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Media Coverage 2003 Vancouver Sun - October 30, 2003 Lower CD prices are convincing Canadian music lovers to open their wallets, according to a report released Wednesday by an independent market research group. Forty-two per cent of consumers surveyed by Solutions Research Group said they are more likely to buy CDs since several music labels and retailers announced they would drop prices by as much as 30 per cent. "The research suggests that a significant price cut has the potential to bring full-length CD sales back to levels before file-sharing took off three years ago," said study director Kaan Yigit. The strategy is working best with people who are now downloading music for free from file-sharing services like Kazaa, according to the Toronto-based research firm. Among frequent downloaders, 57 per cent said they are more likely to buy CDs if prices are lower, the study showed. That's significant, because those individuals tend to be in the 15-to-29 age group, Yigit said, and "the industry looks at that group as the one that's being lost to downloading." Now, "even people who download and have practically stopped buying are saying, 'if [a CD is] $11.99, it's not a problem'." But the news isn't as good for pay-per-song versions of file-sharing services, such as Canada's Puretracks and Napster, which is about to relaunch this week as a paid service in the U.S. Only 15 per cent of the 1,100 Canadians surveyed who now download music from free file-sharing services expressed a strong interest in paying for the same service, while 32 per cent said they were "somewhat" interested. "Many like the idea of easy access to a complete and reliable catalogue of high-quality music on the Web in principle, but when it comes to paying 99 cents a song, it's a different story," Yigit said. If it costs the same to buy a CD as to get it from an online service and you don't have to do the work of downloading it, "what exactly are you getting extra?" he asked. "Think about it -- it's like 'you want me to make pizza at home and still pay you for it?'" User-pay downloading services will have to be significantly cheaper than CDs in order to make them an attractive option, said Yigit. If they aren't, "I'm not sure they're going be the salvation of the industry from a dollars-and-cents viewpoint -- it doesn't add up." For retailers and record labels, one of the biggest problems is that not everyone is on board in terms of price cuts, said Yigit. Universal Music Canada announced last month that it would cut the retail price of top-line CDs to $14.98 and releases from developing new artists to $9.95, following the lead of its U.S. parent, Universal Music Group. Vancouver-based retailer A&B Sound subsequently cut the price of all its CDs by 10 to 30 per cent. But Yigit said more retailers and labels have to do the same in order to get the message out to buyers that CDs are more affordable. "The retailers are scratching their heads and trying to figure out what's going on, and other labels are trying to wait and see what happens with Universal's initiative," he said. "But it's hard to see what's going to happen unless they join in the fun. "If they don't do something about it, it's going to be a flat Christmas compared to last year." A&B Sound's vice-president of merchandising, Lane Orr, said he finds it "bizarre" that many retailers have refused to follow Universal's new retail pricing policy. "If I'm a customer and someone tells me that you shouldn't pay more than $14.99 for this CD and I walk into a retailer and it's $16 or $18, I'm going to be a little confused." He admitted A&B has taken a hit in its gross profits because it dropped its prices across the board before it cleared out its higher-priced stock from Universal, which issues about 30 per cent of CDs sold in Canada. "We're basically lowering the price earlier than we should have, but based on the market being what it is, we chose to jump early," Orr said. But he said the 22-store chain has seen "double-digit" increases in CD sales since it dropped prices across the board a little more than a month ago. By November or December, he hopes that will start to make up for the slimmer profit margin. |