Retailers 'keen to cut price of CDs': Record companies blamed for high cost

RECORD shops would reduce the price of compact discs by pounds 2 if the record companies reduced the cost at which they supplied them by the same amount, MPs were told yesterday.

But while CDs are over-priced and potential customers are being deterred, the problem is not something record retailers can tackle alone, according to Sir Malcolm Field, group managing director of W H Smith, which controls more than a quarter of all British record sales.

Sir Malcolm, along with executives from HMV and Tower Records, was giving evidence to the Commons National Heritage Select Committee examining CD prices. W H Smith argues that high prices are partly responsible for a 13 per cent drop in sales in the pounds 1.1bn recorded music market in the past two years.

The select committee is chaired by Gerald Kaufman who wanted to know why, when he was in New York, CDs were the equivalent of several pounds cheaper and also why some shops discounted every single CD in the shop in a bid to win business, and why this never happened here.

Sir Malcolm said that there were different circumstances in the UK but had to wonder why record companies could not make economies of scale in manufacturing CDs as they sold more - savings which could be passed on to him to pass on to the customer. He denied that a 'cosy' relationship between retailers and the record companies was responsible for high prices.

Asked why, when his shops had a 28 per cent share of Britain's' record sales, he had not put more pressure on the record companies to reduce prices, Sir Malcolm said retailers had been pressing for price cuts for up to 18 months.

W H Smith had pointed out in written evidence that the music industry was dominated by five large record companies which produced 75 per cent and distributed 85 per cent of all titles sold in the UK. 'This degree of concentration . . . gives suppliers enormous power vis-a- vis the retail trade,' Sir Malcolm said.

The select committee launched its investigation last week, taking evidence from the managers of Dire Straits and Simply Red who said that they believed record companies were taking off 'massive hidden profits' from CD sales.

Yesterday, the retailers blamed the manufacturers; last week, the managers blamed the manufacturers. Next week, the select committee hears from the manufacturers, who are expected to blame the retailers and the managers.