10. Economics of New Albums

  1. Many new albums are released every year. On average [10-20]% of Sony BMG albums on sale are new releases (released during the year). This ranges from [0-10]% in Spain to [20-30]% in Portugal. The absolute number of new releases is particularly high in Austria  and Germany, with more than [1,000- 2,000] new albums released in 2006.
  2. Each album goes through several phases during its commercialization. One or several singles are generally released several weeks before the album and contribute towards creating demand for this particular album. A significant number of albums are also purchased by retailers in the pre-release phase in order to build stocks. In the first weeks after release it is often the case that the bulk of sales are realised, first from pre-release stock and then from further orders by the retailers. The sales in this initial period are often supported by more or less intensive promotion of the artist and the album.
  3. When sales start declining, several elements can contribute to reactivate demand from consumers, such as the release of new singles, additional marketing and promotion spending, organisation of a tour. More generally, when sales start seriously declining, the price of the album is often decreased by way of a general PPD reduction or an increase of discounts with the objective to attract additional customers, sometimes referred to widening the sales target beyond non-fan customers. After this first price decrease, price levels can fluctuate for a period, before the album is ultimately definitively classified in the mid or budget price category.
  4. Some albums can follow different patterns. The parties provided the example of [.] in Germany. This album was priced at the launch PPD of EUR [5.00-10.00] and conversely to what is generally observed, its PPD was increased after several weeks, despite an evident lack of success. Other examples were submitted by the parties, where albums had success many weeks after their initial release. In the given examples such late success was notably due to a “re-release” of the album including new or modified tracks.

This item is part of the series of posts based on the European Antitrust Agency 2007 Music Industry Analysis for the Sony BMG Case. It’s home page is here.

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