UMG wants to undercut iTunes with CD pricing

Universal Music Group on Thursday said it would cut the prices on most CDs to $10 or less. Known as the Velocity program, it would see album prices range between $6 and $10. The label would count on sales volume, as well as costlier deluxe versions, to make up for the lower 25 percent profit margin.

The company characterized it for Billboard as a way of reversing years of declining CD sales by competing more closely with digital, where $10 has been the most common price for several years.

"We think it will really bring new life into the physical format," the company's distribution CEO Jim Urie said.

Controversially, however, it doesn't expect to do the same for online sales and could lead to a situation where albums at Amazon, iTunes and other major Internet music stores are actually more expensive than their physical counterparts. Some albums have sold in digital form $8 in recent months but could see little to no cost advantage over Velocity, which doesn't have a set starting date.

Critics have warned that price cuts have typically been ineffective. Universal was one of the first to get closer to the $10 mark for CDs but has had little success in reversing the overall tide of music. Agencies representing music labels have often blamed it on piracy, but the music itself and a shift towards buying single tracks over whole albums has also been considered a factor by outsiders.

by MacNN Staff