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16. Pricing

  1. The net wholesale price of CDs is the net price at which record companies sell albums to retailers. This net wholesale price itself ultimately impacts the retail price to end-customers. A PPD is attributed to an album and is applied to all customers. Conversely, discounts are different from one customer to the other.
  2. Trade pricing for recorded music is highly complex and does therefore not enable the majors to monitor effectively each other’s pricing behaviour. They refer to the large number of pre-defined list prices (PPDs), which are the starting point for the negotiation, and variation of discounts. Each record company uses its own PPDs, as well as its own discount types and discount levels, which differ from those used by other record companies. Retail price is decided by retailers who apply irregular and unpredictable mark-ups on net wholesale prices.
  3. There is not a big difference in pricing strategy between record companies. Notably, some claim that prices are similar within price ranges (full price, mid, budget), and are rather similar for chart albums but less for catalogue. Most industries display a certain level of similarity in pricing for similar products.
  4. According to several professionals, the market for recorded music is “a small world” where new initiatives are rapidly known to all. About two thirds of customers acknowledge that they use the commercial conditions negotiated with a record company, as an argument to negotiate with other record companies. Among them, several also acknowledge that this information is subject to confidentiality.

This item is part of the series of posts based on the European Antitrust Agency 2007 Music Industry Analysis for the Sony BMG Case. It’s home page is here.

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