November 05 2006

Prices drop for music downloads but CDs could be on the increase

Pricing in the music sector looks set for a shake up as Universal Music cuts the price of music downloads. In another move last week the Government investigates an alleged tax loophole allowing CDs and DVDs to be sold VAT-free from the Channel Islands.

Netimperative reports that Universal Music has reduced its prices to online retailers for 1,500 older albums. Of course, it's up to the individual download services whether they pass these reductions onto consumers.

Following lobbying by small businesses, the Government has been reviewing an issue of unfair advantage around the sale of CDs and DVDs. Retailers, such as Tesco and Amazon, who have distribution centres on the Channel Islands are able to keep prices low as items under £18 brought into the UK from the Channel Islands are not liable for VAT. According to The Observer Dawn Primarolo, the Paymaster General, said last week that the government was considering lowering the VAT-free threshold from £18 to £7. This would remove the advantage currently enjoyed by most imported CDs and DVDs and could results in higher levels of music downloads if prices of CDs have to rise.

Emma Herrod