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The Almighty Buck Media Music

Wal-Mart Squeezing Record Labels to Cut CD Prices 910

Posted by michael
from the win-win-situation dept.
Raindance writes "RollingStone.com has a revealing article detailing how retail giant Wal-Mart is making loud noises about throwing its weight around in order to get significantly better bulk prices on CDs. Says one industry executive, 'This wasn't framed as a gentle negotiation, it's a line in the sand -- you don't do this, then the threat is [your product is dropped].' This is the first time a big player has attempted this sort of hardball move on the labels, and the labels may be forced to deal, as Wal-Mart sells 1 out of every 5 retail CDs. Monopoly one, meet monopoly two."
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Wal-Mart Squeezing Record Labels to Cut CD Prices

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  • by garcia (6573) * on Thursday October 14, 2004 @09:26AM (#10523087) Homepage
    Tensions are not as high now as they were last winter, but making sure Wal-Mart is happy remains one of the music industry's major priorities.

    How about making the customers happy? Personally, I can't believe that 1 out of 5 CDs are sold in Walmarts. I can't stand their stores. I absolutely DREAD entering one. They aren't clean, they aren't friendly after you pass the greeter, and they aren't someplace that I want to shop for music as it's just usually a mess and full of people.

    Why not concentrate on making music available for less money somewhere that I might want to buy it instead of worrying about making sure Walmart is happy.

    Virtually no industry executives would publicly comment about their company's relationship with Wal-Mart. But off the record, many record-industry executives shared their concerns. "I don't think there is a music supplier in America who really enjoys doing business with Wal-Mart," says one major-label rep.

    Awww, are we supposed to feel sorry for them? Am I supposed to shed a tear from the corner of my drying eyes that they don't like something? Here's the river... Notice it's dry.

    I don't like dealing with either company and I certainly don't think that Walmart is going to bat for the consumer. They are only doing this to make themselves richer. We aren't exactly benefiting by buying a $10 CD.

    Wal-Mart is like no traditional record seller. Unlike a typical Tower store, which stocks 60,000 titles, an average Wal-Mart carries about 5,000 CDs. That leaves little room on the shelf for developing artists or independent labels.

    I was at Walmart recently buying something I couldn't find at Target. I happened to stop into the electronics section while my fiancé did some shopping elsewhere. Perhaps I wasn't looking in the right spots but I wasn't finding anything by developing and independent artists. If anything it was most older music that wasn't exactly getting radio play. I saw the typical teenybopper crap but nothing that I would consider new and exciting.

    "When you're buying CDs for twelve dollars and selling them for ten like Wal-Mart, it makes the rest of us look like we're gouging the customer, when we're not," says Don Van Cleave, head of the Coalition for Independent Music Stores, a retail consortium. "It's supertough to compete with that price point."

    Most independent stores I have gone to shop for music in are charing $16+ for a CD. If you're buying it for $12 and making $4+ a CD I seriously believe that you are gouging us. I don't feel bad for you.

    "They proposed it to a bunch of artists and managers, but everyone was worried that we are sending a message that instead of the sixteen-track album we sold, those nine extra songs were filler," says a label executive.

    You sent the message when we bought your shit music for $16+ and found that 14 of the songs were filler. Walmart didn't help to spread that message... Your crappy albums did.
    • by Anonymous Coward on Thursday October 14, 2004 @09:31AM (#10523165)

      If you're buying it for $12 and making $4+ a CD I seriously believe that you are gouging us.

      Making a profit on a 33% mark-up is gouging? Sheesh, I had no idea that CDs should be sold for one penny more than they were purchased.

      • by Anonymous Coward on Thursday October 14, 2004 @09:45AM (#10523345)
        lol. I remember marking stuff up 100%. $12 cost, $24.99. It's still a good deal when you think about it. Think about what the retailer has to pay for: rent, electric, water, employee salaries (managers, assistant managers, cashiers Christmas help), insurance, shipping, returns, snow removal and other maintenance, and new product. How is a record store supposed to pay all of that with a %33 markup? What a moron.
    • I can't stand [Walmart]. I absolutely DREAD entering one. They aren't clean, they aren't friendly after you pass the greeter, and they aren't someplace that I want to shop for music as it's just usually a mess and full of people.

      I think it depends on where you're at. Most of the Walmarts I use are Super-Walmarts in Wisconsin. They are always clean, pretty friendly, and very spacious. Yet when I was on vacation in St. Louis, I was in a normal sized Walmart that was at least 10 times over capacity. They
      • by Anonymous Coward
        Walmart that was at least 10 times over capacity

        Walmart has a monolopoly on the Third dimesion. If my house could store 10 times its capacity than I would be rich as them. Those b*s!e^#s having a monopoly on such a comondity - it should be FREE!
      • by southpolesammy (150094) on Thursday October 14, 2004 @10:18AM (#10523753) Journal
        There's a reason why Walmart is popular in sparsely populated areas -- time. In rural areas, a consumer may have to drive to several different stores separated by great distances to get everything they need for the household. This takes an enormous amount of effort and time. Walmart brings all of these disparate "stores" under one roof, making it much more convenient for rural shoppers to go to Walmart. The tradeoff is that the stores may not be the cleanest or have the greatest variety of products, especially at the high end.

        By contrast, in the larger cities, the necessary goods are in closer proximity to one another so that going from one store to another is much less cumbersome. This also creates greater competition for shoppers' dollars, and the stores (on the whole) have a greater variety in order to distinguish one from another. In addition, bigger cities are actively trying to fight back against suburban sprawl and make better use of nearby land. The sheer size of Walmart runs counter to those goals. Therefore, Walmart is disdained in the big cities because it takes up an enormous amount of valuable space and does not stock the high end products that are locally available.
    • by dr_dank (472072) on Thursday October 14, 2004 @09:35AM (#10523212) Homepage Journal
      Most independent stores I have gone to shop for music in are charing $16+ for a CD. If you're buying it for $12 and making $4+ a CD I seriously believe that you are gouging us.

      Do you honestly think that a mom and pop record store is buying discs in the same volume at the same price as the largest retail juggernaut in the history of this planet?
    • by tekunokurato (531385) <jackphelps@gmail.com> on Thursday October 14, 2004 @09:35AM (#10523214) Homepage
      The cost of carrying 60,000 cds instead of just five is tremendous assuming you don't want to be constantly stocked out. Granted, I buy all my music on the 'net and none of it from major labels, now, so I'm not necessarily supporting the old model, but if people want to find those other 55,000 CDs in a store, they're going to have to pay more. No gouging about it.
      • I just thought I'd tack something onto that post--a bit of math in case you don't understand my point. Purchasing 60,000 CDs at one unit each is $720,000. If you expect a store to shell out enough to carry ten each of those most-popular 5,000 CDs and still carry one each of the rest, you're talking $1,260,000. At EACH store branch! Up front, with no chance of recouping most of them, offering that variety for you as a customer so you can have what you clearly desire: choice!

