Dave's Top Eight

1. Jerry Reed...Revisited by Darrell Toney (reviewed 6/07) (5 Stars)
2. Sounds Like Sunday by Janet Paschal (reviewed 5/07) (5 Stars)
3. True To The Call by Kingdom Heirs (reviewed 3/07) (4 1/2 Stars)
4. Revival by Gold City (reviewed 10/06) (4 1/2 Stars)
5. Get Away Jordan by Ernie Haase & Signature Sound (reviewed 2/07) (4 1/2 Stars)
6. Breakin' Chains by Three Bridges (reviewed 5/07) (4 1/2 Stars)
7. Big Sky by The Isaacs (reviewed 4/07)
8. Skywriting by Mercy's Well (reviewed 7/07)

Click title to purchase at CBD.com...click artist name to read Dave's Review. A CD will automatically fall out of the Top Eight after twelve months if no CD surpasses it before then.

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July 20, 2007

Undercut Artists Or Bold Marketing Approach?

SGBlognew sez:
Looks like Crossroads Music has a new website where they are featuring their newest recordings for only $9.99. Also for a limited time with every purchase, you will receive Crossroads Chartbusters Vol.1 at no charge.

Looks like a great deal, but it sure undercuts their own artists (clients).

No, not really. Customers who only buy music direct from their favorite artists aren't very likely to change those buying habits as a result of this. Besides, fans who are in the habit of shopping online and actively seeking out the best price are ALREADY getting their music from companies like CBD, Amazon, Springside, and others. It won't matter to the artist if they go to Crossroads Direct rather than one of those outlets. In fact, it may actually help if the lower price point causes an increase in the overall volume of sales.

Let's do a simple comparison to illustrate this point.

Before Crossroads Direct launched, the Inspirations latest CD, Things Are Different Now, could be bought online directly from the Inspirations site for $17, from Springside.com for $15.95, from Amazon.com for $18.98, and from CBD.com for 11.99. (The Amazon price is out of character for Amazon, which is usually more competitive. They also list it as a "pre-order," for some reason.)

By selling directly to individual customers, Crossroads is simply passing part of the discount they give to those companies along. It's called "cutting out the middle man," and it's been tried by manufacturers with varying degrees of success for many years. Whether or not it's successful in this case will depend on how many additional customer service issues arise from dealing with individual buyers vs. those who buy in bulk. All they're selling is pieces of plastic and some paper with color printing on it, so the main issue will be breakage as long as they're capable of putting the right CD in each package.

The artist isn't hurt, and in fact, could be affected positively. There's a theoretical point in almost every recording contract where labels recoup their investment and the artist starts getting a cut of all future sales. Due to low volume of sales, many Southern Gospel products never reach that point, so the artist sees nothing in the way of profit other than from the units they sell directly to customers themselves. If Crossroads increases volume while taking no hit on profit per unit (they're avoiding giving discounts to third-party distributors), they will reach the "break even" recoup point more frequently.

Crossroads is taking a bold approach by underpricing their nearest competitor (CBD.com) by $2 per unit. Only time will tell if it was bold enough to pay off.

The actual downside is they're risking their business relationships with companies like CBD, Amazon, Springside and others. It's their job to sell as many pieces of product as possible, because doing so makes the artist more popular. Selling direct rather than allowing companies like CBD, Amazon, and Springside to get a cut could cause those companies to say, "Fine. Sell all your music direct if you don't need us anymore and see how well you do without any access to our established customer base."

I haven't mentioned digital downloads, but these are increasingly playing a factor. Few artists currently offer this as an option for customers who shop their websites. Some are finally beginning to explore this area. To me, it makes perfect sense for the label website to be the point where digital downloads of individual songs are sold directly to customers. In fact, it really makes NO sense why they aren't already doing this. Hopefully, that will be on the agenda for this new venture by Crossroads. If you could buy an entire CD as a download for $9.99 or the physical CD for $9.99 plus shipping costs, that would go a long way towards convincing customers to buy more product and it should attract new customers who currently feel that $15 is much more than any CD is worth.

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posted by David Bruce Murray @ 3:24:00 PM


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