updated 12:00 pm EST, Wed January 31, 2007
iTunes Dictating CD Prices
The cost of an album at the iTunes Store is likely determining the overall cost of physical CDs, an anonymous industry contact has told SeekingAlpha. The benchmark $10 price for an album through Apple's online shop is said to have forced major labels to heavily discount their higher-profile releases to compete, with many of Amazon's bestsellers seeing a dramatic 47 percent price drop. Brick-and-mortar retailers have also felt an intense pressure to compete more directly with iTunes, the source said, pointing specifically to Wal-Mart's persistent fear of losing its dominance over low-cost album sales to Apple.
Some of these prices were spurred on by the lower costs of indepdendents and special promotions, according to the industry expert. However, the drops also mirror the steady decline of major labels' physical sales. EMI in particular is in "such bad shape" that it has taken to price reductions on most of its newest release in an attempt to prop up its flagging business, the source said. Conspicuously, some of EMI's largest back-catalog artists -- including Radiohead and The Beatles -- are also those who have so far declined to sell their music through direct downloads.