Universal Music and Video Distribution Pricing

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Last month, the latest bomb in the record business hit the news like a title wave. The Universal Music & Video Distributor, otherwise known as UMVD, is owned by the Universal Music Group. They command at least 25% of all record sales in the United States. UMVD sent a note to retailers in early September announcing they-d be reducing the cost of their front line CDs immediately, and in turn, would like the stores to make the reduction to consumers. Sounds great, doesn-t it! After all, who wants to spend more money than they need to, to buy CDs? And think of how many more you might buy, with these reduced prices?

And of course, once the biggest label group lowers their prices, you can guess that the other 4 label groups in America will follow suit just to stay competitive. But the ramifications of this sweeping change in pricing will have some very negative effects as well.

Not in Los Angeles, where there-s a fantastic array of retailers to serve your music needs. But go to Portland, Oregon, Memphis, Tennessee, Austin, Texas or Boulder, Colorado, and I don-t think the enthusiasm will be felt for long. Most midsize cities in America have one or two excellent small mom & pop record shops that built their business introducing and nurturing new talent. They staff their stores with music lovers not found at Best Buy, Target or Musicland. Those big stores dominate in most of these towns. The new pricing structure is built for the big box and large chain stores, who stock limited kinds of music, with limited knowledge about music. And the UMVD price cuts will require retailers to agree to unrealistic demands of UMVD dedicated merchandising space in their stores and eliminates all artist development plans for new artists. Most mom & pops can-t dedicate that much space to UMVD product and therefore won-t be able to participate in the price cuts. So without the equal pricing margin, the mom & pop shops will not be able to survive. The loss will be a cultural one to music.

Imagine you were only able to see independent and foreign films at one small theater in Los Angeles. It-s not hard to see your perspective would be limited by your exposure.

There-s a lot of debate this going on everywhere in the music business about this. It-s the hottest topic since Napster came on the scene. Most of the senior executives I know are publicly cautious, and privately shocked. They realize, as I do, that if this pricing scheme goes into play with most of the major chain retailers, the mom & pop retailer will be all but finished, with rare exception.