        Assuming they want to stock enough to not lose sales to the store-next-door if they sell one of those 55,000 albums of which they only stock one, they need to tack on another $660,000 in stock. If you were to go try and borrow that kind of money, it'd cost you all your profits just to pay the interest!

        I seriously cannot believe you fault indie-er record stores for charging what they charge, man. It's really, really pathetic.
    • by LetterJ (3524) <j@wynia.org> on Thursday October 14, 2004 @09:39AM (#10523274) Homepage
      "Personally, I can&#146;t believe that 1 out of 5 CDs are sold in Walmarts."

      The thing is, nearly 1 out of 5 *anythings* are sold by Walmart. They are big on a scale most people can't imagine.

      We view "entertainment" industries as big, but really, companies like Walmart dwarf them. They just aren't in the news every day like the movie and record industry. They chug along making billions of dollars without drawing attention to themselves.

      Wal-Mart has 3500+ domestic stores, and nearly 1500 international units. They pull in over $60 BILLION dollars per quarter and $2 billion of that is PROFIT.

      Walmart has so much purchasing power with wholesalers that this current story is just everyday business. However, this time they happened to target a branch of the media, who tend to yell and scream louder than most industries when *anything* happens to them.
      • by nelsonal (549144) on Thursday October 14, 2004 @09:58AM (#10523515) Journal
        Walmart is only about 1 out of 10 average things (they are about 8-9% of US retail sales. It's no surprise that they are above average in a loss leader catagory though. Size of a company is an odd measure, Walmart is huge in sales they swap with Exxon Mobil for most revenue, but Microsoft consistently makes more money than Walmart (on about 1/4 the revenues). Exxon generally makes more than both.
        Keep in mind that the music market has historically operated with small costly stores (in malls and such) that stock a wide variety of albums (to get people in the stores) but make their money on say the top 200 selling albums that turnover (sell through inventory) much more rapidly than the others. Walmart tries to stock only the albums that sell (letting online sellers fulfill the remaining orders) and sells them below cost (also to get people in the store) in order to make money on all the high margin items they are selling. Nearly every business does this they sell certain things cheaply in order to increase sales of higher margin items. Fast food joints give away the burgers to make money on soda and fries. Fancier resturants try to break even on the food and make their money on wine. In software the real money is made on maintenance contracts rather than licensing. What surprises me is how much music Wal-Mart sells when so many titles are edited. Seems kinda pointless for Wal-Mart to even have a rap section, but I guess you never go broke underestimating American smarts.
      • by magarity (164372) on Thursday October 14, 2004 @10:03AM (#10523575)
        OK, everyone, read the parent post where it says:

        They pull in over $60 BILLION dollars per quarter and $2 billion of that is PROFIT

        Now, while 2 billion bucks is a load of cash, 58 billion was spent in search of it. That's a margin of only 3.3%. It is NOT a profit of 33% as a post farther up claims with the illustration of a $12 CD being sold at $16. Walmart makes all of its money on razor thin margins. Yes, 3.3% is razor thin. Compare to, say, Intel, who pulls in a whopping 22.7% profit margin. Now THAT'S a huge margin of profit. Not Walmart and their piddly 3.3%, nevermind how many billions that 3.3% adds up to. Say what you want about the monolithic nature of Walmart and their heavy handed tactics with supplies but you cannot knock it on gouging or otherwise extraordinary profits.
        • by magarity (164372) on Thursday October 14, 2004 @10:13AM (#10523690)
          To further illustrate, Intel had free cash flow last year of $9.5 billion on sales of $33 billion while Walmart had $3.2 billion in surplus cash on sales of $247 billion. Walmart also has debt of $32 billion (ten times its free cash flow) while Intel, for some reason, maintains a piddly $1 billion (1/9 its free cash flow) in debt. Now tell me again that Walmart is a bunch of greedy price gougers...

          PS - In case any nitpicky economists or financiers want to argue with my subject line, while "marginal" in economic terms simply means per each additional unit, it also means "barely within a lower limit" in plain English and that's what I was intending.
    • by Alzheimers (467217) on Thursday October 14, 2004 @09:39AM (#10523276)
      It depends on what part of the country you're from. Here in the North-East, we're not as affected by the Walmart monopoly. But I've got relatives that live in Florida, and they don't say "Store" or "Supermarket" anymore.

      They say, "Oh, we're out of soda ... I need to run to the Walmart". "Oh, we need a new TV ... I need to head up to the Walmart."

      Walmart is ubiqitious in some parts of the country. They're the second highest employer in the country, behind the government. Frankly, I'm surprised it's not a higher ratio.
      • by Pxtl (151020) on Thursday October 14, 2004 @09:47AM (#10523374) Homepage
        Yup. The creepiest thing about those places is how they also have meeting centres, photo labs, halls, etc. This is the old Town Hall. The goal is that they become the only store in the community. Not just the only department store, or electronics store, or grocer - but the only store. They become the centre of town. The local Wal-Mart then dwarfs the government in power - they provide access to all goods for a community.

        Consider this: you have one company that provides for all of the needs of the citizen in the town, and a lion's share of the citizens work for that company. How is this not a commune? Its like communism's evil twin!
        • by Curunir_wolf (588405) * on Thursday October 14, 2004 @12:11PM (#10525220) Homepage Journal
          How is this not a commune? Its like communism's evil twin!

          Seems more like Feudalism [wikipedia.org] to me. Big king in far-off castle, store manager as vassel, serfs working the land (that only the king actually owns any of). Yep, Walmarts in small towns are fiefdoms.

    • I can't believe that 1 out of 5 CDs are sold in Walmarts.
      I saw the typical teenybopper crap but nothing that I would consider new and exciting.
      This is the same demographic that made Titanic the box office "phenom" that it was.

      I wasn't finding anything by developing and independent artists
      I don't think the masses of America buy stuff by developing and inde artists. So I can see how 1 in 5 are sold at walmart.
      see your quote below to reinforce that many people buy music from walmart.
      it's just usually a
    • by Maestro4k (707634) on Thursday October 14, 2004 @09:50AM (#10523418) Journal
      • How about making the customers happy? Personally, I can't believe that 1 out of 5 CDs are sold in Walmarts. I can't stand their stores. I absolutely DREAD entering one. They aren't clean, they aren't friendly after you pass the greeter, and they aren't someplace that I want to shop for music as it's just usually a mess and full of people.

        Why not concentrate on making music available for less money somewhere that I might want to buy it instead of worrying about making sure Walmart is happy.

      While much of what you say about the stores are true, you should feel sorry for the folks trapped working there. I've worked at one, appalling is about the only word that comes close to describing how management treats employees. Many of the people there can't find other work, or Wal-mart pays more than anything else they can find. Wal-mart knows this and abuses it. I fully expect there to be lots more class-action lawsuits against the company in the near future, even with current ones they're getting worse if anything.

