special_k
New Member
From: UMG Corporate Communications
Sent: Wednesday, September 03, 2003 12:12 PM
Subject: A MESSAGE FROM DOUG MORRIS AND ZACH HOROWITZ
Dear Colleagues:
Today we are making a major announcement which we wanted you to hear about directly from us. We have made a decision to significantly reduce our CD prices in the U.S. starting in the 4th quarter. On virtually all top line CDs, we will lower the wholesale price from $12.02 to $9.09, with a Manufacturer Suggested Retail Price of $12.98 (eliminating the $16.98, $17.98 and $18.98 equivalent MSRPs). With this new pricing model, we believe that most retailers will be able to offer our music for less than $10.00, if they so choose.
This is an aggressive move - but the state of the business calls for bold actions. The stores and consumers have been telling us that CD prices are too high. Because many music fans are getting music for free through online piracy, we believe that we need to lower prices to be more competitive with the illegal market. We are also vying for consumer dollars and shelf space with more and more forms of entertainment media. Our new policy will enable music to be offered at a much more appealing price point in comparison to these other entertainment products.
As part of this initiative, we are also planning to significantly increase spending on direct-to-consumer advertising that will greatly raise awareness of our artists and their music as well as highlight our new, everyday low prices. We are confident this will help drive fans back to the stores and increase our overall sales.
If this new pricing initiative is to succeed, we will need a meaningful increase in our sales to offset the reduction in our wholesale prices. All of our research indicates that these new, everyday low prices can lead to dramatic increases in sales at retail. Since UMG is responsible for more than one out of every four albums sold in the U.S., we are uniquely positioned to
implement this new strategy. Our size affords us the critical mass to really give this a chance and, hopefully, reinvigorate the retail business.
At the same time, we are ramping up our efforts to counter the illegal distribution of our music on P2P services. The technical countermeasures we are using to frustrate the P2P experience are working. The dangers of P2P services - including viruses and privacy issues - are being revealed as never before. This month, the Judiciary Committee of the US Senate will hold hearings alerting the public to the uncontrolled dissemination of pornography through P2P services. Oftentimes, a search by the name of a recording artist is the vehicle that leads unsuspecting music fans to pornographic images, including child pornography.
Additionally, in the weeks to come, the industry will begin its lawsuits against P2P users who are illegally distributing our music online. These suits will supplement the educational campaign we launched over a year ago. They will send a strong message that it is illegal to distribute our music online without authorization. And they will make it very clear that those who engage in these activities face serious legal and financial repercussions. The lawsuits, together with the educational campaign and the public awareness of the dangers of P2P use, will lead many to explore purchasing music legitimately again - both online and at retail. Reducing our prices at retail now will underscore that music is a great entertainment value.
And, of course, at the same time, UMG is aggressively making its music available online through an ever-increasing number of legitimate services.We continue to be the most innovative in our offerings and have priced our music so that online retailers can sell it for as low as .99 a track and $9.99 per album.
UMG has consistently re-written the way business is done in the music industry. We have broken all records and set the bar for what a musiccompany can accomplish. We are once again making a bold step with this move. The willingness to take a chance is what makes our company's culture so special.
Doug Morris
Zach Horowitz
Universal Music Group
Sent: Wednesday, September 03, 2003 12:12 PM
Subject: A MESSAGE FROM DOUG MORRIS AND ZACH HOROWITZ
Dear Colleagues:
Today we are making a major announcement which we wanted you to hear about directly from us. We have made a decision to significantly reduce our CD prices in the U.S. starting in the 4th quarter. On virtually all top line CDs, we will lower the wholesale price from $12.02 to $9.09, with a Manufacturer Suggested Retail Price of $12.98 (eliminating the $16.98, $17.98 and $18.98 equivalent MSRPs). With this new pricing model, we believe that most retailers will be able to offer our music for less than $10.00, if they so choose.
This is an aggressive move - but the state of the business calls for bold actions. The stores and consumers have been telling us that CD prices are too high. Because many music fans are getting music for free through online piracy, we believe that we need to lower prices to be more competitive with the illegal market. We are also vying for consumer dollars and shelf space with more and more forms of entertainment media. Our new policy will enable music to be offered at a much more appealing price point in comparison to these other entertainment products.
As part of this initiative, we are also planning to significantly increase spending on direct-to-consumer advertising that will greatly raise awareness of our artists and their music as well as highlight our new, everyday low prices. We are confident this will help drive fans back to the stores and increase our overall sales.
If this new pricing initiative is to succeed, we will need a meaningful increase in our sales to offset the reduction in our wholesale prices. All of our research indicates that these new, everyday low prices can lead to dramatic increases in sales at retail. Since UMG is responsible for more than one out of every four albums sold in the U.S., we are uniquely positioned to
implement this new strategy. Our size affords us the critical mass to really give this a chance and, hopefully, reinvigorate the retail business.
At the same time, we are ramping up our efforts to counter the illegal distribution of our music on P2P services. The technical countermeasures we are using to frustrate the P2P experience are working. The dangers of P2P services - including viruses and privacy issues - are being revealed as never before. This month, the Judiciary Committee of the US Senate will hold hearings alerting the public to the uncontrolled dissemination of pornography through P2P services. Oftentimes, a search by the name of a recording artist is the vehicle that leads unsuspecting music fans to pornographic images, including child pornography.
Additionally, in the weeks to come, the industry will begin its lawsuits against P2P users who are illegally distributing our music online. These suits will supplement the educational campaign we launched over a year ago. They will send a strong message that it is illegal to distribute our music online without authorization. And they will make it very clear that those who engage in these activities face serious legal and financial repercussions. The lawsuits, together with the educational campaign and the public awareness of the dangers of P2P use, will lead many to explore purchasing music legitimately again - both online and at retail. Reducing our prices at retail now will underscore that music is a great entertainment value.
And, of course, at the same time, UMG is aggressively making its music available online through an ever-increasing number of legitimate services.We continue to be the most innovative in our offerings and have priced our music so that online retailers can sell it for as low as .99 a track and $9.99 per album.
UMG has consistently re-written the way business is done in the music industry. We have broken all records and set the bar for what a musiccompany can accomplish. We are once again making a bold step with this move. The willingness to take a chance is what makes our company's culture so special.
Doug Morris
Zach Horowitz
Universal Music Group
but it does expose a lot of stuff you can sometimes do without knowing...
