(UPDATE) UK retailer Tesco is asking record labels to accept much smaller upfront payments for CDs with an additional payout once it sells. The negotiation tests the bargaining power labels still have as CDs sales continue to decline. Similar talks have reportedly begun in the US, and the shift could motivate retailers to once again stock a much broader selection of music.
Instead of paying $11or $13 upfront for a typical album, Tesco wants to pay just 80 cents, with the remainder due after the disc sells, Rob Salter, Tesco’s entertainment director, told the Financial Times. US retailers pay $8 to $9 wholesale for a CD depending on the retail price.
50-70% of most album sales still come via physical CDs over downloads; and the actual manufacturing cost of a typical CD would on average be covered by the 80 cents.
The retailer which spends $4.84 million US each year shipping unsold CDs back to labels would be responsible for destroying unwanted stock, according to Tesco's proposal. Together these changes would encourage retailers to stock a more music. “I think we’ll all end up with more money,” stated Tesco's Salter
A trial with a Robbie Williams release, which stocked the CD in outlets that had stopped selling music increased Tesco’s share of UK sales by 40% from its typical market share.
Details of the plan are still being negotiated, but if implemented has broad implications. Would it increase sales and help keep music retail alive? Is an 80 cent upfront payment fair? How would it effect indie artists?
What do you think of the plan?