In a story last Tuesday dealing with the lowering of list prices by WEA, it should have been stated that the Handleman Co., based in Detroit, is the largest wholesale distributor of records and tapes ("rack jobber") in North America.
In a move bound to have major repercussions in the record business, industry giant WEA (which includes Warner Bros., Elektra/Asylum, Atlantic and a number of custom labels) announced yesterday that, effective Jan. 3, it will reduce the list price on most of its catalogue products from $8.98 to $6.98. The move affects more than 1,100 albums and cassettes by some of the major acts in the business--Jackson Browne, AC/DC, Foreigner, Joni Mitchell and others. Top-name records and tapes will continue to come out at $8.98 list but will eventually drop to $6.98, probably within a year of release; other new products will come out with variable prices. WEA's decision could also mean a shelf price of $4.98 for discounted albums or cassettes.
According to a source at WEA, the move has been in the works for more than a year. Because WEA pays its artists royalties based on list price rather than wholesale costs, new contracts had to be negotiated, causing the delay (some labels, including ECM and Island, and some individual artists and selected items are not included in the reductions).
The wholesale-price reduction is expected to have tremendous impact at the retail level, where complaints of high prices have been blamed for lagging sales in recent years. The WEA reduction will roll prices back to 1976 levels. Catalogue sales used to account for 40 percent of WEA sales but had reportedly declined to less than 20 percent.
The record industry finds itself in the ironic position of discounting its hottest product, new releases, and charging higher prices for its older ones. WEA's move has been compared to achieving a paperback equivalent for records, though the configuration itself hasn't changed. Several years ago, CBS introduced "midlines," selected older albums and tapes selling at $5.98 list; the midlines were so successful that almost every major record company currently has one. WEA's midlines will now jump a dollar to $6.98, in effect establishing a single unit price for catalogue products.
The move caught retailers by surprise, particularly the information that returns on records and cassettes already bought at $8.98 list would be credited at the reduced $6.98 price, leaving many "rack jobber" (major) and "one-stop" (minor) suppliers in the lurch. Harold Okinow, head of the nation's largest rack jobbers, Lieberman Enterprises, and president of the National Association of Retail Merchandisers, said from Minneapolis that "we're really just evaluating it now." His gut reaction, however, was that "in the long haul it's going to be good for the industry . . . in the long haul. Right now it hurts. Normally when people reduce the price of products they give you some kind of inventory protection. So right now everybody is assessing how bad the short-run impact of this will be."