Who sets release prices????

[stewrat]

Just got the new Mogwai at Newbury Comics in Boston today for $9.99/ Great price. The New Pornographers was $12.99 upon release. I would have thought the newer band would be promoted at a lower price. Is that Matador giving the stores different deals or is the shop setting there own prices?

Thanks

[Patrick]

Welcome to the world of "co-op advertising".

If a record is on sale at a store, the only reason is because the label paid for it. It's usually part of a program that can contain listening station placement, a print ad in the local paper, spots on the local radio station, positioning on an endcap or other prominent place in the store, etc.

All of this is paid for by the labels and costs an insane amount of money. You'll also hear it called "P&P" (for price and positioning), "co-oping", "national programs" (at the big chains), or just "advertising".

Stores have been selling real estate and sale pricing in the stores for years now, and the prices just keep going up. It's basically a big transfer of margin from labels to retailers.

With the current sales slump, which is hitting retailers hard, the prices of programs are climbing even more steeply.

It's one of the biggest parts of our marketing budgets these days. Hell, it's the biggest part of our marketing budgets. Nothing else - radio, video, promos, press trips, real ads in consumer magazines, even comes close.

To get back to your original question, about why Mogwai and New P's were priced differently - it's probably because we've got Mogwai in a heavy-duty new-release program, whereas New P's are either off-program or in a lower-profile program because the record's been out for a while. Newbury prices pretty aggressively anyway.

Patrick

[earl grey]

Interesting - never knew it worked this way. So, does the label pay to subsidize part of the price - let's say $3.00 - for the sale? So if it's normally $12.99 at Newbury, it becomes $9.99, and if it's $15.99 at Tower, it becomes $12.99? Or does the label pick the final price and cover the difference, whatever it may be?

[Patrick]

There's every permutation and combination that you could imagine. It's fairly rare that a straight discount gets passed on to the consumer (although these so-called rebates are becoming more common, thank God).

More likely you get a set combination of sale pricing (determined by the store on the basis of list) with positioning, sometimes together with outside advertising. For example you might get an endcap at the front of the local store, sale pricing (one store might mark down 15.98 lists to 12.99, another to 13.99), and a quarter-page ad in the local weekly saying that the record is on sale. Or perhaps just a "cut" in a multi-ad featuring minis of tons of records on sale at Virgin or Tower or wherever that week.

A weekly ad like that might run you from $500 to $1500 depending on the market.

Then there are big "national programs" at the chains involving chainwide endcap placement, deep sale pricing (the most desirable is 9.98 or less), a picture in the chain's circular which is included in the Sunday paper received by millions of people, a big display in the front of the store, MTV2 spots, yadda yadda, etc. Such a program might also involve a $3 rebate on every copy sold during the program's length. This could run you anywhere from $20,000 to $75,000, plus the rebate. Or more.

And every combination in between.

Patrick

[johansen smith]

does the label have any control over stores selling above List Price? I recall seeing Yo La Tengo's "And Then Nothing..." selling for $18.99 at the mall, and the "Danelectro EP" selling for $14.99 at Best Buy. someone should really get hurt for that last one.

[Patrick]

Absolutely none. Stores may price CDs any way they feel like it. Consumers can vote with their feet. That's the free market.

Patrick

[Patrick]

I should mention that co-operative advertising is not limited to music retail. It pervades all retail, from supermarkets where Kraft pays to have their crackers on the endcap nearest the checkout aisles, to bookstores, where Random House pays to have huge Harry Potter displays with special sale prices, and so on.