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Retailers Say States' Suit Against Labels Won't Lower CD Prices
By Staff Writers Brian Hiatt and Teri vanHorn from SonicNet

The lawsuit filed Tuesday by 30 states and U.S. territories accusing the major record labels of conspiring to fix CD prices is unlikely to result in lower costs for consumers, retailers said.

CD prices have continued to rise in recent months, even after a May settlement with the Federal Trade Commission in which the major labels agreed to end their "minimum advertised price" program, retailers said.

"They're never gonna lower their price to us," said Kevin Young, manager of CD Warehouse in Martinez, Ga.

The MAP program, which is at the heart of the states' suit, is an arrangement under which major labels help pay for a retailer's advertising in exchange for selling CDs above a certain price. MAP began in 1995 as an effort, record companies claim, to keep large department stores and electronics chains from selling CDs at a loss and putting mom-and-pop retailers at risk.

Several major labels have said they will fight the suit; the labels did not admit to any wrongdoing in their FTC settlement. Despite promises from the FTC, ending MAP did nothing to encourage wholesale or retail CD prices to come down, retailers said.

Ryan Reynolds, sales manager at a Chicago Tower Records, said that in any case, the MAP program mainly affected sale prices which are what retailers tend to advertise rather than stores' everyday prices.

Reynolds also said the government's focus on retail prices is misguided. "They should start looking into wholesale prices before they look into retail prices that's where the real problem is."

Retailers are faced with wholesale prices as high as $12.79 for some CDs, they said.

Tower Records and other large retailers also are named in the states' lawsuit. A Tower spokesperson said the company had no comment.

Meanwhile, the public relations fallout from the suit is likely to have a negative effect on the recording industry's continuing battle against the free trade of music online, retailers and consumers predicted.

Washington State Attorney General Christine Gregoire, whose state is among the suit's plaintiffs, issued a statement reading: "The recording industry has been aggressive in its efforts to prevent people from obtaining copyrighted music off the Internet without paying for it. We want to make sure that music distributors also play by the rules and don't stifle competition by forcing all retailers to sell music at exorbitant prices."

Consumers agreed that the record labels are in danger of appearing hypocritical.

"I've always felt the record companies were charging an awful lot, and now they're accusing Napster of ripping them off," Samantha Silva of Livermore, Calif., said as she shopped at San Francisco's Amoeba Music on Tuesday.

Steve Stewart, an artist manager who has worked with such acts as Stone Temple Pilots and Ice-T, said the lawsuit "makes [the music industry] look like the money-grubbing industry that it is."

However, Eric Scheirer, a media and entertainment analyst with Forrester Research, said the lawsuit is unlikely to affect public opinion in the Napster case.

"I think this is too complicated an issue to really have much impact," he said.

But Scheirer added that the case could distract labels from what he said is their main task: preparing for their future on the Internet.




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