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.
Posted on June 4, 2011, in Marketing, Music Industry and tagged Amazon, Competition, interscope, Kanye West, Lady Gaga, marketing, nicki minaj, Predatory Pricing, Universal Music Group. Bookmark the permalink. 4 Comments.