      But the 1 in 5 figure is quite believable. While Wal-mart might not have as large a selection, their core customer base isn't looking for one. The CDs sell like proverbial hotcakes at even smaller Wal-marts, bigger ones move so many it's scary. Around here (Tennessee) there are very few chain record stores left. Of the two malls in the closest large city to me, there's one record store apiece. There are a few small retailers, but the biggest of those is a local used-CD chain (two locations).

      • I don't like dealing with either company and I certainly don't think that Walmart is going to bat for the consumer. They are only doing this to make themselves richer. We aren't exactly benefiting by buying a $10 CD.

      On this one you're both right and wrong. Wal-mart is indeed wanting to make more money, but their entire business plan is to buy low and pass along the savings, keeping profit margins lower and making up their money by selling tons of the stuff. Anything Wal-mart can get cheaper will benefit consumers because then the consumers will get it cheaper. Granted Wal-mart's not doing it because they're some grand benefactor, but the end result helps consumers a bit. Actually I suspect that Wal-mart is pushing for this because the overwhelming consensus of their customers is that the CDs cost too much, even at Wal-mart's prices. (I worked in Electronics, you hear this constantly, although people still buy.)

      • Wal-Mart is like no traditional record seller. Unlike a typical Tower store, which stocks 60,000 titles, an average Wal-Mart carries about 5,000 CDs. That leaves little room on the shelf for developing artists or independent labels.
        • I was at Walmart recently buying something I couldn't find at Target. I happened to stop into the electronics section while my fiancé did some shopping elsewhere. Perhaps I wasn't looking in the right spots but I wasn't finding anything by developing and independent artists. If anything it was most older music that wasn't exactly getting radio play. I saw the typical teenybopper crap but nothing that I would consider new and exciting.

      Umm, did you not read the sentence you posted? It said it left little room, which is exactly what you found to be true. Wal-mart's not big on new and exciting though, they're big on selling decent stuff cheap and lots of it. Independent artists and developing artists don't fit that so it's no surprise they're absent.

      It is interesting to note that Wal-mart doesn't handle the merchandising of the CDs itself, they hire a company that does it, so I'm not sure how much direct control Wal-mart has over exactly what is on the racks.

      • Most independent stores I have gone to shop for music in are charing $16+ for a CD. If you're buying it for $12 and making $4+ a CD I seriously believe that you are gouging us. I don't feel bad for you.

      While it's hard to understand t

      • Anything Wal-mart can get cheaper will benefit consumers because then the consumers will get it cheaper. Granted Wal-mart's not doing it because they're some grand benefactor, but the end result helps consumers a bit.
        Sure, cheaper products benefit the consumer (in theory), and that benefits Wal-Marts bottom line. However Wal-marts abusive relationships with it's suppliers are costing the overall economy greatly.

        Those outsourced factory jobs everyone is blaming on Bush? A goodly number of them can actually be laid at the feet of Wal-Mart and it's predatory practices. Look what they did to Levi-Strauss, and L-S bent over and took it to gain acess to Wal-Mart.

        This story [fastcompany.com] about Wal-mart frightens me greatly, and it's just one of many.

    • by ktandaeo (116154) on Thursday October 14, 2004 @09:53AM (#10523451) Homepage
      "Most independent stores I have gone to shop for music in are charing $16+ for a CD. If you're buying it for $12 and making $4+ a CD I seriously believe that you are gouging us. I don't feel bad for you."

      Umm. It's obvious you've never run a business. This markup barely covers overhead and people expenses. What do you expect them to pay their people with? Dorito's?

      It's funny listening people complain that the Independent record stores are disappearing and then think those same stores should give their stuff away for free.

      Money from heaven I guess.

    • by Morpeth (577066) on Thursday October 14, 2004 @09:54AM (#10523468)
      "Most independent stores I have gone to shop for music in are charing $16+ for a CD. If you're buying it for $12 and making $4+ a CD I seriously believe that you are gouging us. I don't feel bad for you."

      After college I worked at a great independent bookstore for about 3 1/2 years, just at Burns Ignoble (Barnes & Noble) was starting to drop store everywhere.

      More than once UPS, USPS, etc dropped off the wrong box in the shipping room, intended for B&N, we'd be opening boxes quickly usually and didn't always notice until we looked at the invoice. The discount a place like B&N gets over the independent is significant, like 8-12% more. This is a similiar situation with record stores.

      When you're running close margins to begin with and your comptetitor is getting stock for 8-12% less than you, THAT's huge, and it's d*mn hard to compete. Sadly, that bookstore, after 45 years in business, closed this summer.

      Also before you complain about costs, think about what independent media places (records & books) tend to offer; people who love their product, are knowledgeable about it, and MOST importantly, they support small presses/publishers/labels than the uber stores won't touch (including Target by the way, not just Wal-mart)

      As independent record and book stored closes, so do the many small presses & labels. The store I worked at bought some great books from indie pubs, many of those are now out of business since Target, Wal-Mart and the like won't even talk to them. Those books are no longer available and those people lost their jobs.

      Seriously, thing hard about where you buy things. Yes, I understand $2-3 more is a lot to some people, however, you are ultimately reducing your the choices and varieties of the music you hear and books you read. Sometimes being a consumer involves more than just the price of an item.

      My 2 cents

      • by stienman (51024) <adavis@NOSpam.ubasics.com> on Thursday October 14, 2004 @11:30AM (#10524605) Homepage Journal
        Sometimes being a consumer involves more than just the price of an item.

        I imagine that if you could have received the same price breaks as B&N then you would have jumped at the opportunity. Then you would sell them at a lower cost to the consumer.

        Assuming that's true, then you are doing what you counsel against. As a bookstore you are a consumer buying from distributers, but you always look for the better deals, just as the end consumer does.

        The next argument usually made is, "We would have to just to survive," which is also made by the end consumer. If I can buy the same product for less, is it in my best interest to buy it for more? The store has to make the same decision, and the result is the same - it's not in the store's best interest to buy from a higher cost distributer, and it's not in the consumer's best interest to buy from a higher cost store.

        This is capitalism. It's nice to believe in a rosy utopia where everyone gets what they want, but the reality is that our economy does not support that model.

        To paraphrase the GPL people, "If you don't like it, invent your own currency and enforce your own economic model. You have the tools."

        -Adam
    • by nomadicGeek (453231) * on Thursday October 14, 2004 @10:22AM (#10523812)
      Most independent stores I have gone to shop for music in are charing $16+ for a CD. If you're buying it for $12 and making $4+ a CD I seriously believe that you are gouging us. I don't feel bad for you.

