Step back, take a deep breath, gather some courage and then let out the deepest, abdominal-wrenching gut laugh you've ever experienced. Universal Music Group has lowered CD prices.
The hilarity of the situation has gone unnoticed by most media outlets. They've portrayed Universal as a brave white knight taking a bold stand to try and correct a very wrong situation. File-traders have eroded the music labels' revenue stream.
But a finely-tuned organization such as Universal isn't going to be undone by millions of teenagers. It's taking the daring, some say revolutionary, step of risking precious margins in favor of high volume sales. Maybe if we price the products low enough, we can bring consumers back.
"We are in the middle of a terrible situation where our music is being stolen," Doug Morris, chairman of Universal, told The New York Times. "We need to invigorate the market, and as an industry leader we felt we had to be bold and make a move."
Be bold? Industry leader? That's where the joke begins.
As The Times points out, this is the first CD price cut since the media format came on the scene in the 1980's. Think about that for a minute. New format, volumes low, prices high. Ronald Reagan was president.
Since the 80's, the record labels' have seen CD sales surge. What do we mean by surge? Let's hop over to the Clinton years, when the CD was a well accepted, popular format and see.
In 1993, CD makers shipped 495 million units and brought in $6.5 billion, according to the RIAA (Recording Industry Association of America). By 2000, units had almost doubled to 942.5 million with $13.2 billion in revenue. That's quite a run.
The labels' performance was, no doubt, helped by a "promotional program" the FTC (Federal Trade Commission) likes to call price-fixing. The U.S. government found that the labels were collectively working to keep CD prices high, during these glorious boom years. Where was the white knight Universal then? Oh, right, probably price-fixing.
Laughing yet? If not, here you go.
"What we're trying to show people is that music is a good value, even if you have to pay for it," Zach Horowitz, president of Universal Music, told The New York Times.
Well, yeah, it's a good value when you aren't artificially keeping the prices high. It's also a good value when basic laws of economics are followed. As the supply of CDs sky-rocketed and the cost of the media plummeted, the price would be expected to go down. Two decades and four presidents is a long time to wait for a single price cut on what became a mass market good. CD players certainly went down in cost.
Thank goodness someone at Universal finally went to a macroeconomics course. Give that person a raise for taking night classes at the local community college.
Universal will lower its prices for a CD to $9.09 from $12.02. This means retailers could sell CDs for as low as $10 instead of the $16-$19 currently charged. That's genius! Forget the raise. Somebody give this reincarnation of John Maynard Keynes a medal.
$10 a CD. That's exactly the price music labels did not want retailers to sell their product at during the 1990's, the FTC found. But, come on, the Berlin Wall has fallen, the Soviet empire has collapsed, we even have robotic pet dogs now. Amazing things can happen in twenty-years.
The music label mob might not be the brightest bunch, but they come around eventually.
So if you are one of those pirates, we mean file-traders and not the music labels here, go on out to the store and make things right. Sure the economy has been obliterated over the past three years, but no group is hurting more than the recording industry. These music executives need help, and now they want to help you. Cash in that unemployment check or dip into the last bits of your severance package. CDs are cheap. They are good value. Now that's funny. ®