Selling Cds For A Song

50 Cent just got devalued. Responding to the music industry's prolonged business crisis, Universal Music Group, the world's largest record company, last week abruptly slashed the price on rap star 50 Cent's CDs by as much as 32 percent. The same goes for virtually all of Universal's roster, including Mary J. Blige, No Doubt and Eminem, not to mention the recordings of Bob Marley, Jimi Hendrix and Nirvana. When the price cuts take effect in October, shoppers can buy CDs from Universal Music labels--Geffen, Interscope, Def Jam, Island and Motown--at a suggested retail price of $12.98, instead of the current $16.98 to $18.98. Industry experts say that Universal's big rivals, who seemed blindsided, now face pressure to follow suit. They declined to comment or are studying options.

The title of 50 Cent's CD, "Get Rich or Die Tryin'," pretty much captures the spirit of Universal's strategy, dubbed "Jumpstart." Universal execs are hoping the move will halt a prolonged industry slump--shipments to stores were off 15 per-cent from 2000 to 2002. (Universal Music, owned by Vivendi, was not included in its merger deal with NBC last week.) Why the slide? Sticker shock, especially when many customers see the alternative as downloading tunes free of charge. The music business has also faced tough price competition from cheap DVDs. Universal is betting that cheaper CDs will boost sales enough to more than cover the slimmer profit margins (some industry execs say sales must rise 15 to 20 percent to make the new math work). Universal Music "expects to invigorate the music market," says CEO Doug Morris.

It's risky business. Universal is also ending the practice of paying merchants to get them to advertise the music--payments that bolster many retailers' bottom lines. Instead, Universal plans to boost its advertising. While applauding Universal's goal, the Best Buy chain said it's talking with the company "to be sure we fully understand the implications of this strategic move."

The cuts could give the biggest artists new reasons to gripe, since their royalties are paid out of sales. Universal's move could prompt some managers to look for ways to make up the difference. "I don't think they'll go quietly into the night," says Chris Castle, a music attorney. "If I was a manager I would find two or three big things that I want and extract that from the label." If Universal's plan doesn't work, it may leave everybody singing the blues.