Yesterday Universal announced they will be cutting the prices of all their CDs to $12.98. Many of their CDs had MSRPs of $18.98 or $16.98, so this is a considerable change. This is also the smartest thing any of the companies could have done.*

I have long said that I am much more likely to buy an album that is $10 as opposed to one that is $20. In fact, I flat out won't buy an album if it's $20. This new price cuts means I will able to go to Virgin and buy a new mainstream record without breaking the bank. Way to go guys.

It seems fairly clear that this is in response to their slumping sales and influx of P2P networks, but I have a feeling the success of the iTunes Music Store, which sells albums at $9.99, made Universal realize that if the price is right then people will spend moeny. It's just annoying it took them to get their heads out of their asses.

I'm curious to see how independent and discount record stores deal with this change. Since they are already charging less than Virgin or Sam Goody, are they going to drop their prices a couple of dollars as well? I don't know the answer to this as I don't know how much the wholesale cost of the album is changing. They must be lowering it because Virgin is not going to take a $4 an album hit, but I'm not sure how much.

I guess this will all come to light in a couple weeks as the prices start to change. We'll keep each other posted.

*I should note that "all their CDs" really means that. It's not just new stuff it's everything in their back catalogue.

UPDATE: An article from the Register says that they are definitely slashing the wholesale price and planning on market forces to bring the album cost down to about $12-13., They also think that the other labels won't initially follow suit.

ALSO: This article from the NY Times says that the wholesale price went from $12.02 to $9.09. So, the record stores are expected to take a hit as well. We'll see.