New trade terms see cost of EMI CDs rise $2 to $10 at HMV stores in Canada
TORONTO (CP) – A dispute between music label EMI and retailer HMV is hitting music fans and indie artists like Sum 41 and Oh Susanna in the pocketbook.
Experts say the price increases – between $2 and $10 – for CDs by artists such as Nickelback, Janet Jackson, Norah Jones, Radiohead and Sarah McLachlan, are just the latest manifestation of the industry’s woes.
The increases, which took effect in early April, are due to a squabble over the wholesale price of EMI’s CDs, and all the indie labels it distributes.
Both sides have been guarded about discussing the issue saying “trading terms” between the companies are confidential. However, each concedes that money is at the heart of the problem.
HMV wants EMI to maintain its volume discount on CDs so the chain can sell new releases at a cheaper price and get music lovers into its stores – rather than big-box competitors like WalMart and Costco.
“EMI chose to reduce the level of support that they had previously offered HMV,” Humphrey Kadaner, president of HMV Canada, said in an interview with The Canadian Press.
As a result, Kadaner said HMV can’t give EMI distributed products the same level of “value-added” support it gives other labels.
That means EMI artists don’t get priority placement near the front of stores, their songs don’t get played inside the stores and they’re not listed on HMV’s chart wall – often the first place a consumer will look when entering a music shop.
Kadaner said under the new trade terms, EMI passed on a higher price to HMV. Subsequently, the chain had to pass the hike on to the consumer, he said.
“We passed it on proportionally. We’ve maintained the same margin as before. We have not tried to use this as a vehicle to drive any incremental profitability,” said Kadaner.
For its part, EMI Canada says it can’t afford to capitulate to the chain’s demands because sales at the chain dropped about 25 per cent last year.
Further, label head Deane Cameron says the label did not raise its CD prices.
“It’s not fair for us to have trading terms that reward HMV for their volume if their volume is not there,” he said. “HMV is selling a lot more DVDs these days. That’s why we’re getting elbowed out.”
He added: “We asked them to consider different trading terms. That wasn’t received too well and we appear to be in the penalty box. It’s disappointing for artists to be punished to this extent.”
It’s far from the first time HMV, which holds the leading market share of pre-recorded music in Canada, has fought to increase its bottom line. Two years ago a messy dispute with Warner over wholesale prices pushed HMV to pull all Warner CDs from its stores.
It’s no secret the CD market has been troubled in recent years. The Canadian Recording Industry Association says that on a per-capita basis, the Canadian music industry has been one of the hardest hit of any country in the world by illegal file swapping. Retail sales have decreased by more than $425 million since 1999, says the organization.
To stay afloat, HMV started selling DVDs a few years back, which some say saved the chain from bankruptcy.
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“When this whole downloading thing happened their music business tanked,” said Maureen Atkinson, senior partner at J.C. Williams Group, a retail and marketing consulting firm. “They really struggled, as did the recording industry.”
But this latest ripple has more victims than just EMI. The label consists of 70 music labels representing over 1,500 artists around the world. In Canada, EMI distributes CDs for smaller independent labels, including Nettwerk, Popular, Marquis and Aquarius.
It’s these smaller Canadian indie labels – which support home grown talent like Sum 41 and Broken Social Scene – that find themselves the biggest victims of EMI and HMV’s trade fallout.
They have the most to lose because their artists aren’t sold in big box stores like Future Shop and WalMart – which mostly only carry Top 40 CDs with very little back catalogue – and rely on specialty stores to sell their stuff.
“It’s just not fair. Do they care that by raising the Oh Susanna disc to $28 they make it impossible for people to buy her CD in their store,” said Terry McBride, CEO of Nettwerk. “That hurts the artist. That artist is a person. They’re not a corporate entity.”
Customers have already said the price of CDs is too high, added McBride.
“It’s extremely short-sighted because people are already buying less and less CDs. The reason why HMV and EMI are having this little tussle is because EMI margins have been shrunk, the marketplace is shrinking and every player in this business needs to come to terms with that and be part of the solution – not get into these stupid little trade wars. Nobody wins.”
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