      A 30% markup for a specialty store is not unreasonable. You act like some asshole is just taking the $4 and putting it in his pocket. You should try to run a business. The owner of the store probably invested a good bit of money up front to get started. You have to fill the store with racks, buy inventory, and plan on running at a loss for the first few months as you grow your business. The owner is probably paying back the debt incurred at startup for a long time or they risked a lot of savings just to get started.

      Once you get past that hurdle you have to pay rent, taxes, insurance, hire employees, pay unemployment tax, workers comp, social security. You also have to pay to advertise your business, pay your accountant to file your taxes, possibly hire a book keeper to help you keep up with the sales tax that you must pay. It is endless. $4 per CD doesn't go very far. You have to sell a lot of CD's to break even. Making a big profit off of such a business isn't a trivial thing.

      I'm not saying that you should feel bad for business owners. Just realize that it isn't all that easy. If you go into a store that you really enjoy that has a wide selection, knowledgeable employees, and a great atmosphere with good customer support, you should appreciate it for the gem that it is. Someone has really had to put a lot of thought and strategy into pulling it off right. They probably also took a lot of risks just to get it started. It isn't all that easy.

    • by MartinB (51897) on Thursday October 14, 2004 @10:33AM (#10523953) Homepage

      When are /.ers going to realise: the purpose of commercial entities is not to spread knowledge of music, but to make profit.

      There are two perfectly valid business strategies to do this:

      1. Target a consumer segment that wants to buy a wide selection of music, which necessarily cannot be limited to the current top radioplay/chart list.
        To do this, you have to hold a much higher level of stock. To do this profitably, you have to have a higher gross margin to maintain a livable net margin.

        The trouble is, unless you can carry a truly huge stock and shift it very fast (Hello, Amazon), you won't be doing the volume to have the buying power with the distributors. Therefore you must add your higher margin to higher costs. Result: high consumer prices.

      2. Target a consumer segment that only cares about what's in the charts/on the radio.
        This is a much bigger segment, and it's a much smaller set of product. Therefore, you can be much more efficient with your supply chain processes, you'll need less real estate for shelving, and you'll shift more volume so can negotiate more robustly with suppliers. You can therefore offer lower prices and still make respectable net margin as your costs are so low.

      Both of these strategies are viable, and are only somewhat competitive. You're a consumer who likes non-chart music, so do you go to WalMart to find it? No, of course not. The existence or otherwise of WalMart is entirely irrelevant to your music buying habits. You worry about all those teenagers who only go to WM only finding chart music? They shop where their needs are met - if they wanted anything else, they'd go elsewhere.

      But I think the biggest trap you've fallen into is the High Fidelity one - mistaking selling CDs for loving music. If you're a retailer who does it because you love the music and don't have a profit motive, then you have a hobby, my friend, not a business.

      Amazon are very smart about this. They explicitly do not target people who love *read* books, but those who love to *buy* them.

      Wal-Mart don't care about the music. It's just business - they supply a need profitably to provide a maximised return to their owners. This isn't A Bad and Evil Thing: their owners (ie the stockholders) legally require them to behave like this.

      And this is the case for pretty much everyone involved: The people who press the CDs, the people who design the covers, the people who ship the CDs, the people who provide catering to the studios - everyone. Even among professional musicians, the strongest desire of all is to be paid, or didn't you notice the existence of the Musician's Union...

    • I don't like Walmart, but the problem is, like most people...

      I'm too broke to NOT shop at Walmart.

      cheers.
  • Good (Score:3, Interesting)

    by HBI (604924) <kparadine@@@gmail...com> on Thursday October 14, 2004 @09:27AM (#10523095) Homepage Journal
    I'm still not buying any more RIAA CDs, Walmart or elsewhere.
    • Re:Good (Score:5, Insightful)

      by mfh (56) on Thursday October 14, 2004 @09:43AM (#10523324) Journal
      I'm still not buying any more RIAA CDs, Walmart or elsewhere.

      Me too. I listen to internet radio and look for nice mixes around the web and all of them are indy. I could care less about the RIAA. They are goons. The RIAA operates like Jimmy Hoffa's Teamsters once did; oppression by coercion. The Teamsters took a beneficial idea (a trade union) and turned it into a money grubbing business front for organized crime. It's the same thing the RIAA has done with music, perhaps without the organized crime, but you never know. Music used to be free, but then the Metallica bands came along with their business plans. Metallica are sellouts. Who wants to put more cash in their pockets? I would much rather support a starving artist with new ideas.
    • Re:Good (Score:4, Funny)

      by AEton (654737) on Thursday October 14, 2004 @09:50AM (#10523412)
      Great!
      CD prices are down!
      CD sales are down!

      (Clearly it's due to piracy. [slashdot.org] - whatever will we do?)
    • Stop, thief! (Score:3, Insightful)

      by JonTurner (178845)
      >> I'm still not buying any more RIAA CDs, Walmart or elsewhere.

      Of course, you realize that's "stealing" (by the RIAA's) definition. They have a right to your money, and by denying them your hard-earned cash you're just plain evil.

      Now if the RIAA were intellectually honest (stop laughing, I'm trying to make a point) they would revise their annual "loss due to piracy" (e.g. "we lost 3 billion dollars to internet pirates this year...) statements downwards due to the lower retail costs. Of course, that
  • by gpinzone (531794) on Thursday October 14, 2004 @09:27AM (#10523097) Homepage Journal
    Two wrongs sometimes do make a right.
  • by CountBrass (590228) on Thursday October 14, 2004 @09:27AM (#10523102)

    meet Evil Empire 2.

    Make it difficult to know who to BOOOOH! at!: Ugly Sister 1 (speciality: cutting wages to the bone and destroying local stores) or Ugly Sister 2 (speciality: suing young children and pensioners).

    • Why not boo both of them, and take your money elsewhere? That's what I do.

      Soundclick.com can get you some pretty good music (yeah, you gotta wade through all the goobers who think the world is holding its collective breath waiting to hear them croak out some lyrics while a midi file plays near their microphone... but amongst the chaff is some pretty tasty wheat)... there are other places, as well, to find music that's got nothing to do with the RIAA.

      Then there are Wal-Mart's competitors. Use them. Shop
  • by AKAImBatman (238306) * <<akaimbatman> <at> <gmail.com>> on Thursday October 14, 2004 @09:27AM (#10523107) Homepage Journal
    ...treat others as you would like to be treated. Enjoy the seed you sowed RIAA (and members)!
    • by overbyj (696078) on Thursday October 14, 2004 @09:39AM (#10523277)
      As much as I would like to rub the RIAA face in the dirt with this one, the issue is really much much bigger than just the RIAA. Wal-Mart is a ruthless competitor that rivals, if not surpasses, that ruthless competitor in Redmond. They have such retailing clout that when they make you an offer, you have no choice but to take or suffer the perilous consequences.

