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Wal-Mart / U2

Posted By Barry Ritholtz On November 29, 2004 @ 11:28 am In Finance,Music | Comments Disabled

Wal-Mart [1] throws the gauntlet down on CD sales for the holiday: The retailing giant is discounting U2′s new CD by 37%, to $8.84 (shipping is $1.97).


The rest of their CDs [2] are priced between $9.94 and $13.94.

As mentioned previously [3], I expect to see Wal-Mart continue to apply additional pressure on the labels to drive the price of CDs to under $10.

I disagree with several commentators who believe Wal-Mart "needs" CDs to drive foot traffic; In the entertainment space, its DVDs — not CDs — that are the growth product. CDs growth chart is sloping down the other side of the mountain.

Wal-Mart focuses on revenues and profits per square foot. Their real estate is the most valuable in the retail landscape. If CDs fail to generate significant sales because they are priced too high, or significant profits because the margins are not advantageous, they will simply be dropped as a product line.

And noted before, DVDs are priced far more competitively than CDs are. Indeed, the DVD/CD combo [4] is the only interesting audio product outside of the iPod to generate any sort of buzz . . .

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URL to article: http://www.ritholtz.com/blog/2004/11/wal-mart-u2/

URLs in this post:

[1] Wal-Mart: http://www.walmart.com/catalog/product.gsp?product_id=3347532&cat=4104&type=4&dept=4104&path=0%3A4104

[2] rest of their CDs: http://www.walmart.com/catalog/catalog.gsp?path=0%3A4104&dept=4104&cat=4104

[3] previously: http://bigpicture.typepad.com/comments/2004/10/walmart_wants_1.html

[4] DVD/CD combo: http://bigpicture.typepad.com/comments/2004/11/live_at_st_anns.html

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