Artists Question Cheaper CDs

Lower prices could mean lower royalties

September 29, 2003 12:00 AM ET

Slashing CD prices to $12.98 may seem like a great idea, but some artists don't like the sound of it. If the Universal Music Group's new battle plan to reverse a three-year slump doesn't boost sales, it could drastically lower artist's profits. "I'm already getting calls saying, 'What's the net effect on my royalties?'" says Nick Ferrara, a New York music lawyer who represents the Corrs, Creed and Drowning Pool. "For an established artist, I'm not sure that reducing prices will stimulate sales. The artist is going to get less money, so they're not going to be happy."

Universal, which accounts for thirty percent of the music market, including artists such as Eminem, U2 and Mariah Carey, shocked the industry in early September by proposing the price-cut plan, which lowers suggested retail prices on CDs to $12.98 beginning October 1st. According to Universal Music and Video Distribution president Jim Urie, studies indicate that $12.98 is the "sweet spot" for consumers. But to make up for the lost revenue, the company will have to sell significantly more CDs -- perhaps as much as fifteen percent more."The plan definitely puts a squeeze on artists," says attorney Dave Stein, who represents Taking Back Sunday and the Starting Line. "But for new artists, it's less of an issue, because they make more money by touring than they do from album sales."

If Universal's plan works, many predict that other labels will cut prices accordingly, though none have announced plans to do so. "Artists are open-minded, because the record industry is broken right now," says Fred Davis, who represents Linkin Park, Missy Elliott and Britney Spears. "If it works, everyone will make more money. But it's better to try and fail than not to try at all."

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