      Vlasic pickles is one fine example of their ruthlessness. Wal-Mart basically forced Vlasic to make the big size containers with more pickles in them than most humans should eat within a reasonable amount of time. Wal-Mart basically forced a price structure on them too with this giant jar of pickles. As a result, you the consumer have a choice. Pay for the giant jar and end up throwing away the vast majority of the pickles, or buy the more expensive jar in the grocery store. Joe Consumer buys the giant jar with the rockbottom price. As a result, Wal-Mart has now forced Vlasic to cannibalize themselves and they end up having to file bankruptcy.

      Wal-Mart has a well-established policy of forcing sellers to sell their products for cheaper prices year after year if the product does not change. Wal-Mart argues that if your product does not change, then production costs level off and you should then be able to bring your product to them for a lower cost. Ever notice how many gazillion different kinds of toothpaste and toothbrushes there are at Wal-Mart? That industry has figured that they cannot afford to not be sold at Wal-Mart but yet they have to maintain a certain price structure. Therefore, they "innovate" with toothpaste and toothbrushes. Now you have cinnamon flavor, cinnamon flavor with whitening, cinnamon flavor with tartar control, cinnamon flavor with whitening and tartar control and so on. This will not stop. What is next? Cinnamon flavor with bladder control???? Wal-Mart forces this "innovation" because of their business tactics.

      I could list many more examples and this is to not even mention that it is nearly impossible to actually earn a living working at Wal-Mart. They are basically an American sweatshop except they don't actually produce anything. They just peddle stuff and drive competition away.

      So as much as I would like to see the RIAA suffer for their deeds, this issue transcends them.

      • by DarkSarin (651985) on Thursday October 14, 2004 @09:53AM (#10523458) Homepage Journal
        I have a very different take on Walmart. They are successful for one reason-they market what consumers want. This is what makes them different from the Redmond Giant. Walmart has made themselves based on extraordinarily good pricing. Their methods of getting that pricing are sometimes dubious, sure, but they provide what people want, and usually at a good price.

        Will they continue to do so once they have wiped out all the competition? Probably not, but I don't think that Walmart will ever be competition free.

        There will always be conscientious objectors to the big W, and they will shop somewhere else. There is Target, which has made some very smart decisions on how to carry a very similar product line, yet be compelling. They are price competitive on most items, but they also market to a higher class customer, and tend to have more trendy goods than Walmart (their home decor is especially telling). I think target is here to stay. They are avoiding the mistake of Kmart, and not trying to imitate Walmart to closely (which is what killed Kmart, largely--there was little to differentiate the two, and Walmart consistently beat them on price).

        Is Walmart perfect? No. I hope they get slammed in the current class action suit under Title VII (gender discrimination in wages). They deserve it.

        Can people earn a living at Walmart? Probably not until you get to the Management level. This means that you need to either work your way up, or move on. It makes the perfect job for high-school and college kids trying to make a few extra bucks. It doesn't work for anyone with the desire to work there for the rest of their lives, unless they can make management.
        • They are successful for one reason-they market what consumers want.

          They are sucessful for 2 reasons. 1) They stock everything. Many people have the philosophy "If they don't sell it at walmart, you don't need it" 2) They capitalize on poor, younger and middle aged, people and other penny pinchers, by offering them the illusion that "You can get more for less!".

          First, I've never ever known someone that has ever "saved" money by paying less for something. All the people that I know that talk all the tim
      • by Suidae (162977) on Thursday October 14, 2004 @10:27AM (#10523880)
        Wal-Mart basically forced Vlasic to make the big size containers with more pickles in them than most humans should eat within a reasonable amount of time

        Yes, maybe they could preserve them somehow, like.. maybe they could.. pickle them...
  • by Richard_at_work (517087) <<richardprice> <at> <gmail.com>> on Thursday October 14, 2004 @09:31AM (#10523150)
    I really dont think you could label Walmart as a monopoly by any stretch of the word. THere are plenty of competing businesses, Walmart is jsut the biggest.
    • by cnelzie (451984) on Thursday October 14, 2004 @09:46AM (#10523351) Homepage
      ...in recent months there has been a cornucopia of stories detailing how Wal-Mart does business.

      Some of those stories details how Wal-Mart abuses its position as the largest, wealthiest and subsequently most powerful retail chain in the world.

      They have squeezed their suppliers enough that many suppliers have had no choice but to shut down all manufacturing operations in the United States and move those operations into foreign markets where they can continue to stay in business.

      The option is either lose their largest customer and possibly enough revenue to shut down completely or shutdown all US Factories, put anywhere from a few hundred to several thousand American factory workers out of a job and stay in business. Business-wise, they have no choice but to comply with Wal-Mart. Unfortunately, that isn't good for the US workers that just lost their jobs.

      You can say things like, "Well, those American workers should have learned to live with earning less money."

      It's not all about just the money paid to an hourly worker. It's about the cost of benefits, cost of mandatory operation fees, like licenses, worker's compensation, unemployment office fees and a number of additional aspects that raise the cost of production in the US.

      Then, you also have to take into account the minimum wage law. If you can have something produced overseas by workers that are fine with making, over the couse of a single day, the same amount that a highly skilled American manufacturing worker, like a Tool & Die Maker (Which is between $19 and $25 an hour), is paid for one hour. As a business, what are you gonig to do? Stay in business or go out of business?

      Wal-Mart has done more to help decrease the number of available manufacturing jobs in the United States then most people think.
    • by gosand (234100) on Thursday October 14, 2004 @09:50AM (#10523409)
      I really dont think you could label Walmart as a monopoly by any stretch of the word. THere are plenty of competing businesses, Walmart is jsut the biggest.

      Walmart is not a monopoly - but they have ruined their share of small businesses. They also treat their employees like garbage, and don't give back to the communities that they overtake. That is why many communitites protest and try to keep them from setting up shop there.

      But realistically, in the end, people want the best prices on things. Walmart can offer the lowest price (usually) because they have such a huge operation and their costs are lower. Note the deal that they have with the RIAA - I am sure that nobody else gets that kind of discount. They aren't a monopoly, but they are one of the largest forces in retail. 5 of the top 10 richest people in the country are from the Walton family.

      I have talked to people who have marketed products to Walmart. They are hard-asses about accepting your product into their stores, and they take a huge cut. It is very much like record labels - you give away the lion's share of your product sales in hopes that they'll stock your product on their shelves.

    • In the end, the small towns are screwed either way. With the "walmartification" of small towns, the main street stores are being run out of business. Even some large regional grocery stores are having a difficult time fighting the Super Walmart stores. The result is fewer store choices in a small town, generally low wages for employees, and most of the profit being pumped out of the state.

      Now, without Walmart we'd probably have far more locally-owned mom-and-pop businesses in small towns. But there would b
  • Heh (Score:5, Insightful)

    by starseeker (141897) on Thursday October 14, 2004 @09:31AM (#10523159) Homepage
    Nothing like having to take it as well as dish it out.

