Retailers warn of aggresive price-cutting

Source: Music Week

 

 

Album sales may have been buoyant in the first half of 2006 but the optimistic figures conceal a raft of aggressive price-cutting, retailers are warning. :o

 

In the opening six months of the year sales of artist albums were up 2.25% on 2005, with 51.37m units sold, compared to 50.24m in the previous year. Although the compilations market continued to under-perform, with sales down 10.56% on last year, the strength of artist album sales meant that the overall market fell by just 0.39%.

 

Retailers attribute the health of the artist albums market to a number of key factors, including a strong release schedule and the health of the guitar pop market. However, the over-riding consideration is one of price, as specialist retailers chase low supermarket price points and labels pursue chart placings.

 

"There have been lessons learned from January, when Hard-Fi and Editors had massive hit albums on the back of price cutting," says Woolworths product manager for music Keith Black. "They were selling at about the £6.99 price point. People have seen that and they realise they don't have to spend all this money on TV and releasing singles, they can invest the money into price."

 

Playing a big part in that drive to lower prices is HMV. In its full-year results, released last week, the retailer announced the rollout of "simplified, lower pricing" in its UK stores this September as a way of competing with competition from supermarkets and internet businesses.

 

The announcement follows the successful trial of a lower pricing policy in six HMV stores earlier this year. As a result, sales in these stores grew by 8.4% compared to the rest of the chain, with HMV UK and Ireland managing director Steve Knott noting, "It's brought back people who have migrated elsewhere and it's saying to the average punter shopping on the high street who might go to M&S, Next or Boots they might want to shop at HMV."

 

Overall, sales at HMV were down 5.7% to £1.8bn for the year and pre-tax profits fell 20.7% to £98.2m.

 

Many retailers welcome the advent of lower prices. However, there is concern as to where such discounting could lead. "The biggest part of the buoyant albums market is about price. It is a much more competitive market. Prices have declined, which squeezes margins," says Total Home Entertainment commercial director David Hollander. "Retailers will make their own minds up about pricing and I suspect that we have not seen the last of these low prices and even lower for newer artists."

 

Indeed, there are already signs of this aggressive price-cutting spreading to other product categories - Woolworths is working on plans with EMI to sell selected compilations for £12.97, rather than their normal £14.97 price point, and one senior retail source says that an albums chart dominated by bargain-priced new releases is entirely plausible.

 

"It's not pushing the imagination too much to imagine that, but it depends on how many new acts are around," he says. "Sixty per cent of our chart wall is under £10 now and all our numbers suggest that the average price of a CD has decreased by at least 10% over the last two years."

Good, CD's from music shops are usually way too expensive, especially from HMV. I don't know anyone who buyes stuff from there unless it's in the sales.