Universal 'plans to slash CD prices'

[dutchman]

Universal Music Group has announced plans to lower CD prices in the US in a bid to increase physical music sales.

The world's largest music company confirmed yesterday that the trial, aimed to launch in the next few months and run throughout 2010, will include a selection of new releases and focus on a variety of major retailers, including Best Buy and Wal-Mart.

"It seems pretty obvious to us that a dedicated fan will gladly pay for extra content, for deluxe versions," Jim Urie, head of distribution at Universal, told The New York Times. "But the casual fan isn't willing to pay $15 (£9.99) dollars for a regular CD."

However, the news has not been welcomed by some quarters of the industry, who have expressed doubt that a cut in prices would spike sufficient sales to offset smaller profit margins.

"The price needs to be either dramatically lower than $10 (£6.50) or you have to go north of that to maintain the margin and live with lower volume," said one executive at a rival label, who requested anonymity after admitting that he was not authorised to discuss pricing strategies.

Sales of CDs have fallen by more than half since 2000, according to Nielsen SoundScan. Despite industry division, the move to price new CDs at $10 (£6.50) or less is gaining ground as it would allow physical music to compete with the going rate for many albums available at online retailers such as iTunes or Amazon.

Universal was previously Polygram which still retains a majority shareholding in the company.