Retail & Vinyl

Rebirth For Music Retail? Negotiations Begin To Charge Stores Just 80 Cents Upfront To Stock A CD

image from 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?

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  1. I dont know If 0.80 can fly here in the states. Im sure there are more upfront costs than just manufacturing to think about. so lets say $2.25 upfront which is still a big savings.
    Can you trust that your UNSOLD CD’s will be destroyed by a retailer? of course Not Dont be Ridiculous!
    I can guarantee your CD’s will end up in a Sri Lanka Walmart .. You think Cops DESTROY all the Weed & Coke & Guns they confiscate?

  2. Great point. I wonder, though, if that risk isn’t worth it to revitalize music retail and have them stock a broader selection. Or am I just too old school?

  3. I think its a great idea & I hope it gets done.
    We’re having a conversation about CD’s ..
    THAT in itself is Old School

  4. Although I think this sounds like a very interesting idea and I would like to see how it works out after being implemented on a larger scale, I am curious about how this might affect advances that the artist will get from the label. With income from album sales taking a year or more to find it’s way to the artist’s pocket, advances are a large part of an artist’s income in the meantime and I wonder with retailers not paying the entire wholesale cost upfront if that will diminish the typical advance given to an artist.

  5. I’m afraid that’s wishful thinking – retailers will rather give up music altogether than accepting that they can’t do any returns any more.

  6. It sounds like another last gasp. Others have made the point that trusting the stores to destroy the copies, is a lot of trust – in an industry known for it’s graft.
    It may be a null point for indies, or worse for the mid size indies. For guys like me, it hardly matters. My sales are mostly on-line and at shows, with a few scattered stores around the country.

  7. Seems like the shot of adrenaline to revive the dying patient on the operating table. It will, at best, give the CD another few months or a year to survive.

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