Two weeks ago, the chairman and CEO of the world's largest record company, Universal Music Group's Doug Morris, ran into the owner of a small local record store near Morris' home on Long Island. He asked how business was faring, and the answer was not good: After 19 years of operation, the owner was closing down and becoming a teacher. For Morris, it was another reminder that the music industry is in dire straits. Album sales have been sliding for the past three years, some 1,300 people in the industry have lost their jobs in the last six months, and only three artists sold more than 2 million records during the first half of the year: 50 Cent, Norah Jones, and Linkin Park.
But this past week, the music business gulped hard and got back in the fight. The multipronged attack -- which includes cutting the price of CDs, suing pirates who download copyrighted music, and offering amnesty to anyone who has snagged illegal music from file-sharing networks -- is an attempt to drive consumers away from online swapping and back into buying CDs. Even though this gambit is playing more like an uncoordinated dance number than an opening chess move, it's the music industry's most aggressive strike back against ruinous technology. Here's the deal.
Ashanti's answer: $10 CDs
In spring 2002, Universal Music began experimenting with the price of CDs, and Ashanti's self-titled debut was a test case. The album, which could be bought on sale or with a rebate, landed at No. 1 and sold half a million copies in its first week. Based on those results, along with feedback from record buyers and retailers, $10 was deemed the magic price point that would get people away from their computer monitors and back into the record store. That's why Universal, which controls 30 percent of the market, is reducing the price of every pop album it sells: A new album by, say, Mary J. Blige that would normally cost between $16.98 and $18.98 could now sell for just $10. The loss in profit on each album will be balanced, Universal hopes, by an increase in the total number of CDs sold. ''It's a bold strategy,'' says Morris, ''and we decided, as the market leader, to try it.'' For now, the other major music labels are taking a wait-and-see approach with the price cuts. ''Any initiative that's going to encourage people to buy more records is welcome,'' says an executive from one rival label. ''The real leap of faith is how it will be received by the retail community.''
Sue every pirating man, woman, and child
Thwarted in its attempts to shut down faceless software programs, the music industry reluctantly muscled into the homes of its consumers last week. The 261 people targeted by the Recording Industry Association of America include a 50-year-old school-bus driver in California and 12-year-old Brianna LaHara from New York City, whose mother settled the next day. They were caught sharing at least 1,000 illegally copied songs (including felonious selections like Poison's ''Fallen Angel'') on such peer-to-peer file-trading networks as iMesh, Grokster, and Blubster. With penalties ranging from $750 to $150,000 per song, the damages could add up to millions. Consider yourself warned: More suits are expected to be filed in the months ahead.