Tesco is to demand that music companies to accept minimal upfront payments for the CDs they ship to the retailer in a deal that will test how record labels’ bargaining power has diminished alongside shoppers’ interest in CDs.
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Tesco wants to pay just 50p upfront for an album that would normally cost £7 or £8, with the remainder handed over when it sells the CD, Rob Salter, Tesco entertainment director, told the Financial Times.
Some music companies told the paper they were willing to test Tesco’s plan, while others worried that it could affect their cash flows.
Salter said the change of terms would allow Tesco to stock a wider range of music in more of its stores. He said: “I think we’ll all end up with more money.”
He said a trial with a Robbie Williams album last year, which put the CD in stores that had given up selling music, had increased Tesco’s share of the album’s UK sales by 40% from its typical market share.
Tesco spends £3m a year shipping unsold CDs back to music companies, and Salter said it would also take on the task of destroying unwanted stock.