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ivan@stellysee.de
| From | Beth2459@aol.com |
| Subject | JumpSTART |
| Date | Sat, 6 Sep 2003 23:10:29 EDT |
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Thought folks on the list would be interested in the below that my pal Jeff
sent- what follows the message was his reply regarding indie music stores,
since he works in one (and used to work at Newbs)
----Original Message-----
Subject: even more about U Music
JumpSTART.
Thats the name Universal Music & Video Distribution has given the plan
announced yesterday by Universal Music Group brass to lower the wholesale price of
most CDs to $9.09, while simultaneously eliminating discounts and co-op
advertising.
In a letter sent to retail accounts along with details of how the new plan
will work, UMVD President Jim Urie writes, We are responding to many of your
comments and what we perceive are the wishes of the music fan, noting that
JumpSTART represents a virtual overhaul of how UMVD does business.
The basic concept, according to the materials supplied to retailers, is to
drive consumer demand with everyday low pricing. The theory is that low prices,
combined with UMG tripling the amount of money spent on direct-to-consumer
advertising, will increase store/website traffic and result in more units sold.
Starting this month and phasing-in through the end of the year, new releases
will carry a suggested retail price of $12.98, with most frontline CDs
wholesaling for the aforementioned $9.09. Midline and developing-artist product
(SoundSavers, 20th Century Masters, Listen Up!) will wholesale for $6.06.
One exception to the new pricing will be releases from a select number of
superstar artists, which will carry a higher wholesale price of $10.10. While
not detailed in the materials sent to retailers, insiders say those titles that
chart in the Top 15 upon release will be invoiced at the superstar price until
they slip out of the Top 25.
The lower prices, of course, come with the elimination of discounts and co-op
ad dollars, but there are other catches as well: In order to qualify for the
new aggressive JumpSTART pricing, retailers must agree in writing to a
promotional commitment requiring them to devote a minimum of 33% of merchandising and
marketing opportunities (i.e. end caps, windows, listening booths) and 25% of
their overall bin space to UMVD product.
Thats some catch. But theres more: One-stops must ensure that their accounts
cooperate in distribution of UMVD-provided marketing materials (flyers, bag
stuffers, etc.) through their stores and display in-store signage featuring
UMVDs low-price sticker artwork. They must also agree to pass the savings realized
from JumpSTART pricing to their accounts.
One independent retailer has already characterized the above requirements as
impossible, noting that major-label product has never had that large a
presence in indie stores. Those retailers who choose not to participate (or
participate and are found to be non-compliant) will be charged higher wholesale prices
of $11.50, $12.50 (superstar) and $7.00 (midline).
Meanwhile, UMVD is revamping its returns policy as well, eliminating its
Inventory Management Incentive program, which included a 1.6% discount on
purchases (incentive) and a 10% penalty on returns (disincentive), in favor of a flat
rate of 25 cents per returned CD. In theory, the new policy will help most
retailers, or at least those returning more than 16% of purchased product (16%
has been known as the break-even point for returns).
If that isnt enough to make you completely glaze over, get this: UMVD is
adjusting its price protection policy to accommodate its new pricing scheme. In a
nutshell, price protection for inventory currently in retailers possession
will be achieved by allowing unlimited purchases at the new wholesale prices
during the transition period which runs from this month through the end of the
year. UMVD product wont be stickered with the lower prices until Oct. 1, or Nov.
1 for September releases. Catalog won't be stickered until Jan. 1.
Oh, and credit terms have changed, too: There will be no more cash discounts,
and payment of invoices must be received by the 10th of the second month
following the billing dateno more grace period, Sparky!
Got it? Good, because we stopped paying attention about eight paragraphs ago.
...................................................
In reply to more on project Jump Start
In theory Im happy about lowering CD prices as Ive stated. But I am well
aware of how this is not a very good move for Indy stores. In fact Indy stores
will start dropping like flys. When youre paying $9.09 a disc for a 30 count box
its nice in a sense for a Newbury. For a small Indy who doesnt deal direct
with UMVD youre more than likely getting your product from Aliance/AEC who will
be taking another $1 on that $9.09. So basically Youre going to be paying about
$11 (gotta figure in your shipping costs buddy) for something youre expect to
sell for no more than $12.98. Even if you pay $10 for a $12.98 list CD your
normal 35% drops to about 30% and thats if you arent sale pricing anything. How
can you compete with that. Of course this doesnt even take into consideration
that we wouldnt be considered compliant anyway since we dont deal direct with
UMVD. So I guess we will actually be paying $11.50 - $12.50 for CDs that list
for $12.98? Odd since we pay about $12.68 for $17.98 CDs now. No?
Basically retail is being cornered into absorbing the loss when it actually
looks like the labels are Robin Hood. Nothing like a business that has decided
to slowly kill itself off. First by suing their customers and now not giving
the very stores that have helped them grow to the corporate sloths they now
are. Any one with common knowledge of the entertainment industry knows that Wall
Mart is the largest seller of DVDs in the country. Im going to assume that
goes the same for music as well. Start making it even more difficult for the
Indy stores to stay alive and soon there will only be giant retail to get your
entertainment. Those who dont want to shop in the big-box stores will I guess
run to their computers for MP3s? Since Newbury decided its losing to much money
selling CDs and the mom and pops are all boarded up. Plus this doesnt even
cover the implications of family friendly entertainment edited for Wall Mart.
As for defectives. What defectives? Have you ever run an Indy record store
and tried to return defective CDs to Aliance. Sorry no can do. There isnt a
single major label that will take back a defective CD through Alliance. Ill recall
one occasion when I have special ordered a double Jazz CD, ironically one on
Verve (a UMVD company). Only to find both CDs inside are the same disc not
defective just the same. Reordered it and the same thing, probably a box lot
thing. Anyway Alliance wouldnt take them back. So little ol us are left with two
CDs that cost about $19 each trying to explain to the customer that we cant
order a third copy if the first two are like that. We would then be out $60. In
theory we could just hand out $1 bills to the next 60 people to come in the
store and maybe that would gain us some new customers for the costumer we lost
for refusing to try an order a third CD.
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