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Labels Raise Prices, Consumers Respond Like Sheep

See Hear's Ken St. Jean/What's he so happy about?



After minor recession-related setbacks in 1991, the U.S. record industry's sales swelled mightily in '92. CD sales went up by nearly 25 percent last year, cassettes 30. The industry pushed almost 900 million CDs, cassettes, albums, singles, and music videos on consumers, parting them from close to ten billion dollars in the process.

And since the industry's all-but-official motto is Fuck Consumers Whenever Possible, it's responded by raising prices.

Last fall albums by Michael Bolton (on Sony), Bon Jovi (PolyGram), Madonna (Warner Bros.), and Garth Brooks (Liberty) were released at a jacked-up $16.98 list price. While the labels are still testing the waters (records from Mick Jagger and Coverdale/Page, the latter a surprise bestseller, are out at the old $15.98 list), the process mirrors the modus operandi we remember from the salad days of vinyl price hikes in the late 70s and early 80s: after some preliminary talk about the value of "superstar product," everything goes up.

To demonstrate their commitment to the concept, the companies are raising catalog prices for steady sellers as well. Local retailers report new $16.98 list prices on old product like the so-called "Three Tenors" album (In Concert, by Jose Carreras, Placido Domingo, and Luciano Pavarotti, one of the biggest-selling classical albums in history) and Led Zeppelin's fourth album. And just two weeks ago, WEA--the gigantic distribution company that handles records by Warner Bros., Sire, Elektra, Reprise, and Atlantic--upped several hundred older titles to a $15.98 list. Last week Sony--which handles Columbia, Epic, and other labels--did likewise.

In retail terms the price hikes mean increases of 50 to 60 cents wholesale on new stuff, two dollars or more, in some cases, for catalog items that are leaping up from budget status. While retailers report that they'll swallow the hikes at least for a while, if the past is any indication a year or so from now record buyers will be paying a dollar more across the board.

The problem: fans keep buying the albums, even at the inflated prices. "They just put up with it," expostulates Russ Solomon, owner of Tower Records, which does the second-largest dollar volume among U.S. chains. "The sad truth is that people just go along with it."

Solomon's feeling is that the price increases hurt the smaller artists. "I don't think that the price stops anyone from buying what they really want. For that, the price is somewhat academic. It's what they might want that's affected." Jack Rose, owner of the Chicago-based 47-store Rose chain, concurs: "The pricing really affects the marginal popular acts. The company says, 'Well, we could do it with Michael Jackson, let's do it with K.D. Lang.' Things like that will suffer."

A more optimistic view is taken by Ken St. Jean, founder of the four See Hear stores. "People are going to shop," he says gleefully. He's happy because his stores are built on rock-bottom prices and he figures he'll benefit from people looking for deals. Still, the price hikes cramp his style, too. "The $9.99 thing is not dead, but we just won't be doing it that often," he says.

Another problem facing local stores is the industry's 86-ing of the cardboard "longbox" that most CDs come packaged in, which helps prevent theft. While environmentalists and some artists have agitated for years for the box's elimination (estimates are that the 350-million plus boxes account for 25 million pounds of trash a year), an unorganized retail industry was caught off guard when the major distributors unilaterally announced a switch to the plain jewel box early last year. It went into effect last week, and record stores across the country are busy converting to "keepers"--permanent longboxes that are removed by clerks at the register and reused. Tower's Solomon says it'll cost his chain more than a million dollars to convert (though Chicago's store is going to stay with just jewel boxes, at least for a while); Rose said he'll probably spend three-quarters of a million. Both said temporary industry price credits--10 to 20 or so cents per CD--would cover less than half their costs, and neither was happy about it.

St. Jean was positively ecstatic. "I love it," he says of the new standard. "We've been getting ready for it for years. We didn't like the longbox for environmental reasons, but in the long run I think it's going to save me a lot of money." He explained that the security stickers he applied to each CD cost him six cents each: now he just needs to apply them once, to the "keepers." He wishes Tower good luck on its policy of going with jewel boxes only. "I think that's the kiss of death in this town," he says. "They're going to get totally ripped off."

Hitsville bemoaned the passing of the DigiTrak and its imitators, the elegant cardboard longboxes that folded down to normal CD size. Albums like Bonnie Raitt's Luck of the Draw and Sting's The Soul Cages demonstrated the fun you could have with the packaging. But St. Jean said he, for one, likes his jewel boxes, and so do customers. "And they want the jewel boxes perfect, too," he says. "If there is even a smudge on their jewel boxes they don't want 'em. Retailing in this city, I'm tellin' ya."

Art accompanying story in printed newspaper (not available in this archive): photo/J. Alexander Newberry.

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