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Dallas
= Cult of Ray =
USA
725 Posts |
 Posted - 10/12/2004 : 12:07:10
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This is a double-edged issue. Yes Wal Mart is only doing this so more people by records at WalMart and they make more money. Yes records are overpriced and consumers are being gouged. In either equation, Artists still get too small a cut. Judging by the stats at the end of the article, the price has little or nothing to do with paying the artists or creative types.
Begin Article
Wal-mart wants every CD you buy to cost less than ten bucks. And the nation's largest retailer -- which moved a quarter of a trillion dollars' worth of goods last year -- usually gets its way. Suppliers who don't accede to Wal-Mart's "everyday low price" mantra often find their products bounced from the chain's stores, excluded from being sold to the 138 million people who shop at a Wal-Mart store every week.
In the past decade, Wal-Mart has quietly emerged as the nation's biggest record store. Wal-Mart now sells an estimated one out of every five major-label albums. It has so much power, industry insiders say, that what it chooses to stock can basically determine what becomes a hit. "If you don't have a Wal-Mart account, you probably won't have a major pop artist," says one label executive.
Along with other giant retailers such as Best Buy and Target, Wal-Mart willingly loses money selling CDs for less than $10 (they buy most hit CDs from distributors for around $12). These companies use bargain CDs to lure consumers to the store, hoping they might also grab a boombox or a DVD player while checking out the music deals.
Less-expensive CDs are something consumers have been demanding for years. But here's the hitch: Wal-Mart is tired of losing money on cheap CDs. It wants to keep selling them for less than $10 -- $9.72, to be exact -- but it wants the record industry to lower the prices at which it purchases them. Last winter, Wal-Mart asked the industry to supply it with choice albums -- from new releases from alternative rockers the Killers to perennial classics such as Beatles 1 -- at favorable prices. According to music-industry sources, Wal-Mart executives hinted that they could reduce Wal-Mart's CD stock and replace it with more lucrative DVDs and video games.
"This wasn't framed as a gentle negotiation," says one label rep. "It's a line in the sand -- you don't do this, then the threat is this." (Wal-Mart denies these claims.) As a result, all of the major labels agreed to supply some popular albums to Wal-Mart's $9.72 program. "We're in such a competitive world, and you can't reach consumers if you're not in Wal-Mart," admits another label executive.
Tensions are not as high now as they were last winter, but making sure Wal-Mart is happy remains one of the music industry's major priorities. That's because if Wal-Mart cut back on music, industry sales would suffer severely -- though Wal-Mart's shareholders would barely bat an eye. While Wal-Mart represents nearly twenty percent of major-label music sales, music represents only about two percent of Wal-Mart's total sales. "If they got out of selling music, it would mean nothing to them," says another label executive. "This keeps me awake at night."
Wal-Mart would not directly comment on tensions with the labels, but Gary Severson, Wal-Mart's senior vice president and general merchandise manager in charge of the chain's entertainment section, did allude to the dispute about music prices. "The labels price things based on what they believe they can get -- a pricing philosophy a lot of industries have," he says. "But we like to price things as cheaply as we possibly can, rather than charge as much as we can get. It's a big difference in philosophy, and we try to help other people see that." Virtually no industry executives would publicly comment about their company's relationship with Wal-Mart. But off the record, many record-industry executives shared their concerns. "I don't think there is a music supplier in America who really enjoys doing business with Wal-Mart," says one major-label rep.
No one in the music business ever expected Wal-Mart to become the most powerful force in record retailing. In the past, the business was shared among smaller local and regional chains such as Musicland, which once had an estimated ten percent of the market. But as Wal-Mart and other national discount operations such as Target and Best Buy have grown -- approximately half of all major-label music is sold through these three -- an estimated 1,200 record stores have closed in the past two years, according to market-research firm Almighty Institute of Music Retail. Last February, Tower Records, with ninety-three stores, declared bankruptcy and is now up for sale; Musicland has already changed owners, with many local outposts shuttered.
Wal-Mart is like no traditional record seller. Unlike a typical Tower store, which stocks 60,000 titles, an average Wal-Mart carries about 5,000 CDs. That leaves little room on the shelf for developing artists or independent labels. There's also scant space for catalog albums, which now represent about forty percent of all sales. At a Wal-Mart Supercenter in Thorton, Colorado, for example, there were no copies of the Rolling Stones' Exile on Main Street or Nirvana's Nevermind. While most of the latest hits were priced at $13.88, some records -- from the O Brother, Where Art Thou? soundtrack to the latest by Yellowcard -- were displayed for $9.72. Says Severson, "Paying fifteen dollars for a piece of music is a difficult value equation for customers."
