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THE MORNING BUZZ: Hollywood Did Something Right

10 Mar, 2002 By: Thomas K. Arnold

Hollywood, it appears, has finally done something right.

The tension between music retailers and record companies at the annual NARM convention in San Francisco, now underway, is as thick as cold butter.

The whole downloading mess could have been averted, angry retailers say, had record companies not stubbornly refused to even consider lower price points for CDs.

Indeed, over the last few years the suggested list prices of new releases has inched upward, from $17.98 to $18.98 and, just recently, $19.98.

Not only that, but unlike in the video industry, these prices tend to stay high as long as the CD is in print. “Repricing” is a foreign concept to record companies, except in very rare instances.

As a result, music dealers say, it's getting increasingly hard to make money in this business of selling prepackaged music. Even if you deep-discount new releases, as many retailers inevitably do, the catalog titles -- the stuff you're hoping the customer will buy once you've lured him or her into the store with the promise of picking up the latest Britney Spears album for $12 -- are still averaging close to 20 bucks a pop.

“This is the only business I can think of where new releases, which sell anyway, are discounted, while catalog titles are priced higher,” said one disgruntled record-store owner, trying to make sense of it all. “What opportunity is there for incremental sales?”

These same record retailers, who are quick to bash record companies as Evil Empires, have nothing but kind words about DVD pricing.

“Those guys knew what they were doing,” one retailer said to me last night at a cocktail party. He noted that DVDs are priced low out of the gate, effectively the same as a CD, and yet the customer gets “so much more.”

“He gets a movie that cost millions of dollars to make, not a CD some band recorded in its garage,” this retailer said. “And then there's all the extras, the interviews, the documentaries. On CDs, there's none of that.”

Music retailers also praise the studios for consistently chopping the price of catalog titles—to the point where one analyst predicted most older movies would sell for $10 or even less by the end of this year.

If the record companies would only take a cue from their video peers, the prevailing sentiment at the NARM show goes, the music industry wouldn't be in such a fix. The whole downloading revolution started, I've been constantly reminded, because consumers were sick and tired of shelling out $20 for a CD on which they may only like one or two songs. Such a risk is worth gambling $10 or $12, but $20? No way -- particularly when for pennies more, you can get a brand-spanking-new DVD of a hot new movie.

“The video guys really handled this thing right,” one record company executive confided to me. “And we've blown it so bad.”

I have to concur. My own CD buying has ground to a halt, unless I can find something I like in the “cutout,” or bargain, bins. Meanwhile, DVD prices are so attractive I keep wanting to add to my collection, even though it's already spilled into my laundry room.

Say what you will about Hollywood; with DVD, the studios have done the right thing. Our current system of DVD pricing couldn't be more ideal to grow, nurture and develop a fan base for a new format. Thank God, no one's talking about changing that—at least, not openly.

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