“You’re gonna cut wholesale prices and like it.”
Wal-Mart’s notorious for squeezing their suppliers to get the lowest, lowest, lowest wholesale rates imaginable. Lesser companies have been squeezed into bankruptcy by providing those “Rollback” prices in exchange for the healthy market share that Wal-Mart provides.
Not so for the music industry. Wal-Mart’s been using the Top 40 as a loss leader, paying as much as $12 for an album at wholesale and selling them for $9, in order to get folks into the store. (What a very 1990’s strategy!) Notice that all the records and tapes are in the back of the store. It’s their version of milk in a supermarket.
Those days are drawing to a close. With the advent of private label compilations and “special projects” companies, Wal-Mart can still get hot names on the shelves without paying the majors’ rates. So they’re asking the majors to cut those prices, to bring them in line with their other suppliers.
Wal-Mart is the country’s largest record store. So if the majors want to stay in the game, they’re gonna have to play ball.
Warren Cohen and Steven Knopper are covering the issue for Rolling Stone. I chuckled at the $1.60 artist royalty in their pricing breakdown. We all know where that goes, don’t we?