For the music industry, having such a dominant retailer is like being stuck in a bad marriage. Whereas traditional music retailers took advertising money from the labels to push new releases in Sunday newspaper circulars, Wal-Mart barely advertises locally. It relies on national campaigns, where it promotes its own low-price policy. "Wal-Mart has no long-term care for an individual artist or marketing plan, unlike the specialty stores, which were a real business partner," says one former distribution executive. "At Wal-Mart, we're a commodity and have to fight for shelf space like Colgate fights for shelf space."
In the same way that Wal-Mart made it difficult for local mom-and-pop retailers to compete with its low prices, it has hurt smaller music stores. "When you're buying CDs for twelve dollars and selling them for ten like Wal-Mart, it makes the rest of us look like we're gouging the customer, when we're not," says Don Van Cleave, head of the Coalition for Independent Music Stores, a retail consortium. "It's supertough to compete with that price point." Even online, Wal-Mart sells songs for eighty-eight cents, compared with ninety-nine cents at the market leader, Apple iTunes Music Store.
Getting Wal-Mart excited about carrying a record is at the top of every label's to-do list, but it's harder than it sounds. There is an immense cultural chasm between slick industry executives and Severson's team of three music buyers at Wal-Mart headquarters in Bentonville, Arkansas. Only one of the three had ever worked in music retailing -- until that person moved to a new division in August and was replaced by someone who previously bought Wal-Mart's salty snacks. (Wal-Mart also relies on buyers at its two distribution companies, Handleman and Anderson Merchandisers, who purchase records as well as stock the Wal-Mart stores.)
"Content-wise, Wal-Mart is limited about what they sell," says one label chieftain. "Wal-Mart is Middle America's shopping headquarters, with different buying habits and consumer tastes than those who live in Manhattan and L.A." When founder Sam Walton christened the first Wal-Mart in 1962, music was never a priority -- it wasn't an everyday, easy-to-stock product like light bulbs, since the Top Ten changed so much. The chain also had specific objections to music. Walton wanted all stores to remain family-friendly, and in the rural South, rock & roll had the potential to turn away many customers. In 1986, the Rev. Jimmy Swaggart led one such campaign to ban music from Wal-Mart, saying rock fostered "adultery, alcoholism, drug abuse, necrophilia, bestiality and you name it." Albums and magazines about rock (including Rolling Stone) were temporarily pulled from the Wal-Mart shelves.
Wal-Mart's wariness about music ended once the music industry adopted a voluntary advisory sticker on albums deemed to contain adult language or sexual content. Today, before any new album is released, someone at each label is charged with asking, "Do we have any Wal-Mart issues?" If an advisory sticker is placed on an album, the label will put out a clean version about ninety percent of the time. Since the edited version of a hit record usually averages only about ten percent of a record's total sales, they do it mostly to keep Wal-Mart happy.
Wal-Mart has loosened up a bit, too. Eminem's albums, stickered or not, are not carried by the chain, but it does sell the 8 Mile soundtrack. And it carries an edited version of 50 Cent's debut. Since the labels are so adept at self-policing, though, censorship controversies are now rare. "There have been examples in the past, but it's not a current issue," says Severson.
Wal-Mart has also urged the labels to create exclusive new products that would lower music prices. In a short-lived test, Universal excerpted seven songs from existing albums by acts such as Sum 41 and Ashanti and sold them at Wal-Mart for $7. Few other labels wanted to participate. "They proposed it to a bunch of artists and managers, but everyone was worried that we are sending a message that instead of the sixteen-track album we sold, those nine extra songs were filler," says a label executive.
Some record executives think they can survive Wal-Mart's push. They argue that the hottest acts will always command a premium price. "50 Cent sold 7 million copies," says one rep, "and I guarantee that many of those sold for fifteen, sixteen dollars." And they believe that Wal-Mart will want to carry those hits because they draw customers. "If they can't find a record at Wal-Mart, people will go elsewhere," says one executive. "We should play hardball." But each label is watching the others to see if any make major concessions to Wal-Mart's demands for lower prices. A label that gives in could gain shelf space at the expense of another. "If you lose an account, one of your rivals could get more product in the store and get one up on everyone else," says a major-label rep. "You have to tread cautiously."
