Wal-Mart Talks Money With AC/DC, Prepares To Slash Shelf Space Even More

noah | June 9, 2008 8:53 am

Ubiquitous American retailer Wal-Mart got a fair amount of press for its status as “one of the few remaining chain stores selling music” today, with stories in the New York Times and the Wall Street Journal about its upcoming music strategy. But the WSJ gets the scoop: Wal-Mart’s next store-exclusive release will be the upcoming album by AC/DC, which is slated to hit stores in the fall. Unlike the two other classic-rock stalwarts who had chart-topping exclusives with the Bentonville behemoth, the Eagles and Journey, AC/DC’s album will come out on a major label (Columbia). The Journal notes that “Columbia’s decision to sell a major new release at only one chain has the potential to alienate retailers left out,” although those alienated retailers can at this point be counted on one person’s digits. And how is Wal-Mart going to celebrate its music mogul status? By demanding lower wholesale prices and cutting floor space even more!

From the Journal:

Wal-Mart’s current talks with the four major music companies have their roots in 2007’s post-Thanksgiving shopping season. Wal-Mart at the time cut CD prices aggressively and saw a strong bump in sales. As a result, the chain approached music companies in February and asked them to commit to deep, across-the-board price cuts, to as low as $5, and to no more than $12, per disc.

The labels — owned by Vivendi SA’s Universal Music Group, EMI Group Ltd., Warner Music Group Corp. and Sony BMG, a joint venture of Sony Corp. and Bertelsmann AG — balked, arguing that reducing prices so sharply would undercut the value of their product everywhere. The two sides began discussing other changes they could make.

Among the options under consideration are reductions in inventory, aimed at weeding out poor-selling titles. Wal-Mart has indicated to some music executives such cuts would be extensive, while others have been told they would likely be minimal.

Wal-Mart’s senior vice president for entertainment, Gary Severson, says that in the next six months, “you’ll see us clarifying our offering, whether through price or assortment.” He adds that the extent of any planned cuts “depends on the store.”

However, one thing that will not be cut are the special editions of albums, also known as “the ways some less reputable artist try to pad their SoundScan tallies.” (Surely you know of at least one artist who offered different bonus tracks to different chains, thus throwing down the gauntlet for “real fans” to buy as many as five copies of an album. Whether this strategy will work in the face of a cratering economy, of course, remains to be seen.) From the Times:

Exclusive album deals have been happening for some time with that goal in mind. Wal-Mart and Best Buy, the two largest physical retailers of music, often get special editions of albums, with exclusive songs or video footage. In 2005, Wal-Mart made a deal to become the exclusive distributor of Garth Brooks albums, including a new collection of outtakes. But the Eagles and Journey are the first two major acts that have released albums of new material that are available at only one retailer. And although record labels tread carefully around such deals, for fear of upsetting rival stores, bands need not be so sensitive.

This summer Wal-Mart will carry an exclusive release by the young country singer Taylor Swift in a promotion that also calls for Ms. Swift to promote L.E.I. jeans. (In this case, Ms. Swift’s label was part of the deal.) And Mr. Azoff said that he was already talking to Wal-Mart about an exclusive deal for Fleetwood Mac’s next release. “Classic rock really works there,” Mr. Azoff said.

Something tells me, Irv, that any genre would “really” work at Wal-Mart, given the megamart’s increasing status as the only music-retailing game in many towns and the plummeting sales expectations across the board.

As CDs Decline, Wal-Mart Spins Its Strategy [WSJ]For Some Music, It Has To Be Wal-Mart And Nowhere Else [NYT] [Screen grab via Epicycle]