    Ironically, if they give in and sell cheaper it will probably result in MORE money for all involved, since people will be able to buy more CDs without feeling quite so ill at the prices.

    Can't say I'm real happy about Walmart having so much power though. Frankly I don't trust any business with so much power. But I will say I'm inclined to worry about Clear Channel more than Walmart, since for most of Walmart's products the barrior to entry in the market isn't unthinkably high.
  • No news here. (Score:5, Informative)

    by artguy66 (801662) on Thursday October 14, 2004 @09:31AM (#10523160)
    Walmart does it to ALL of their manufacturers. Perhaps this one may deserve it.
  • by dubiousmike (558126) on Thursday October 14, 2004 @09:32AM (#10523176) Homepage Journal
    though many of you hate walmart for a bunch of good reasons, if you do not sell your CD in walmart, you can not top the billboard charts. Artists have changed core elements of their music/art because walmart said they wouldn't sell it if they didn't. This might actually lower prices for some independant music resellers, though unlikely. Them walmart will just ask for an even lower price. The fact remains that walmart has such a huge purchasing power, that little stores can not compete.
  • by chud67 (690322) on Thursday October 14, 2004 @09:35AM (#10523202) Journal
    I have heard from more than one person that this is typically how WalMart deals with its vendors/suppliers. If you have a company making widgets, for example, WalMart might come to you and place a small order for widgets to sell in their stores. Then as your product sells they gradually increase their orders until eventually they have pretty much your entire production line devoted to WalMart orders. At that point they come in and low ball you by saying, 'we're only going to pay x dollars per order from here on out, take it or leave it'. The vendor, whose entire business now hinges on WalMart orders, is forced to comply.

    While I don't agree with this practice, I am glad to see it getting turned on the record companies now, since they've been ripping me and other consumers off for years. Let the jackals tear each other to pieces...

  • by Anita Coney (648748) on Thursday October 14, 2004 @09:38AM (#10523256) Homepage
    If Walmart truly sells every 1 out of 5 CDs sold, it should simply start signing major artists directly. That way Walmart could keep even more of the profits.

    • by dykofone (787059) on Thursday October 14, 2004 @10:05AM (#10523595) Homepage
      My god man! Keep quiet, if Walmart became a record label, it'd destroy every last shred of hope for decent music in the world as we know it. I can see it now, they'd turn to radio stations and say "pay us a ridiculous amount of money to play our songs, or you won't get to play any of our #1 hits, of which currently take up the top 40."

      Suddenly, radio stations are folding because they can't afford to pay the Walmart prices, Clear Channel has to start playing independent bands selected by live DJ's, and the only place you'll hear the Britney Spears is at her live concert in a Walmart parking lot.

      Wait, nevermind, that's a great idea! Get Walmart into the music industry ASAP!

  • by hcob$ (766699) on Thursday October 14, 2004 @09:38AM (#10523259)
    I hate Walmart's Business practices...
    I hate the RIAA's price fixing...
    I like cheaper music prices....


    *Head explodes from the logical paradox*
  • by amightywind (691887) on Thursday October 14, 2004 @09:38AM (#10523266) Journal

    Monopoly one, meet monopoly two.

    You are completely misusing the word. Walmart is a leader in the incredibly competative retail sector. They got that way by being maniacly efficient and offering low prices on goods people need. They compete with other strong retailers (Target, Sears, Home Depot ...) everyday to the benefit of everyone. To make money they require volume. To create volume Walmart must offer low prices. The RIAA is under the same market pressures as any other Walmart supplier.

    • by copper (32270) on Thursday October 14, 2004 @09:56AM (#10523494)
      Interesting fact my Torts professor shared with the class: sales at Walmart peak at the beginning and in the middle of every month as their number one customers are those people living paycheck to paycheck. Walmart's extremely low prices are a boon for this working class and thus quite a good thing for a large part of America (especially rural America).
      • by Fnkmaster (89084) on Thursday October 14, 2004 @12:22PM (#10525402)
        This is a myth. No, the part about the paycheck to paycheck people shopping at certain times is true, but the part about this being a "boon for the working class" is exactly the wrong conclusion. Do you know why the working class is poorer today than they used to be? Because they earn less money. Where do you think the jobs they used to have went? These people don't realize that by buying the cheaper products at Walmart they are quite literally subsidizing the loss of their own jobs.


        Who do you think used to work at the manufacturers that were driven to source from China by Walmart? Do you think it was the educated urban elite? White collar technology workers? No, and no. It was the same working class people who are now finding themselves jobless or taking much worse jobs at lower pay than their old factory jobs, because the factories don't exist anymore, in large part due to Walmart and big box retailers disrupting the old supply chain.


        You are free to think this is ultimate good or ultimately bad for the country and its citizens, but it's hard to deny that the working class has been complicit in their own demise in much of the country by being such steadfast patrons of Walmart, and active supporters in many cases. Ever talk to a person from rural Alabama and suggest to them that Walmart is bad for the country? Damn, that pisses them off, and for all the wrong reasons - they think Walmart could never do anything like this, because they employ nice local people and have senior citizens smiling and greeting you when you walk in the door. How could Walmart be costing them jobs, when you see how many people each Walmart employs? They just don't get it.

    • by dykofone (787059) on Thursday October 14, 2004 @09:58AM (#10523521) Homepage
      Except that Walmart isn't the one offering those low prices. They turn to the producer and say "cut your prices so we can be competitive, or we won't sell your product."

      In most instances, such as the music industry, the producer can't afford to lose 20% of their market, and Walmart is famous for being strict on their tactic of "our way or the highway."

  • But so what? (Score:4, Insightful)

    by beforewisdom (729725) on Thursday October 14, 2004 @09:39AM (#10523279)
    If Walmart wins will that pass the savings on to the consumer or do something for their horribly treated workers like give them health care?

    Probably neither, why should we care.

    Just two big behemoths fighting over a scrap of plunder
  • Why CDs are $15.99 (Score:5, Informative)

    by ChaosMt (84630) on Thursday October 14, 2004 @09:40AM (#10523287) Homepage
    From the end of the article...

    $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

    • by philipgar (595691)
      These numbers are interesting in many respects. First the artist royalties seem awfully high. Are these assuming the top artists that are selling millions of albums? Marketing and promotion. . . Where does this go? Sure I see posters up at record stores, and they supply cds for free to radio stations etc, and producing music videos that are grossly overpriced and never played (at least I've never seen music videos played on MTV anymore). But even then thats not that much. Not enough to justify that
    • by HarveyBirdman (627248) on Thursday October 14, 2004 @10:10AM (#10523661) Journal
      $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

      Getting the album for free off the internet? Priceless. :-)

    • Indeed. So why do CDs sell for $23 (12.99 GBP) and more in "Great Britain"?

      That $15.99 quoted is 8.90 GBP according to XE.com's converter. Clearly our CDs are better quality than yours? No?

