NASHVILLE SKYLINE: Ripped-Off Consumers Get Reparations

Record Industry Sends $13.86 to Kiss and Make Up for Overcharges

(NASHVILLE SKYLINE is a column by CMT/ Editorial Director Chet Flippo)

This week I got a check in the mail for $13.86. It represents what the recording industry owes me for overcharging for CDs in the past. Do I feel vindicated?

You bet. Every time I pay more than I know I should for music, I feel victimized. But I still buy it. And, in the overall artistic scheme of things, price gouging has been the least of the record industry’s sins in recent years. But is $13.86 enough for every victim of greed in recent years? Not likely. Perhaps one of the worst things is that the victims at the other end of the price-gouging pipeline — the artists who actually create the music that makes the product that is sold — are getting no attention at all.

So, this settlement of $13.86 per music buyer — for the ones who bothered to file a claim, that is — is only a symbolic victory.

To backtrack a little, my check was accompanied by a letter from the Tennessee attorney general. Tennessee is one of 43 states that filed the Compact Disc Minimum Advertised Price Antitrust Litigation on behalf of music buyers against BMG, EMI, Warner-Elektra-Atlantic, Sony Music, Universal Music, Transworld Entertainment, Tower Records and Musicland Stores. The companies are paying out a total of $67 million in individual checks to consumers and in charitable donations (some of it by donating CDs to schools, libraries and charitable institutions). Tennessee attorney general Paul G. Summers noted in his letter that it’s “a pleasure to bring this matter to a satisfactory conclusion and to return value to consumers who purchased CDs while the challenged pricing policies were in effect.” (That was from 1995 to 2000, when the companies allegedly conspired to set “minimum advertised prices.”)

I’m not so sure this is a conclusion to anything.

When Universal Music Group (UMG) made its much ballyhooed announcement some five months ago that it was slashing CD prices, a lot of industry observers — including this one — predicted that it would be a positive force in the industry. But it’s hard to tell if it’s made any real difference. For one thing, there is no one comprehensive price structure throughout the record industry. Prices are what the companies decide they are — although $18.99 remains a fairly standard retail price except for UMG. And UMG’s discounts are not standard across its catalog, and not all UMG labels are being discounted.

And with the advent of the “big box” retailers — Wal-Mart, Target, etc. — aggressively courting music consumers, discounts on CDs are now routine, although primarily aimed at superstar releases.

To look at discounts on a current CD, Kenny Chesney’s When the Sun Goes Down on BNA is listed at a retail price of $18.98. You can pay that, if you want, although it would be hard to, because it’s discounted at so many places. Prices listed online range from $15.99 at Tower to $13.99 at Best Buy to $13.49 at Amazon and Borders and Target down to a low of $11.88 at Wal-Mart.

Discounted prices also fluctuate wildly. I bought Norah Jones’ Feels Like Home in its release week at Target for $9.98. This week it’s listed at Target for $13.49, so it’s no longer what’s referred to as a “loss leader” — a low price just to get you into the store.

UMG’s Shania Twain’s Up! now lists for $12.99, and it’s routinely discounted at $10.99. I bought it for $9.98 at Target in its release week. By reducing the list price, UMG has managed to keep Twain’s price down.

Usually what happens with UMG’s lower retail prices is that it means that the discount is also much less. Meaning that a $13.99 list CD may only be discounted to $13.49 or perhaps $12.99. So it all evens out: a BMG $18.99 CD discounts for $12.99 and so does a UMG $13.99 CD. George Strait’s For the Last Time: Live From the Astrodome now lists for $12.99 and is discounted at $12.88. So an 11-cent discount amounts to virtually nothing. If you’re buying at discount prices — and who doesn’t? — the price effectively hasn’t changed. No CD releases except first-week loss leaders are dropping below the magic $10 price barrier, and until they do, retail sales will continue to be volatile. Even so, a random poll of record store employees by CMT found a majority of them agreeing that the UMG price cuts have had an overall positive effect on sales.

There’s another, and perhaps deeper problem, though, that was addressed in an article by Don Henley in the Washington Post recently. Henley, a founder of the Eagles as well as the Recording Artists Coalition, looked at the retail fallout caused by discounting. “Music stores used to be magical places offering wide variety,” wrote Henley. “Today the three largest music retailers are Best Buy, Wal-Mart and Target. In those stores, shelf space is limited, making it harder for new artists to emerge. Even established artists are troubled by stores using music as a loss leader. Smaller, more-personalized record stores are closing all over the country — some because of rampant peer-to-peer piracy but many others because of competition from department stores that traditionally have no connection whatsoever with artists.”

Specialty stores — such as the Ernest Tubb Record Shops — that carry deep catalog unavailable elsewhere may be able to hold out against the discount pricing onslaught, but the small independent stores and smaller chains are falling.

And we haven’t even gotten around to the online downloading aspect of all this. That’ll be addressed in a future sermon.