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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."
I'm still not buying any more RIAA CDs, Walmart or elsewhere.
HBI's Law: Frequency of calling others Nazis is directly correlated with the likelihood of the accuser being Communist.
If Walmart truly sells every 1 out of 5 CDs sold, it should simply start signing major artists directly. That way Walmart could keep even more of the profits.
If someone says he and his monkey have nothing to hide, they almost certainly do.
It depends on what part of the country you're from. Here in the North-East, we're not as affected by the Walmart monopoly. But I've got relatives that live in Florida, and they don't say "Store" or "Supermarket" anymore.
... I need to run to the Walmart". "Oh, we need a new TV ... I need to head up to the Walmart."
They say, "Oh, we're out of soda
Walmart is ubiqitious in some parts of the country. They're the second highest employer in the country, behind the government. Frankly, I'm surprised it's not a higher ratio.
As much as I would like to rub the RIAA face in the dirt with this one, the issue is really much much bigger than just the RIAA. Wal-Mart is a ruthless competitor that rivals, if not surpasses, that ruthless competitor in Redmond. They have such retailing clout that when they make you an offer, you have no choice but to take or suffer the perilous consequences.
Vlasic pickles is one fine example of their ruthlessness. Wal-Mart basically forced Vlasic to make the big size containers with more pickles in them than most humans should eat within a reasonable amount of time. Wal-Mart basically forced a price structure on them too with this giant jar of pickles. As a result, you the consumer have a choice. Pay for the giant jar and end up throwing away the vast majority of the pickles, or buy the more expensive jar in the grocery store. Joe Consumer buys the giant jar with the rockbottom price. As a result, Wal-Mart has now forced Vlasic to cannibalize themselves and they end up having to file bankruptcy.
Wal-Mart has a well-established policy of forcing sellers to sell their products for cheaper prices year after year if the product does not change. Wal-Mart argues that if your product does not change, then production costs level off and you should then be able to bring your product to them for a lower cost. Ever notice how many gazillion different kinds of toothpaste and toothbrushes there are at Wal-Mart? That industry has figured that they cannot afford to not be sold at Wal-Mart but yet they have to maintain a certain price structure. Therefore, they "innovate" with toothpaste and toothbrushes. Now you have cinnamon flavor, cinnamon flavor with whitening, cinnamon flavor with tartar control, cinnamon flavor with whitening and tartar control and so on. This will not stop. What is next? Cinnamon flavor with bladder control???? Wal-Mart forces this "innovation" because of their business tactics.
I could list many more examples and this is to not even mention that it is nearly impossible to actually earn a living working at Wal-Mart. They are basically an American sweatshop except they don't actually produce anything. They just peddle stuff and drive competition away.
So as much as I would like to see the RIAA suffer for their deeds, this issue transcends them.
No trees were harmed in the composition of this; however, numerous electrons were inconvenienced.
Some of those stories details how Wal-Mart abuses its position as the largest, wealthiest and subsequently most powerful retail chain in the world.
They have squeezed their suppliers enough that many suppliers have had no choice but to shut down all manufacturing operations in the United States and move those operations into foreign markets where they can continue to stay in business.
The option is either lose their largest customer and possibly enough revenue to shut down completely or shutdown all US Factories, put anywhere from a few hundred to several thousand American factory workers out of a job and stay in business. Business-wise, they have no choice but to comply with Wal-Mart. Unfortunately, that isn't good for the US workers that just lost their jobs.
You can say things like, "Well, those American workers should have learned to live with earning less money."
It's not all about just the money paid to an hourly worker. It's about the cost of benefits, cost of mandatory operation fees, like licenses, worker's compensation, unemployment office fees and a number of additional aspects that raise the cost of production in the US.
Then, you also have to take into account the minimum wage law. If you can have something produced overseas by workers that are fine with making, over the couse of a single day, the same amount that a highly skilled American manufacturing worker, like a Tool & Die Maker (Which is between $19 and $25 an hour), is paid for one hour. As a business, what are you gonig to do? Stay in business or go out of business?
Wal-Mart has done more to help decrease the number of available manufacturing jobs in the United States then most people think.
If you ignore the other uses of a tool, does that make the tool less useful, or you less useful?
Yup. The creepiest thing about those places is how they also have meeting centres, photo labs, halls, etc. This is the old Town Hall. The goal is that they become the only store in the community. Not just the only department store, or electronics store, or grocer - but the only store. They become the centre of town. The local Wal-Mart then dwarfs the government in power - they provide access to all goods for a community.
Consider this: you have one company that provides for all of the needs of the citizen in the town, and a lion's share of the citizens work for that company. How is this not a commune? Its like communism's evil twin!
Umm. It's obvious you've never run a business. This markup barely covers overhead and people expenses. What do you expect them to pay their people with? Dorito's?
It's funny listening people complain that the Independent record stores are disappearing and then think those same stores should give their stuff away for free.
Money from heaven I guess.
Interesting fact my Torts professor shared with the class: sales at Walmart peak at the beginning and in the middle of every month as their number one customers are those people living paycheck to paycheck. Walmart's extremely low prices are a boon for this working class and thus quite a good thing for a large part of America (especially rural America).
Walmart is only about 1 out of 10 average things (they are about 8-9% of US retail sales. It's no surprise that they are above average in a loss leader catagory though. Size of a company is an odd measure, Walmart is huge in sales they swap with Exxon Mobil for most revenue, but Microsoft consistently makes more money than Walmart (on about 1/4 the revenues). Exxon generally makes more than both.
