Walmart – The Music Label Assassin
Walmart announced that it will begin change the way it carries music CDs. Essentially, Walmart is demanding reduced prices and is telling the labels it won’t peddle their back catalog. A previous article detailed why the major labels have been so vicious in their defense of their catalog of music – they want to force the continual repurchase of music by the same customer.
Well, Walmart isn’t going to be part of that game anymore. Also, the days of the $20 CD are over. Walmart is demanding that prices should be around $5 a disc to no more than $12 a disc. This must be driving the major labels apoplectic. The last time this happened it resulted in an antitrust action by the federal government. In the 1990s in order to combat a price war among retailers which the FTC said “ had resulted in significantly lower compact discs prices to consumers and lower margins for retailers. . . Through these stricter MAP programs, the distributors hoped to stop retail price competition, take pressure off their own margins, and eventually increase their own prices.” The same price competition is happening again – and the winner is the consumer.
Total sales of music in terms of dollars is decreasing because of competition. What is worse for the major labels (but to the benefit of consumers) is the rise of the single once again. To buy that one song – purchasers no longer have to buy the entire CD. They go to iTunes or Amazon and buy the song – simple as that. A 99 cent song doesn’t provide the same cash flow as an album.
Now that Walmart plans to limit the shelf space for music CDs, major labels will find themselves fighting for shelfspace just like toymakers and food producers.
Of course, Walmart is competing with Apple – as they are the two largest music retailers in the country. Walmart is contracting directly with acts like the Eagles to bring their music directly to the stores exclusively. Apple agrees to feature certain products. And then there is Nine Inch Nails and Radiohead who are taking their music directly to customers.
Where are the major labels in all this – they are squeezed out and made minor players. The power will lie with content creators (artists) and customers (fans).
If you want to read more – see this article on the great music bubble of the 1990s.
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