Are Universal Music Group breaking competition laws with Lady Gaga: Born This Way?

“Your single was 99 cents, mines was 4 bucks” – Jay-Z: Imaginary Player

Amazon & Interscope had reached an agreement to sell Lady Gaga’s latest album- Born This Way, for 99 cents.

The album has moved around 1. million units in it’s first week of release. The average price of a digital album on Amazon is around $10.

The pricing tactic was a strategic form of marketing called predatory pricing.

This is where a product is sold at a lower price to stop businesses from entering the market or to drive out smaller businesses.

Predatory pricing is used to damage competitors because for them to continue, they would also have to lower the price of their product. This can lead to the competitors cost to profit margin being too insufficient to continue.

“Can prices ever be “too low?” The short answer is yes, but not very often. Generally, low prices benefit consumers. Consumers are harmed only if below-cost pricing allows a dominant competitor to knock its rivals out of the market and then raise prices to above-market levels for a substantial time.” – Federal Trade Commision

In my opinion, this form of predatory pricing is harmful to the music industry (not just the record industry) because it affects smaller retailers and I strongly believe it should be addressed before this becomes the norm. A similar tactic was used by Universal Music Group for “Black Friday” when the latest albums by Kanye West and Nicki Minaj were being sold on Amazon for $3-$4 in the first week of release.  Exclusive dealing is illegal according to U.S anti trust laws because it represents a from of monopolization.

Predatory pricing is illegal in various countries worldwide, and is tightly regulated in the U.S by Federal Trade Commision and the U.S Department of Anti Trust Justice.


About Harlem World

the BAWSE *ross grunt*

Posted on June 4, 2011, in Marketing, Music Industry and tagged , , , , , , , , . Bookmark the permalink. 4 Comments.

  1. The law makes sense when their aren’t many competitors, on the flip side couldn’t businesses who are hurt by a rival who uses predatory pricing also answer by using the same tactic?

    As far as UMG is concerned their in a dying business in a world where everyone a musician, everyone has a CD burner and blog to promote their music. I take no issue with them doing whatever they can to sell album.

    Is selling a Lady GaGa for 99 cents breaking competition laws?…probably not their not driving anyone out of business from this ploy…But If they sold every album for a dollar from here on then maybe they would.

    • Thanks for your input November,
      If Amazon were to increase the price of the product after a certain amount of time, then this is a breach of anti trust law – according to the FCC.

      On the sales side of things, 600k records sold at $1 = 600k. I see this as dangerous to the record industry. Theres no profit in that. Artist cant realistically recoup like that.

      Universal and other majors have enough credit to operate at a loss, however smaller indies can’t.

      As a consumer, its definitley a benefit. If albums were $1 I’d buy a lot more new releases instead of older records.

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