Prices can go down

News this week that the average price of a CD has fallen below £8 for the first time, compared to more than £11 in 2000, tell all retailers that prices do not have to just go up.

While the recording industry may blame the internet and supermarkets, which are accused of below cost selling, the business of music may not be suffering in proportion. Radiohead guitarist Ed O’Brien told Time magazine that “the music industry isn’t in crisis, the recording industry is; it is an unbelievably good time to be a fan of music and new bands.”

Whatever, most corner shops are not big into music. However, the implications for book, magazine and newspaper sales is more sobering.

The Boston Consulting Group (BCG) has just studied the attitude of shoppers towards buying digital content in China, the US and Germany. They will pay $70-$120; $100-$150; and $130-$160 respectively for an e-reader. For a book the price ranges are $1-$2; $5-$10; and $7-$12 respectively. For a magazine $1-$2; $2-$4; and $1-$3. For a monthly newspaper subscription $1-$2; $5-$10; and $5-$12.

The FT quotes Dominic Field of BCG as saying the pricing would reassure “some but not all” newspaper publishers and disappoint book and magazine publishers.

It looks like the arrival of digital books and magazines may see strong parallels with the music industry. The low prices in China may also help cause price deflation.

At a local shop level, this does not mean that you will not be able to make a profit from newspapers and magazines. In fact, you may have more of the print on paper market for yourself as the supermarkets cut investment in anticipation of lower margins and demand. However it does mean that cover price inflation, which helped retailers so much in the 1990s and early 2000s is unlikely to return.