The tug of war between the labels and Wal-Mart isn't going away soon. The chain is aggressively opening new stores -- fifty-seven in October -- including some in urban areas. So unless it makes good on its threat to cut back on its music section, it will continue to grow as the top record store and become even more powerful. Laments one industry rep, "There is some impending doom associated with us not helping them."
Price War: Does a CD have to cost $15.99?
Major labels insist that the low prices mass retailers such as Wal-Mart and Best Buy demand are impossible for them to achieve. But Best Buy senior vice president Gary Arnold counters, "The record industry needs to refine their business models, because the consumer is the ultimate arbitrator. And the consumer feels music isn't properly priced." Labels point to roster cuts and layoffs as evidence that they can't sell CDs cheaper.
This breakdown of the cost of a typical major-label release by the independent market-research firm Almighty Institute of Music Retail shows where the money goes for a new album with a list price of $15.99.
$0.17 Musicians' unions
$0.80 Packaging/manufacturing
$0.82 Publishing royalties
$0.80 Retail profit
$0.90 Distribution
$1.60 Artists' royalties
$1.70 Label profit
$2.40 Marketing/promotion
$2.91 Label overhead
$3.89 Retail overhead
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Coldheartofstone
* Dog in the Sand *
Canada
2025 Posts |
Posted - 10/12/2004 : 12:09:51
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yay...crap CD's for even cheaper!
And what the hell have I learned? |
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Ebb Vicious
* Dog in the Sand *
USA
1162 Posts |
Posted - 10/12/2004 : 12:20:33
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what's funny is that the labels don't realize that one of the reasons they don't sell as many records is the fact that you pretty much have to go to a big chain to buy them now, and most people who are fanatical about music and normally buy a lot of it hate going to those places.
or maybe it's just me. |
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Carolynanna
>> Denizen of the Citizens Band <<
Canada
6556 Posts |
Posted - 10/12/2004 : 12:43:37
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Does this mean we should buy cd's at Wal-Mart and only cd's as its an area where they actually lose money???
I'm not sure how I feel about buying their loss-leaders.
Maybe if its the only thing you buy.
__________
"The things that will destroy us are: politics without principle; pleasure without conscience; wealth without work; knowledge without character; business without morality; science without humanity,
and worship without sacrifice." |
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mattb
= Cult of Ray =
Canada
474 Posts |
Posted - 10/12/2004 : 12:47:09
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The reason CDs aren't selling as well is that you have incredibly shitty music and the labels are the only ones to blame for it. The past 20 years of promoting quick hit product that has no substance has created mainstream artists that have been influenced by it and create even worse music. If your reference point is a commercial jingle which 99% of mainstream music is then try as you might chances are you aren't going to get anything good from it.
My friend was interviewing the guys from "the music" and started talking to them about the stone roses because he thought he could hear their influence. They all looked at him with blank faces and one of them said, "sorry mate, all I listen to is dance music." Perfectly sums it up, "hey how can we make a buck? this rock thing seems to be taking off".
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http://www.broszkowski.com |
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ramona
"FB Quote Mistress"
USA
3988 Posts |
Posted - 10/12/2004 : 13:16:48
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WalMart is the devil. I am convinced.
_____________________________________________________________________
There’s a story in your voice - both by damage and by choice
It tells of promises and pleasure and a tale of wine and woe
The uneasy time to come
And the long way ‘round we go to get there
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http://buymediamonds.blogspot.com |
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Visiting Sasquatch
= Cult of Ray =
USA
451 Posts |
Posted - 10/12/2004 : 17:27:58
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| Well this doesnt affect me one way or the other. I'm used to having to make an effort to find my CDs, usually on the internet or directly from the label. Some indie labels cell CDs directly for around $10 anyway, including shipping. Only rarely do I buy from Best Buy or Virgin...never Walmart or Target...I hate censored shit. |
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Daisy Girl
~ Abstract Brain ~
Belize
5305 Posts |
Posted - 10/12/2004 : 20:59:55
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Ok... i have worked on the vendor end to walmart. What these record companies need to do is first get their cost structures reduced NOW... because now will begin the downward price pressure. They will squeeze every last drop of blood out of you and don't for one second think that Target and Best Buy and Amazon won't want in on the action-- because you can't discriminate on prices.