Keep in mind that the music market has historically operated with small costly stores (in malls and such) that stock a wide variety of albums (to get people in the stores) but make their money on say the top 200 selling albums that turnover (sell through inventory) much more rapidly than the others. Walmart tries to stock only the albums that sell (letting online sellers fulfill the remaining orders) and sells them below cost (also to get people in the store) in order to make money on all the high margin items they are selling. Nearly every business does this they sell certain things cheaply in order to increase sales of higher margin items. Fast food joints give away the burgers to make money on soda and fries. Fancier resturants try to break even on the food and make their money on wine. In software the real money is made on maintenance contracts rather than licensing. What surprises me is how much music Wal-Mart sells when so many titles are edited. Seems kinda pointless for Wal-Mart to even have a rap section, but I guess you never go broke underestimating American smarts.
Degaussing scares the bad magnetism out of the monitor and fills it with good karma.
Hidden Cost Of Wal-Mart Jobs
t %20study.html
t %20study.pdf
Use of Safety Net Programs by Wal-Mart Workers in California
Arindrajit Dube
UC Berkeley Institute for Industrial Relations
Ken Jacobs
UC Berkeley Center for Labor Research and Education
from http://www.dsausa.org/lowwage/walmart/2004/walmar
A Study for the UC Berkeley Labor Center
August 2, 2004
Wal-Mart is the largest employer in the United States, with over one million workers. It is the largest food retailer and the third largest pharmacy in the nation. The company employs approximately 44,000 workers in California, and has plans to expand significantly in the state over the next four years. Wal-Mart workers receive lower wages than other retail workers and are less likely to have health benefits. Other major retailers have begun to scale back wages and benefits in the state, citing their concerns about competition from Wal-Mart.
We estimate that Wal-Mart workers in California earn on average 31 percent less than workers employed in large retail as a whole, receiving an average wage of $9.70 per hour compared to the $14.01 average hourly earnings for employees in large retail (firms with 1,000 or more employees). In addition, 23 percent fewer Wal-Mart workers are covered by employer-sponsored health insurance than large retail workers as a whole. The differences are even greater when Wal-Mart workers are compared to unionized grocery workers. In the San Francisco Bay Area, non-managerial Wal-Mart employees earn on average $9.40 an hour, compared to $15.31 for unionized grocery workers--39 percent less--and are half as likely to have health benefits.
At these low-wages, many Wal-Mart workers rely on public safety net programs-- such as food stamps, Medicare, and subsidized housing--to make ends meet. The presence of Wal-Mart stores in California thus creates a hidden cost to the state's taxpayers.
This study is the first to quantify the fiscal costs of Wal-Mart's substandard wages and benefits on public safety net programs in California. It also explores the potential impact on public programs of Wal-Mart's competitive effect on industry standards.
Main Findings:
* Reliance by Wal-Mart workers on public assistance programs in California comes at a cost to the taxpayers of an estimated $86 million annually; this is comprised of $32 million in health related expenses and $54 million in other assistance.
* The families of Wal-Mart employees in California utilize an estimated 40 percent more in taxpayer-funded health care than the average for families of all large retail employees.
* The families of Wal-Mart employees use an estimated 38 percent more in other (non-health care) public assistance programs (such as food stamps, Earned Income Tax Credit, subsidized school lunches, and subsidized housing) than the average for families of all large retail employees.
* If other large California retailers adopted Wal-Mart's wage and benefits standards, it would cost taxpayers an additional $410 million a year in public assistance to employees.
For the complete study (840 KB pdf file):
http://www.dsausa.org/lowwage/walmart/2004/walmar
If Slashdot were chemistry it would look like this:Cadaverine
Walmart is so powerful it's scary.
The labels have been squeezing artists down to a puny 65 cents per CD or less and now Walmart is squeezing the record labels. I love it! There is justice in the world occasionally. Since the artists cut is already so low the labels will have to absorb this.
:)
I predict people will definately buy more CD's if they are $10 or less. Also, since the CD's will be so cheap, the labels probably won't be able to afford to license copy protection for the CD's. Note to self, sell stock in companies that license CD protection technologies.
The race to the bottom has begun and now the slick record label exec's in their $3000 suits are about to feel the pain. However, the exec's shouldn't worry too much if they should lose their job, George W. Bush is creating jobs that pay $5/hr. or less every day
Welcome to the free-market monopoly!!!!
At the end of the article, the Almighty Institute of Music Retail provides a breakdown of the $15.99 spent on a new album. What surprises me is that when you adjust the underlying model for online music sales, the numbers break down to $9.88, which assumes that the record labels maintain their $4.61 of overhead and profit. This leads me to suspect that, despite their assertations to the contrary, Apple does in fact make some money off the iTunes music store.
0.17 musicians unions
n/a packaging/manufacturing
0.8 publishing royalties
n/a retail profit
0.15 credit card fees
1.6 artists royalties
1.7 label profit
2.4 marketing
2.91 label overhead
0.15 retail overhead
9.88 total
"...What is good for General Motors is good for America." -Charles Wilson, Secretary of Defense and fmr President of GM
"The independants can't afford to compete with WalMart on the hits, but can't survive only on non-hits."
They can compete another way. If Walmart even sells Eminem, it would be the censored, clean lyrics version. They're run by Bible-thumping prudes. They wouldn't sell music with explicit lyrics no matter how wildly popular it was. Of course, you still won't have enough customers in a rural area to support an indie record store, but there's always mail order like Amazon or just downloading.
They also card you for ANYTHING coded "Mature", and will not sell it to anyone under 18. The business model seems to work for them. As for the "developing artists", Wal-Mart isn't a specialty retailer, it's a mass marketer. It's not the kind of merchandise I'd be looking for at a Wal-Mart in the first place: for THAT, I'd be looking online, because the local record stores also shill a slightly-larger number of "established" acts and genre CDs (i.e. Folk, Jazz, Soundtracks, and back catalog items) that don't move as quickly as the latest top 40 trash. . .