CD price cut 'would stifle musical talent': Recording industry defends pricing policy

TALENT will shrivel and small independent record companies fold if the music industry is forced to cut the price of CDs, MPs were told yesterday.

The apocalyptic warning was delivered by the country's largest record companies. But their counterattack against widespread 'misinformed' criticism of CD prices appeared to fall on deaf ears at the final hearing of a Commons National Heritage Select Committee inquiry.

The arguments put forward by EMI Records and PolyGram did nothing to dissuade Gerald Kaufman, the committee chairman, from the view that British consumers were being 'ripped off'. Why, he repeatedly asked, were CDs cheaper in the United States? Rupert Perry, president of EMI, said production, distribution and manufacturing costs were lower in the US, where the market was bigger. He insisted: 'Any comparison with the States is erroneous. Everything there is cheaper.'

'That makes no sense to me at all,' Mr Kaufman said, to groans from industry executives in the committee room.

Mr Kaufman, a classical music fan, demanded better explanations for the comparatively high price of some of his favourite ditties. Mr Perry argued CDs were just one element in a complex business where profits from best-selling CDs were invested in new talent. But Mr Kaufman suggested profit was clouding judgement.

Mr Perry remained civil. But Maurice Oberstein, the gravel-voiced American executive vice-president of Polygram International, had obviously taken lessons in politeness from Mr Kaufman. Countering claims from Dire Straits and Simply Red that CDs are too expensive, Mr Oberstein listed managers who believed they were too cheap. He attacked the committee for its ignorance of 'general business practice' and insisted the 26 per cent rise in US sales was primarily due to the discovery of successful American bands rather than the lower price of CDs.

Mr Kaufman accused the record company executives of evasiveness and unhelpfulness.

Two small independent record companies said that small businesses could close if a price cut was enforced.

Robin Morton, of Temple Records, a small specialist Scottish music label, said the price of cassettes had been long kept too low, starving the industry of 'risk capital'. The arrival of the CD had presented companies with an opportunity.

The CD was fairly priced at less than the cost of a round of drinks or a night at a Dire Straits concert. 'If you raise the price you are going to put a lot of us out of business,' he warned.

Mr Oberstein said after the hearing: 'This committee might turn out to be to the record industry what Beeching was to railways. There will be just main lines, no branch lines for talent.'