      That $9.72 quoted as Wal-mart's price equals 5.41 GBP. At that price I for one would be buying lots of CDs, but all you can get for that price in the UK is the broken stuff in the remainder bin.

      Differential pricing and price pointing are the scourge of modern retailing. I'd love to see Asda (UK arm of Wal-mart) ta

    • by po8 (187055) on Thursday October 14, 2004 @01:44PM (#10526533)

      A simpler view of the same data...

      $1.70 for packaging and distribution
      $1.77 to the musician / artist (split among author, performers, and union)
      $4.69 to the retailer
      $7.83 to the publisher / label
      Draw your own conclusions.
  • by cerebralsugar (203167) * on Thursday October 14, 2004 @09:46AM (#10523354)
    "Paying fifteen dollars for a piece of music is a difficult value equation for customers."


    WOW! Is it ever. Apparently Walmart marketers understand the music biz better than the music biz people.

    At Wal-Mart, we're a commodity and have to fight for shelf space like Colgate fights for shelf space."

    Which is why people go to walmart. Walmart is like a commodity store. Are we going to sell the new Eminem CD based on the "Intrinsic Value" of the liner notes or the number of hits on the CD?

    Then the article says:
    Unlike a typical Tower store, which stocks 60,000 titles, an average Wal-Mart carries about 5,000 CDs.

    and then

    . "When you're buying CDs for twelve dollars and selling them for ten like Wal-Mart, it makes the rest of us look like we're gouging the customer, when we're not," says Don Van Cleave, head of the Coalition for Independent Music Stores, a retail consortium. "It's supertough to compete with that price point."

    Well, Don Van Cleave, there you go! Your message to consumers needs to be, your prices are higher, but they have to be because you carry a much larger inventory and your large selection is a service your store is providing. Have tastes that go beyond the top of the charts? Well guess what, your music is in our store, and for the selection we have our price while still not the best, they are very fair. Now you're not selling a commodity. You are selling a service. You are selling expertise that perhaps your music staff has. But instead, you people try to do the same thing - push the hits.

    My girlfriend took a temporary position at a cocunuts store here in town. And let me tell you, they don't get the sell based on value thing. They push the hits, hits, hits. The kind of CDs you will listen to for a month or two and then forget. How is that kind of CD worth $15? It's not. She has pretty diverse tastes, and has broken "company code" by playing other "non-corporate approved" kinds of music,a nd has had a lot of sucess selling it. She figures every time she plays something, even if it's old, she has 5 or 6 people that ask "What is this?It's interesting". And a lot of them buy it. Now imagine what could happen if the whole store's marketing was geared that way. You could sell a good amount of that older or lesser known stuff, for a higher price. And you could still take the hits, and trim the price way down, as a loss leader, to get people in the first place. Maybe you can't go sub-cost like walmart, but you can get down close.

    Kudos to Walmart for beating the record industries margins down. As long as they only stock 5000 cds in each store, independent retailers should have no worries if they figure out how to position themselves correctly. The beauty of this is it could also force the record companies to sell to distributors and record stores for a lower price, actually helping the smaller guys.
  • by jbarr (2233) on Thursday October 14, 2004 @09:49AM (#10523392) Homepage
    Having dealt with Wal-Mart as a supplier, I can say that they definitely DO have leverage that seemingly can't be fought. Basically, they are the 800 pound gorilla that calls the shots. Don't like it? Then they won't carry the product.

    From a CD-purchasing-consumer's perspective, this may sound great, but my problem with this is that it is easy to get caught up in anti-music industry sentiments while overlooking the fact that Wal-Mart can do this in just about any other industry too. Don't like the price of tires? Just threaten to drop the product. Don't like the price of milk? Just threaten to drop the product. Never mind that the price is already competitive with other, smaller businesses that don't have the leverage to "force" lower prices.
  • by paiute (550198) on Thursday October 14, 2004 @09:58AM (#10523516)
    Hidden Cost Of Wal-Mart Jobs
    Use of Safety Net Programs by Wal-Mart Workers in California

    Arindrajit Dube
    UC Berkeley Institute for Industrial Relations

    Ken Jacobs
    UC Berkeley Center for Labor Research and Education
    from http://www.dsausa.org/lowwage/walmart/2004/walmart %20study.html [dsausa.org]
    A Study for the UC Berkeley Labor Center
    August 2, 2004

    Wal-Mart is the largest employer in the United States, with over one million workers. It is the largest food retailer and the third largest pharmacy in the nation. The company employs approximately 44,000 workers in California, and has plans to expand significantly in the state over the next four years. Wal-Mart workers receive lower wages than other retail workers and are less likely to have health benefits. Other major retailers have begun to scale back wages and benefits in the state, citing their concerns about competition from Wal-Mart.

    We estimate that Wal-Mart workers in California earn on average 31 percent less than workers employed in large retail as a whole, receiving an average wage of $9.70 per hour compared to the $14.01 average hourly earnings for employees in large retail (firms with 1,000 or more employees). In addition, 23 percent fewer Wal-Mart workers are covered by employer-sponsored health insurance than large retail workers as a whole. The differences are even greater when Wal-Mart workers are compared to unionized grocery workers. In the San Francisco Bay Area, non-managerial Wal-Mart employees earn on average $9.40 an hour, compared to $15.31 for unionized grocery workers--39 percent less--and are half as likely to have health benefits.

    At these low-wages, many Wal-Mart workers rely on public safety net programs-- such as food stamps, Medicare, and subsidized housing--to make ends meet. The presence of Wal-Mart stores in California thus creates a hidden cost to the state's taxpayers.

    This study is the first to quantify the fiscal costs of Wal-Mart's substandard wages and benefits on public safety net programs in California. It also explores the potential impact on public programs of Wal-Mart's competitive effect on industry standards.

    Main Findings:

    * Reliance by Wal-Mart workers on public assistance programs in California comes at a cost to the taxpayers of an estimated $86 million annually; this is comprised of $32 million in health related expenses and $54 million in other assistance.

    * The families of Wal-Mart employees in California utilize an estimated 40 percent more in taxpayer-funded health care than the average for families of all large retail employees.

    * The families of Wal-Mart employees use an estimated 38 percent more in other (non-health care) public assistance programs (such as food stamps, Earned Income Tax Credit, subsidized school lunches, and subsidized housing) than the average for families of all large retail employees.

    * If other large California retailers adopted Wal-Mart's wage and benefits standards, it would cost taxpayers an additional $410 million a year in public assistance to employees.

    For the complete study (840 KB pdf file):
    http://www.dsausa.org/lowwage/walmart/2004/walmart %20study.pdf [dsausa.org]

  • by gorbachev (512743) on Thursday October 14, 2004 @10:15AM (#10523718) Homepage
    Meanwhile RIAA would still sell CDs to other retailers at current prices.

