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Last Updated: Thursday, 4 September, 2003, 16:00 GMT 17:00 UK
Music giant slashes album prices
Record shop
Universal is hoping for a "dramatic and sustained increase" in sales
Music fans in the US will enjoy cheaper CDs after the world's largest record company, Universal, announced plans to cut the price of albums by up to 30%.

Universal - which has artists like U2, Eminem and Sir Elton John on its roster - said it hoped to "invigorate" the market after a three-year slump.

From October, the company will put the "suggested" price for most CDs at $13 (8.25) - down from $17-19 (11-12).

Album sales in the US dropped 15% between 2000-2002 - blamed on "piracy".

The music industry says it has lost out to free, unauthorised song sharing websites and the proliferation of CD-copying.

The gap between the perception of how record companies like EMI work and the actual reality is now a chasm
David Munns
Vice chairman, EMI Music

And fans now also have the option of buying songs for $0.99 and albums for about $10 from legitimate online services like Apple's iTunes.

Universal Music president Zach Horowitz said a price of $12.98 was the "sweet spot" that would make their records sell.

"We're confident that when we implement this we will get a dramatic and sustained increase," he said.

The current wholesale price to record stores is $12.02 - but this will now start at $9.09.

But Universal said it had not discussed the change with retailers and it is not known whether record stores will honour the new suggested price.

News of the cut hit the share price of rival EMI on the London stock exchange, which closed at 154p, down 10%.

"It's not a price war as such, but it could mark the beginning of one," said a shares dealer in London on the news of EMI's drop.

'Explore options'

Almost 30% of all albums sold in the US are by Universal artists.

Mr Horowitz said fans will begin to "explore a host of options" as they leave illegitimate online services.

"We felt that the most important thing we can do is to encourage people to go back into stores is to reduce our prices dramatically."

You could make downloading music go away tomorrow and the industry would still face challenges
Sean Baenen
Odyssey, research company
None of the other major labels would comment on whether they would follow Universal's lead.

More than 940 million CDs were sold in the US in 2000 - but that dropped to 800 million in 2002.

A recent survey by research firm Odyssey suggested that the drop in sales was partly due to high prices.

Some 53% of adults said they had stopped buying music because it was too expensive, the survey found.

Odyssey managing director Sean Baenen said: "This is something that the industry has failed to address.

"You could make downloading music go away tomorrow and the industry would still face challenges."

'Bold move'

A spokesman for Universal's international arm said there were "no immediate" plans to cut CD prices in the rest of the world.

"We constantly review and change our prices country by country. As a result, our international pricing is already close to the new US pricing level," a statement said.

"This new US initiative is a bold move, and we're confident it will succeed."

In the UK, the average price of a single CD album has dropped to 9.79 - a new low - due to competition from online retailers and supermarkets.

Judgements

The vice chairman of EMI Music, David Munns, contacted BBC News Online after reading users' views about the state of the industry in a previous story about CD prices.

"The gap between the perception of how record companies like EMI work and the actual reality is now a chasm," he wrote.

"Investing in new artists and music is not a 100% science.

"Thousands of new albums and singles are released every year in every conceivable genre. We use our best judgements on what we think people will like.

"Sometimes we're right, sometimes we're wrong, but no-one can force anybody to like or dislike something, and that includes us."

UK album sales have been relatively healthy - a record 228 million albums were sold in the 12 months from June 2002.

The singles market is the most worrying area for the UK industry, with sales down 37% during 2003 so far compared with 2002 - which already had the lowest sales for 25 years.


WATCH AND LISTEN
Barclays Stockbrokers media analyst David Ferguson
"Without piracy, there is no way the music industry would have considered cutting the price of CDs"



SEE ALSO:
EMI boss defends music industry
04 Sep 03  |  Entertainment
Global illegal CD market swells
10 Jul 03  |  Entertainment
Gloom settles on global CD sales
09 Apr 03  |  Entertainment
Record sales for 'cheap' albums
19 Aug 03  |  Entertainment
Record label unveils single plans
05 Aug 03  |  Entertainment


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