Universal to raise price of CDs by $1

NEW YORK (Universal announcement) - Universal Music Group will hike the wholesale prices of newly released compact discs on April 26, contrary to a widely-touted price-slashing plan.

The world's largest recording company rocked the industry in September when it unveiled wholesale price cuts as large as 25 percent in response to several years of industrywide sales declines. Other recording companies were expected to follow, but none made such drastic cuts.
"If that drop was profitable, they wouldn't be raising prices," Michael Goodman, a Yankee Group analyst, said of Universal's change. "If they had generated some profits, then you would have seen the other record labels follow suit."

Consumers often didn't see any price discounts because many retailers resisted or ignored Universal's recommended cuts.

Universal plans to raise its wholesale prices on most new CDs by 40 cents, to $9.49, and by 25 cents, to $10.35, for some superstar recordings.
Jim Urie, president of Universal Music and Video Distribution, said new releases will remain $1.50 to $2.50 less than rival wholesalers' prices. "We adjusted our prices to give us the financial wherewithal to continue with a program that we very much believe in," Urie said.

But Universal will cut prices of its older CDs even more, dropping many wholesale prices by up to 18 percent, to as low as $5.51, a spokesman said.
Duncan Browne, chief operating officer at Boston-based Newbury Comics, said Newbury plans to absorb Universal's hikes rather than increasing retail prices. "Consumers don't feel like CDs are cheaper," he said. "Newbury was fairly aggressive in lowering prices (but) others weren't. So the customer got this mixed message."
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.