference is if more different CDs were stocked than before to give consumers more choice.

In any event, it's a step in the right direction. Record stores are vitally important to the music business, and it's important that they get any help they can from any place they can. Let's hope something similar takes place in the US.


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