Media Coverage 2003

The Toronto Star - October 30, 2003
Cheap CDs foil piracy, survey hints

by Tyler Hamilton

Industry considers $9.99 to be the 'impulse price point'

Little interest found in paying for music downloads

Vastly cheaper compact disc prices may be persuading users of free online music-sharing services to pay instead of pirate, a national survey has found.

According to the survey, six out of every 10 people who frequently download music from Kazaa or other file-swapping networks would be "more likely" to buy a CD if prices were lowered by "as much as 30 per cent."

Universal Music and some retailers, such as Future Shop, have moved recently to decrease CD prices to stem the tide of online piracy.

Last month, Universal Music Canada — a subsidiary of the world's largest music company —dropped its list price for top CDs to $14.98, while prices for developing artists fell to $9.99.

Industry experts hailed the double-digit reduction as a good starting point, but so far the other major labels haven't budged.

Future Shop, a big seller of CDs, said earlier this month it is lowering prices by as much as 35 per cent.

"The research suggests a significant price cut has the potential to bring full-length CD sales back to levels before file-sharing took off ... even the most avid downloaders say they will be back to the stores if the price is right," said Kaan Yigit, director of the survey and president of Toronto-based Solutions Research Group Consultants Inc.

"It's economics 101," said Yigit, adding that $9.99 is considered the magic price within the industry. "It's about bringing it down to an impulse price point."

The survey also found that 42 per cent of all Canadians — whether or not they download from free Internet sites — would be more likely to purchase CDs given dramatic cuts to prices.

Yigit's company contacted 1,100 Canadians aged 12 years or older during October.

The telephone survey was national, had no sponsors, and is statistically accurate to within plus or minus 2.95 points, 19 times out of 20.

99 cents a song

While lower CD prices appeal to many online music-swappers, far fewer seem interested in the recent batch of music sites that typically charge people 99 cents to download and burn a song.

These sites include Puretracks.com, launched earlier this month in Canada, and U.S. sites such as iTunes, Napster 2.0 and MusicMatch.

Only 15 per cent of people who download songs for free from file-swapping networks had a strong interest in paying, while 32 per cent were somewhat interested.

"There is currently limited interest in paying for downloads in the 15 to 19 age group and among young males," said Yigit. "As the prices of actual CDs drop, the online music value proposition will also be affected."

He said Universal, which is a financial backer of Puretracks.com, is hedging its bets with both an online and CD price-reduction strategy. "Really the right response is what Universal is trying to do."

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