Wow, I thought this was bogus, but here's the story:
As CDs Decline, Wal-Mart Spins Its Strategy
Chain Signs Latest
Exclusive Album --
And May Cut Titles
By ETHAN SMITH
June 9, 2008; Page B1
Veteran rockers AC/DC are set to become the next major band to sell a new
album only through Wal-Mart Stores Inc., according to people familiar with
the matter, a move that highlights the growing music-industry clout of
Wal-Mart.
The AC/DC deal, however, comes at a time when the retail giant -- the
largest seller of compact discs in the nation -- is signaling it may rock
the music world by stocking fewer CDs. Such a move is part of a trend that
would further accelerate the already steep decline of CD sales as
consumers
make the transition to digital music.
The AC/DC arrangement aims to replicate a successful strategy recently
used
by fellow classic-rockers the Eagles and Journey, both of whom in recent
months have sold new albums exclusively at Wal-Mart. The Eagles'"Long Road
Out of Eden" was the third-best selling album of 2007.
Such deals exemplify the kind of special treatment Wal-Mart increasingly
seeks -- and receives -- from artists and record labels alike. These
constituencies are willing to risk their relation****ps with competing
retailers to keep Wal-Mart happy. Unlike the Eagles or Journey, AC/DC is
under contract to a major record label, Sony BMG's Columbia Records, which
brokered the pact with Wal-Mart and will also benefit from sales there.
Columbia's decision to sell a major new release at only one chain has the
potential to alienate retailers left out. (One competitor unlikely to
complain is Apple Inc.'s digital iTunes Store, where AC/DC has never made
its music available.)
Wal-Mart is expected to pull out the stops to promote the AC/DC album, the
band's 16th studio release, which is to come out in the fall and hasn't
yet
been titled. Such a push -- including prominent displays of CDs in stores
and heavy advertising -- could yield blockbuster sales, in an environment
in
which blockbusters are increasingly rare. Columbia Chairman Steve Barnett,
reached by telephone, declined to comment. Wal-Mart spokeswoman Melissa
O'Brien didn't respond to requests for comment about AC/DC.
But even as it strikes novel deals with a handful of artists and labels,
Wal-Mart is preparing changes in its approach to selling the vast majority
of music. It is unclear what the upshot of those changes will be, but one
likely scenario involves cuts in the number of music titles the chain
carries.
Wal-Mart executives, frustrated by perennially declining CD sales, have
been
quietly exploring changes in their approach to selling music. The company
has described different versions of its potential new strategy to
different
players in the music industry.
These plans represent what could be a large next step in the demise of the
physical CD, whose sales have fallen 16.5% so far this year, according to
Nielsen SoundScan. Though the iTunes Store recently passed Wal-Mart to
become the largest music seller in the U.S., Wal-Mart is still the largest
seller of CDs, accounting for an estimated 30% sold in the U.S. (Factoring
in iTunes sales and other paid downloads, Wal-Mart sells about 21% of the
country's music). Even though it carries far fewer old titles than
specialty
music stores, Wal-Mart has become especially im****tant at a time when many
of those chains, such as Tower Records, have gone out of business, along
with hundreds of independent record stores.
Though CD sales have been in steep decline since 2000, they remain crucial
for music companies, accounting for 80% to 85% of domestic music sales,
and
are much more lucrative than 99-cent digital downloads. Wal-Mart's own Web
site has gained little traction in its effort to sell music downloads, a
market in which it remains a minor player.
Wal-Mart's current talks with the four major music companies have their
roots in 2007's post-Thanksgiving shopping season. Wal-Mart at the time
cut
CD prices aggressively and saw a strong bump in sales. As a result, the
chain approached music companies in February and asked them to commit to
deep, across-the-board price cuts, to as low as $5, and to no more than
$12,
per disc.
The labels -- owned by Vivendi SA's Universal Music Group, EMI Group Ltd.,
Warner Music Group Corp. and Sony BMG, a joint venture of Sony Corp. and
Bertelsmann AG -- balked, arguing that reducing prices so sharply would
undercut the value of their product everywhere. The two sides began
discussing other changes they could make.
Among the options under consideration are reductions in inventory, aimed
at
weeding out poor-selling titles. Wal-Mart has indicated to some music
executives such cuts would be extensive, while others have been told they
would likely be minimal.
Wal-Mart's senior vice president for entertainment, Gary Severson, says
that
in the next six months, "you'll see us clarifying our offering, whether
through price or assortment." He adds that the extent of any planned cuts
"depends on the store."
Music executives are bracing themselves.
"It's going to be a world where they're going to carry less titles," says
Scott Siman, the manager for country superstar Tim McGraw, who has had
extensive dealings with Wal-Mart. Earlier this year, Wal-Mart was the
exclusive outlet for the launch of a custom-flavored snack called Tim
McGraw's Spicy Jalapeņo Fritos, and the star's "Greatest Hits: Limited
Edition." The chips and CD were sold together in a $12 "combo pack,"
helping
the disc debut at No. 1 on Billboard magazine's country chart in April.
But Mr. Siman said the real motivation for the exclusive offering at
Wal-Mart was to try to maintain interest in Mr. McGraw's older studio
albums, such as 1999's "Place in the Sun," so that they would be ensured
shelf space. "If you're going to have enduring catalog titles, you're
going
to have to market them," Mr. Siman adds. When it comes to new music, he
adds, "You can't just rely on putting a record out, hoping you'll get some
airplay ... and hoping people will figure it out."
In preparation for Mr. McGraw's next album, to be released by Warner Music
this fall or winter, his handlers are already working on product tie-ins
--
including a men's fragrance and a children's book -- at least some of
which
are likely to be sold exclusively at Wal-Mart.
Wal-Mart's own falling CD sales have already caused some collateral
damage.
Last week[6/2], Handleman Co., the so-called rackjobber that stocks and
manages the music inventory for a third of Wal-Mart stores, announced it
was
selling that part of its business to a competitor, Anderson Merchandisers
LP.
Handleman Chief Executive Al Koch says that even after aggressive cost
cutting, his company couldn't continue selling music profitably. "In the
short term, it's not possible to downsize as fast as revenue is
declining,"
says Mr. Koch.
<copperskier@[EMAIL PROTECTED]
> wrote in message
news:d1611376-ca3c-436b-82ca-0b5fc6c08dab@[EMAIL PROTECTED]
> Can't see Wal-Mart selling an album titled "Strap It On"
>
> AC/DC to sell new album through Wal-Mart: paper
> Sun Jun 8, 2008 8:52pm EDT
> NEW YORK (Reuters) - Rock band AC/DC will sell its new album only
> through Wal-Mart Stores Inc, the Wall Street Journal re****ted on its
> website on Sunday, citing unnamed sources .
>
> The AC/DC album is expected to come out in the fall, the paper
> re****ted. Wal-Mart did not have an immediate comment.
>
> (Re****ting by Paritosh Bansal; Editing by Alex Richardson)
>
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