Wal-Mart Squeezing Record Labels to Cut CD Prices

Raindance writes "RollingStone.com has a revealing article detailing how retail giant Wal-Mart is making loud noises about throwing its weight around in order to get significantly better bulk prices on CDs. Says one industry executive, 'This wasn't framed as a gentle negotiation, it's a line in the sand -- you don't do this, then the threat is [your product is dropped].' This is the first time a big player has attempted this sort of hardball move on the labels, and the labels may be forced to deal, as Wal-Mart sells 1 out of every 5 retail CDs. Monopoly one, meet monopoly two."

Comments

No news here.

[artguy66]

Walmart does it to ALL of their manufacturers. Perhaps this one may deserve it.

Standard Operating Procedure

[chud67]

I have heard from more than one person that this is typically how WalMart deals with its vendors/suppliers. If you have a company making widgets, for example, WalMart might come to you and place a small order for widgets to sell in their stores. Then as your product sells they gradually increase their orders until eventually they have pretty much your entire production line devoted to WalMart orders. At that point they come in and low ball you by saying, 'we're only going to pay x dollars per order from here on out, take it or leave it'. The vendor, whose entire business now hinges on WalMart orders, is forced to comply.

While I don't agree with this practice, I am glad to see it getting turned on the record companies now, since they've been ripping me and other consumers off for years. Let the jackals tear each other to pieces...

Re:My eyes are filling with tears for the labels..

[LetterJ]

"Personally, I can’t believe that 1 out of 5 CDs are sold in Walmarts."

The thing is, nearly 1 out of 5 *anythings* are sold by Walmart. They are big on a scale most people can't imagine.

We view "entertainment" industries as big, but really, companies like Walmart dwarf them. They just aren't in the news every day like the movie and record industry. They chug along making billions of dollars without drawing attention to themselves.

Wal-Mart has 3500+ domestic stores, and nearly 1500 international units. They pull in over $60 BILLION dollars per quarter and $2 billion of that is PROFIT.

Walmart has so much purchasing power with wholesalers that this current story is just everyday business. However, this time they happened to target a branch of the media, who tend to yell and scream louder than most industries when *anything* happens to them.

Re:My eyes are filling with tears for the labels..

[southpolesammy]

There's a reason why Walmart is popular in sparsely populated areas -- time. In rural areas, a consumer may have to drive to several different stores separated by great distances to get everything they need for the household. This takes an enormous amount of effort and time. Walmart brings all of these disparate "stores" under one roof, making it much more convenient for rural shoppers to go to Walmart. The tradeoff is that the stores may not be the cleanest or have the greatest variety of products, especially at the high end.

By contrast, in the larger cities, the necessary goods are in closer proximity to one another so that going from one store to another is much less cumbersome. This also creates greater competition for shoppers' dollars, and the stores (on the whole) have a greater variety in order to distinguish one from another. In addition, bigger cities are actively trying to fight back against suburban sprawl and make better use of nearby land. The sheer size of Walmart runs counter to those goals. Therefore, Walmart is disdained in the big cities because it takes up an enormous amount of valuable space and does not stock the high end products that are locally available.