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 music industry uncovered - part one
Look what’s happening behind the racks, folks. A few slimy deals between major record labels and retailers:1. Major labels offer huge discount agreements with large retail outlets – eg, Amazon.com – allowing them to have a lower dealer price. “We sell it cheaper,” they cry. “That’s because you get it for f**k all,” we reply. Discount offers averaging 60 per cent also mean that the major chains – eg, HMV, Virgin, Tower – return the favour by providing prominent display positions and big in-store profiles. 2. Major labels will actually supply supermarkets with CDs free of charge to ensure an artist’s presence on the shelves. Likewise, some retailers – eg, Woolworth’s, Entertainment UK – demand 100 per cent discount in order to stock an album. Small independent labels, meanwhile, have to pay for chain-store advertising in order to get their artists stocked in major shops. 3. Silver, gold or platinum-disc status is based not on the amount of sales to customers but on ship-to-store orders. Labels and distributors will ask favours of main supermarket chains, and send thousands of albums to the supermarkets’ central warehouses just to make up the figures and secure a silver/gold/platinum disc for their artist. In this way, labels court their artist and keep them sweet – making the band think the record company is doing them right. 4. In October 2002, a $143m settlement was announced following a nationwide price-fixing case in the USA involving five major record companies and three huge retail chains. The Attorneys General of 41 states opened a can of worms wherein EMI Music Distribution, Warner-Elektra-Atlantic Corp, Sony Music Entertainment & Universal Music Group and Bertelsmann Music Co were discovered to have conspired with the likes of Tower Records to stop discount offers to customers, avoid price competition and set minimum prices. The major record companies – who, of course, refused to admit any wrongdoing – were also ordered to give $75.7m worth of CDs to schools and libraries for the purpose of “music education programs”. The majors, meanwhile, say they paid out only to avoid the cost of further litigation. Customers with a receipt for CDs purchased after 1995 were eligible for compensation having been deemed to have overpaid for CDs. 5. In the early 80s, compact disc technology was new and therefore prices were set higher than for vinyl albums. Major labels assured everyone that the cost would drop once the CD format became the norm. But guess what?
Stuart Turnbull
Next week, we look at major labels and their artists.
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