    This can NOT be viewed as a good thing. If Walmart gets what they want, the independent record store will dissappear everywhere where Walmart is. They simply won't be able to compete, their revenues will continue to drop until they go out of business.

    And since Walmart is well known for exercising "editorial control" over goods sold at Walmart, you will no longer be able to buy any records with explicit lyrics or controversial topics. Certain types of music will simply dissappear or become even more expensive in areas where Walmart dominates.

    Welcome to Fahrenheit 451 21st century style.
  • by amichalo (132545) on Thursday October 14, 2004 @10:15AM (#10523721)
    I don't like Wal-Mart's "kill the little retailer and the supplier" attitude, so I don't shop there.

    I don't like the RIAA's CD pricing and 'CD copyprotection' methods so I buy exclusively from iTunes Music Store or I download it from Limewire if iTunes doesn't carry it.

    You hold the power, it is in your wallet.

  • by Carnage4Life (106069) on Thursday October 14, 2004 @10:18AM (#10523762) Homepage Journal
    I was just talking to some coworkers about how much power Walmart has in the retail world yesterday and one of them pointed out that a recent Fast Company article points out that Walmart is partially responsible for the low rate of US inflation [fastcompany.com]. The entire article is a very eye opening look at the effect of Walmart on local US and the global economy. Many claim it was the catalyst for the rush to offshoring manufacturing in past years.

    Walmart is so powerful it's scary.

  • by zerofoo (262795) on Thursday October 14, 2004 @10:49AM (#10524123)
    Look at the breakdown in the article for the cost of a $15.99 CD:

    $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

    Excluding profits for all those involved I calculate almost $11.00 in COSTS that are way out of line.

    We are in an era of "innovation stagnation". Companies are not creating "new stuff", but making money by taking costs out of the "old stuff". The record industry has simply refused to accept this fact.

    Wal-mart, Dell, Southwest Airlines, and other low-cost providers are not providing new and innovative products, they are providing new and innovative business models that take cost out, and therefore provide value.

    If the record industry is to survive, it must either create something radically new (MP3 online distribution of every artist past and present, and DVD - SACD discs) or reduce it's costs to meet market price.

    The market has spoken. $15.00 CDs are not a viable business model.

    -ted
  • by turg (19864) * <turgNO@SPAMwinston.org> on Thursday October 14, 2004 @10:55AM (#10524213) Journal
    Here [fastcompany.com] is a very interesting article on the way Wal-Mart works with suppliers. They have done similar things in other industries to what they're doing here, and really transformed the way business is done in some fields.
  • Walmart is not evil (Score:3, Interesting)

    by ttyp0 (33384) on Thursday October 14, 2004 @10:56AM (#10524229) Homepage
    I'm tired of everyone bashing large companies, especially Walmart. Last year Walmart had 258 billion in revenue, paying over 5 billion in taxes. People are always complaining about unemployement.. well just think about how many jobs walmart stores create. Benefits are usually better with larger companies. I work for a small company and health insurance I pay out of my own pocket. Unless you're a communist, capitalism is good for our society. Nobody makes you shop at walmart, so if you don't like them, don't shop there. Personally, I enjoy the lower prices.
  • by Proudrooster (580120) on Thursday October 14, 2004 @10:57AM (#10524250) Homepage
    The labels have been squeezing artists down to a puny 65 cents per CD or less and now Walmart is squeezing the record labels. I love it! There is justice in the world occasionally. Since the artists cut is already so low the labels will have to absorb this.

    I predict people will definately buy more CD's if they are $10 or less. Also, since the CD's will be so cheap, the labels probably won't be able to afford to license copy protection for the CD's. Note to self, sell stock in companies that license CD protection technologies.

    The race to the bottom has begun and now the slick record label exec's in their $3000 suits are about to feel the pain. However, the exec's shouldn't worry too much if they should lose their job, George W. Bush is creating jobs that pay $5/hr. or less every day :)

    Welcome to the free-market monopoly!!!!
  • by LittleGuy (267282) * on Thursday October 14, 2004 @11:03AM (#10524318)
    The RIAA is being told by Someone Big Enough to Stand Up to Them to lower prices -- that's good.

    It's Wal-Mart - Home of the Censored and Creatively Limited Music Selection -- that's bad.
  • by cameronk (187272) on Thursday October 14, 2004 @11:16AM (#10524454) Homepage
    At the end of the article, the Almighty Institute of Music Retail [almightyretail.com] provides a breakdown of the $15.99 spent on a new album. What surprises me is that when you adjust the underlying model for online music sales, the numbers break down to $9.88, which assumes that the record labels maintain their $4.61 of overhead and profit. This leads me to suspect that, despite their assertations to the contrary, Apple does in fact make some money off the iTunes music store.

    0.17 musicians unions
    n/a packaging/manufacturing
    0.8 publishing royalties
    n/a retail profit
    0.15 credit card fees
    1.6 artists royalties
    1.7 label profit
    2.4 marketing
    2.91 label overhead
    0.15 retail overhead
    9.88 total
  • by crath (80215) on Thursday October 14, 2004 @11:33AM (#10524640) Homepage
    First the RIAA complained that people ripping CDs and distributing them was putting music stores out of business. Now, in this article, the RIAA trumpets the closure of music stores in the context of Walmart's price pressure on those businesses. Sounds like another excuse to me. Instead of whining about the changes happening to their business model, they should embrace the change and join the rest of us in the 21st century.
  • by shark72 (702619) on Thursday October 14, 2004 @02:06PM (#10526797)

    "This is the first time a big player has attempted this sort of hardball move on the labels."

    Not true in the least. Slashdotters have Wal-Mart to thank for the record labels being punished for price fixing (as in the popular Slashdotter refrain, "the record companies are evil! They've been busted for price fixing!"). Here's what happened, in a nutshell:

    1. Wal-Mart started selling CDs at sub-par margins or as a loss leader to get people into the stores to buy other high-margin items.
    2. Record chains like Tower Records freaked out, as their primary business was selling CDs and they couldn't compete with a Wal-Mart which had a huge store of fishing rods and cheap clothing to make up the bulk of their business.
    3. The record companies helped fund the advertising for Tower as well as two other chains (TWE and MusicLand, I believe) in exchange for Tower et. al. agreening not to display prices in those ads that went below a certain point. FWIW, this is called a "MAP program," for "minimum advertised price," and is prevalent in tons of other industries.
    4. Wal-Mart got all pissy and threw their weight around with the government.
    5. The government told the record companies to stop, and to send checks to consumers.
    6. Lots of other industries, including the computer peripheral industries, still happily continue MAP programs... until that point that Wal-Mart tattles on them, too.
    7. Tower Records subsequently declared bankrupcty. Enjoy buying your music at Wal-Mart, folks.
    That's about as hardball as you can get.

"The value of marriage is not that adults produce children, but that children produce adults." -- Peter De Vries

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