BMG to Lower Some Music CD Prices

Starting next month, BMG will try out a new, multi-tiered pricing strategy -- in hopes of luring customers back to buying music legally.

CDs will be produced in various models: the cheapest, at €9.99 ($12.30), is known as the "anti-piracy" version. Like a pirated CD it will have no cover or booklet; the CD title and artists' name will simply be stamped on the CD itself.

For €12.99, buyers can get a regular version, with a cover and a booklet. A luxury, €17.99 production will have DVD extras and special add-on features, BMG chief Maarten Steinkamp told the newsweekly Der Spiegel. Also starting in August, previously released BMG CDs will sell for €12.99 instead of €16.99.

BMG, part of the Bertelsmann media conglomerate, said it hopes the new pricing system will boost record sales by some 25 percent. BMG, which is currently merging with Sony's music subsidiary, said it hopes the move will help defend it against the spread of CD piracy. But officials conceded they are not certain if the strategy will work.

Pleasing the public

"We are in no way certain it will work, maybe we'll even lose money," Der Spiegel cited Steinkamp as saying. "But we have to change our product to match demand and try new things," he said.

"We have to finally become more customer friendly, and give music fans a wider choice. The music industry has simply sat on its backside for too long," Steinkamp added.

Total sales in the German music industry fell nearly 20 percent in 2003 from the previous year, to €1.65 billion, while the number of CDs and other music products sold was down by 18 percent, to 183 million pieces.

CDs also face increasing competition and cannibalization from other mediums -- not only illegal music downloads, but also the legal kind. Services like Apple Computer's iTunes Music Store are also selling downloads of full CDs for about €10. During its first week of business in Germany, iTunes sold approximately 250,000 songs.