p2pnet.net News:- Wal-Mart, America’s largest record retailer, could be leading the way to cheaper music CDs.

It, “now sells an estimated one out of every five major-label albums,” says Rolling Stone. “It has so much power, industry insiders say, that what it chooses to stock can basically determine what becomes a hit. ‘If you don’t have a Wal-Mart account, you probably won’t have a major pop artist,’ says one label executive.”

Along with other giants such as Best Buy and Target, “Wal-Mart willingly loses money selling CDs for less than $10 (they buy most hit CDs from distributors for around $12),” says the article. “These companies use bargain CDs to lure consumers to the store, hoping they might also grab a boombox or a DVD player while checking out the music deals.”

Now, says Warren Cohen in his story, Wal-Mart wants Big Music to supply it with choice albums at favorable prices.

Cohen quotes an unidentified label rep as saying, “This wasn’t framed as a gentle negotiation. It’s a line in the sand – you don’t do this, then the threat is this.”

Wal-Mart denies these claims, the report states, adding that Best Buy senior vp Gary Arnold says, “The record industry needs to refine their business models, because the consumer is the ultimate arbitrator. And the consumer feels music isn’t properly priced.”

Cohen also gives an interesting breakdown of the cost of a typical major-label release listing at $15.99.

• $0.17 Musicians’ unions
• $0.80 Packaging/manufacturing
• $0.82 Publishing royalties
• $0.80 Retail profit
• $0.90 Distribution
• $1.60 Artists’ royalties
• $1.70 Label profit
• $2.40 Marketing/promotion
• $2.91 Label overhead
• $3.89 Retail overhead

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See:-

willingly loses money – Wal-Mart Wants $10 CDs, Rolling Stone, October 12, 2004

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