CD Price Declines are Accelerating, Says The NPD Group

Average price for full-length CDs sold at retail falls to $13.29 in the first quarter of 2004

PORT WASHINGTON, NEW YORK, June 23, 2004 - Based on the latest information from The NPD Group's MusicWatch PriceLab, the decline in overall average price for physical full-length CDs appears to be accelerating. CD prices declined nearly four percent in Q1 2004, versus Q1 2003; by comparison, the year over year in Q4 was only 2.5 percent and for Q3 the drop was less than one percent.

The average price of CDs in the U.S. has reached a low of $13.29, versus $13.79 in 2003. A similar pattern was observed for the top 50 sellers in Q1 2004, where the average price was $13.36 nationwide, a drop of 3.1 percent versus year ago.

"There are several reasons for the accelerating decline," according to Russ Crupnick, president of NPD Music. "First and foremost the recording industry has had to deal with a changing market over the past few years, which was fueled in part by file-sharing. But the retail landscape has also changed, and consumers are increasingly exposed to everyday low prices or terrific discount offers. Everyone also recognizes the increasing competition for entertainment dollars, as DVDs and video games are growing at double digit rates. These situational factors are causing the industry to reduce rethink pricing."

PriceLab also reported the following related metrics:

  • The average price of so-called "catalog" CDs, which are comprised of titles that are 18-months old or older, have fallen below the $13 dollar threshold to an average of $12.99 in Q1 2004; however, prices are down on both catalog titles and new releases.
  • Universal Music Group's titles declined five percent between Q1 2003 and Q1 2004, which may be a reflection of the company's "Project Jumpstart" initiative to lower prices at retail.
  • On a retail channel basis, prices declined the most at mass merchandisers, which include retailers such as Wal-Mart, Meijer, and Target. Prices at the mass channel fell by five percent between 2003 and 2004.

"Record labels are diligently trying to respond to consumer feedback about high CD prices, and to the relative value of music," Crupnick said. "According to a consumer survey conducted earlier this year, one out of three CD buyers report rank the price of CDs ‘important' or ‘very important' in their purchase decision."

Source: NPD MusicWatch PriceLab collects pricing information at the title level on a continuous basis from members of NPD's online consumer panel of more than 2.5 million registered members. An average of 1,000 music buyers are surveyed each week.

About The NPD Group, Inc.
Since 1967 The NPD Group has provided reliable and comprehensive sales and marketing information for a wide range of industries. NPD provides critical knowledge on what is selling, where, to whom and why to help our clients make more successful, fact-based business decisions. Today more than 1,300 manufacturers and retailers rely on NPD to help them better understand their customers, product categories, distribution channels and competition in order to help guide their business and positively impact sales and revenues. Information from The NPD Group is available for the following major vertical sectors: apparel, appliances, automotive, beauty, cellular, consumer electronics, food and beverage, foodservice, footwear, home improvement, housewares, imaging, information technology, music, software, travel, toys and video games.

About NPD Music
NPD Music, a division of The NPD Group, provides reliable in-depth perspective on the most important issues facing today's music industry. MusicWatch and MusicWatch Digital are the flagship information services from NPD Music that reports on what consumers buy, as well as where -- and why. These two complementary services provide a detailed look at today's music consumers, covering such critical issues as consumers' habits related to downloading music and burning CDs, key influences on music purchases and customer viewpoints on specific retailers. NPD Music provides the consumer information needed to understand today's music marketplace and discover where music consumers are today - and where they'll be tomorrow.

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Lee Graham
For The NPD Group, Inc.