Wal-Mart Attempts to Discount CDs–Record Labels Cry Uncle

A new Billboard article said that Wal-Mart, the largest retailer of music with an estimated 22 percent market share, has proposed a five-tiered pricing scheme that would allow the discounter to sell albums at even lower prices and require the labels to bear more of the costs.

According to unnamed sources in the article, the Wal-Mart proposal would allow for a “promotional program that could comprise the top 15 to 20 hottest titles, each at $10. The rest of the pricing structure, according to several music executives who spoke with Billboard, would have hits and current titles retailing for $12, top catalog at $9, midline catalog at $7 and budget product at $5. The move would also shift the store’s pricing from its $9.88 and $13.88 model to rounder sales prices.”

Wal-Mart divisional merchandise manager for home entertainment Jeff Maas said that it makes sense to evaluate the future direction of the CD industry in the face of declining sales, and that this type of pricing exactly mirrors what’s happening in the DVD world. Of course, the record industry will have none of it, with one top label executive saying that “I don’t think this is a Wal-Mart discussion. I think this is a future-of-the-business discussion. Right now everyone is paralyzed.”

Still, another label exec said that “the decision might come down to: Do we give up 20 percent of our business (i.e., Wal-Mart) in order to not lose the entire business?”

Wal-Mart already tried going digital once, launching a subscription video service that failed after a year, along with a new mobile storefront back in December.