Al Weisel
Greed or Need?
By Al Weisel
Rolling Stone, 1994
CDs hit $17.98 in record biz's banner year
With record industry sales going through the roof, Geffen Records has decided to test the upper limits of what consumers will pay. The label announced that the new Eagles LP, Hell Freezes Over, and Aerosmith's upcoming Big Ones greatest-hits album will be list priced at $17.98, $1 more than other so-called superstar releases and $2 more than most new CDs. Geffen spokeswoman Bryn Bridenthal says, "Now that $16.98 has become the industry standard for established artists, we felt that $17.98 was appropriate for superstar event releases." She cited Frank Sinatra's Duets album, list priced by Capitol at $17.98, and Atlantic's new Three Tenors album - coming out at a whopping $19.98 - as other examples of this trend.
While some record company sources cite the spate of superstar megacontracts and increasing artist royalties as a factor in the increase, others see the price hikes as purely strategic "It's a continuing process," says Russ Solomon, president of Tower Records. "The record companies will take a starring artist and release it at a higher price. They have been pushing up prices for years. The only thing that will ever make any difference is if the public responds to it in a negative way. But chances are they won't, because the leader of these price rises is always something desirable."
A random survey of record buyers at Tower Records in lower Manhattan ; seemed to support Solomon's view. Linda Klein, 44, who was buying the Rolling Stones' Voodoo Lounge, says: "When I want something, I'm going to get it. A I dollar more wouldn't dissuade me." Jeremy Bierbach, 19, says: "I look for the best price," but he concedes that he would buy a record he really liked even if the price were higher. But Don Weber, 41, says: "I think it would affect whether I would buy it. I find myself being more particular about how much and when I buy, because prices are kind of high."
In the carnival-mirror world of CD pricing, however, nothing is exactly as it seems. Retailers pay $10.65 for a $16.98 list-price CD. Few stores actually sell new CDs at the list price. While Geffen's move will increase the cost to retailers, it remains to be seen whether higher prices will immediately be passed on to consumers, since retailers usually sell new releases at a discount. "Something strange about this system is, the most desirable items get cut priced the lowest," says Solomon. "It's masking what the real prices are, and the dealer takes it in the shorts."
For the last year merchants have also suffered from bloody competition spearheaded by electronics chains hawking topselling CDs below cost. By taking a loss on certain CDs, they hope to attract customers who make other purchases. Recently, PolyGram tried to stop this practice by refusing to ship product to retailers that sell its CDs at deep discounts. Best Buy, the Minneapolis-based chain that instigated the price war, says it will stop pricing PolyGram releases below cost, but Best Buy president Brad Anderson says, "We don't plan on stopping it on other titles unless we believe other retailers will."
Although RIAA chairman Jay Berman says, "I never talk about pricing," he wasn't so reticent about the record companies' banner year. "The record business is doing very well. Unit sales for the first half of 1994 were up 12.4 percent over the same period last year. We've been on a steady increase over the past decade, but an increase of this magnitude is unusual." So far, at least, consumers seem willing to take whatever the record companies dish out.■
Al Weisel is the co-author, with Larry Frascella, of Live Fast, Die Young: The Wild Ride of Making Rebel Without a Cause, being published in October 2005.
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