What the future is for mainstream music is that Walmart will dominate. What these labels/artists need is a Walmart verson... with a shorter or one or two less tracks than the "premium" aka retail version... if you are doing that big of a press the record labels can afford it.. then they can keep the prices up for the other outlets... which actually ends up being a win/win. If changing song content isn't enough... add some kind of value added to the premium price... eg... a coupon to a show, an autographed copy, extra cool album art... an interactive dvd...dvd video clips a live interview...a password to chat with the artist as a specific time with a group ect, etc....this will mean that each version will need a different sku tho.
What the smaller artists/labels need to do is to provide this value added and promote the heck out their online retail sites.......... |
Edited by - Daisy Girl on 10/12/2004 21:03:49 |
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Jason
* Dog in the Sand *
1446 Posts |
Posted - 10/12/2004 : 23:10:21
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Sometimes I wonder if the music industry is deliberately phasing itself out. And I say that seriously.
Not only are many DVDs priced lower than CDs, but DVD players (which can play CDs) are easily found for prices much lower than a new, stereo-component CD player. When my CD player died awhile back, I just bought a $50 DVD player and hooked that up to my stereo instead of paying $100 for another CD player. |
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hammerhands
* Dog in the Sand *
Canada
1594 Posts |
Posted - 10/13/2004 : 12:49:00
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| Future Shop (like Best Buy) helped to trim down the number of record stores here by selling loss leaders. Then they raised the price and cut their selection. |
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VoVat
>> Denizen of the Citizens Band <<
USA
9168 Posts |
Posted - 10/13/2004 : 18:34:31
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I definitely want lower prices on CDs, but Wal-Mart's monopolistic policies annoy me. To put it in a silly way, they're apparently unable to play fair and peacefully co-exist with other retailers, even when they're making lots of money. Definitely a downside to laissez-faire capitalism. (Wait, is there an UPSIDE to laissez-faire capitalism?)
Wal-Mart rarely has CDs I want anyway. If they keep muscling music stores with better selections out of business, though, they might not sell the CDs I want anywhere but on the Internet. I mean, I don't exactly love Tower, but at least their selection is pretty decent. I didn't know they had declared bankruptcy.
"Signature quotes are so lame." --Nathan |
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ObfuscateByWill
* Dog in the Sand *
USA
1887 Posts |
Posted - 10/14/2004 : 00:31:30
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Haven't been inside a Walmart for a couple of years.
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Never thought of buying my music there. Laundry soap, maybe.
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I did buy a couple of DVDs in their "2 for $5" bin, though. Got "Ernest Goes to Camp" and "True Stories"
 Take a bite of the chocolate coffin. |
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Atheist4Catholics
= Cult of Ray =
USA
925 Posts |
Posted - 10/14/2004 : 06:04:57
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Remember that Wal-Mart also encourages censorship. They censor explicit albums sold in their stores and refuse to sell others. Remember the Sheryl Crow album that had a disparaging remark about Wal-Mart in it?
http://www.eonline.com/News/Items/0,1,159,00.html They wouldn't sell it.
I saw a copy of Siamese Dream in there that was censored even though there aren't any swear words in it. The only change made was to take the song titles off the back because one of the songs was called "silverfuck".
I never buy albums at Wal-Mart, but I understand that I have better options then most people because I live in a big city. Still, go to www.newburycomics.com and you can shop at the same store I do. They've got a great indie selection, great prices, and shipping will only cost you a couple bucks total. There are better options, people are just lazy. They're content to buy their underwear, vegetables, gasoline, medicine, guns, and CD's in the same store regardless of the quality of the product and the store's corporate ethics.
For more information on rock, visit www.timfranklin.net |
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VoVat
>> Denizen of the Citizens Band <<
USA
9168 Posts |
Posted - 10/16/2004 : 11:56:28
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I wonder if the Wal-Mart ban meant MORE copies of that album were sold in stores other than Wal-Mart. Controversy sells, after all. On the other hand, Sheryl Crow does kind of suck.
My girlfriend accidentally bought an edited Ben Folds CD at Wal-Mart. I don't really get the edited versions in general. It's not like kids aren't going to be exposed to any curse words if they're bleeped out of the songs they listen to. It just makes the songs sound crappy. I guess I can see leaving people the option of buying edited versions, but ONLY stocking the edited ones is dumb.
"Signature quotes are so lame." --Nathan |
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Wal Mart going after Record prices
