Universal Music Group To Lower CD Prices

When you eliminate the physical product (a book, CD, etc.), how much is the content worth? That's the question for companies balancing existing production with digital sales.

CD sales have fallen off in recent years, while digital downloads have seen significant growth. Ars Technica projects digital music sales will eclipse that of CDs by mid-to-late 2010.

Universal Music Group (UMG) is taking steps to bolster their flagging CD sales. They are reducing the price per album, so that consumers will be spending anywhere between six and 10 dollars — a figure that is more competitive with digital services like iTunes.

The decision is a gamble for UMG: the price change lowers the company's profit margin by shifting the wholesale price from $10.35 to about $7.50. Rolling Stone reports UMG is betting on increased sales volume to make the change profitable.

Will the lower price of a physical album entice consumers to purchase? It worked for retailer Trans World Entertainment, which saw sales jump 100 percent during a $9.99 test plan that partnered with Sony, UMG and EMI. With music sales already down 15.4 percent from just last year, success for UMG could signal a broader change from the other major labels.

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