Universal to Raise Price of CDs by $1

By | April 19, 2004 at 12:00 AM

Universal Music Group will raise the suggested retail price of its CDs by $1 to improve profit margins for merchants after many balked at the company’s push to slash prices, a source familiar with the plan said Friday. The move could leave consumers paying about $11 for a popular CD.

Universal’s new suggested retail price will be $13.98, but most retailers typically charge less than that amount.

UMG is the world’s biggest record conglomerate, with artists that include U2, Eminem and Shania Twain.

Its move comes just three months after the company cut wholesale prices and reduced its suggested retail price from $18.98 to $12.98.

Universal expected merchants would pass the discounts on to consumers, thereby stimulating sales that had been down for three years industrywide.

UMG had given retailers until Jan. 1 to sell off existing inventories before making that pricing scheme official, but many were slow or never adopted the changes, the source said.

Universal’s competition also did not follow suit with lowered prices.

Calls to the National Association of Recording Merchandisers were not immediately returned.

In a related move, Universal plans to raise the wholesale price it charges retailers for the most popular CDs to $10.35 from $10.10, effective April 28, the source said.

The wholesale cost of most other recent CDs would increase by 40 cents – to $9.49 from $9.09. The price of older CDs would be lowered.

A UMG spokesman declined to comment on the pricing plans.

Universal’s pricing changes come amid a run of improved U.S. music sales for retailers in the first three moths of the year.

Chain store sales were up 7 percent over the same period last year, while independent music retailers saw a 3 percent increase, according to Nielsen Soundscan.

Discount chains such as Wal-Mart, Target and Kmart, meanwhile, posted a 13 percent jump in sales in the same period.

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