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Business News Labels & Publishers Retail
Tesco pushing for new CD sales terms
By CMU Editorial | Published on Tuesday 8 March 2011
Tesco is pushing the record companies to accept new terms where they are paid only 50p upfront for each CD that they supply to the supermarket giant, with the rest of the wholesale price of the disc paid if and when it is sold.
The proposal, confirmed by Tesco’s Entertainment Director Rob Slater to the Financial Times, is backed up with threats and incentives. The threat is that with CD sales continuing to decline, without more favourable terms supermarkets might tire of stocking music discs, depriving mainstream music companies of a valuable route to market.
As for incentives, Tesco argues that cheaper overheads would let it stock a greater range of CDs in more stores, possibly resulting in more CD sales overall, plus under the new terms Tesco would agree to destroy unsold stock itself, rather than returning unsold CDs to the labels, saving the music firms the costs of destroying unwanted disks (which costs record companies millions every year).
Slater’s plans aren’t entirely new – he himself has been mooting them for a while, and some of the US supermarket chains have been suggesting a similar change to terms of late. In the record companies opinions seem to be divided on the plan.
Some told the FT that the cash flow implications of Slater’s proposals would be significant, especially at the start of any change in terms, and that the labels would therefore resist the change. But others said that the prospect of more Tesco stores selling more CDs made these plans worth considering, while at least one suspected that ultimately Tesco could do whatever it liked and the labels would eventually have to comply with the company’s demands.
