Cassette Prices Rise, Close the Gap on Compact Discs : Recordings: Distributors defend the $10.98 cassette but say across-the-board hikes are still some time off.

By STEVE HOCHMAN

June 23, 1990 12 AM PT

The $10.98 music cassette is here!

That price--a dollar over the going rate for pop cassettes since 1988--has been in effect for selected movie sound tracks, but it now appears on its way to becoming the standard, higher price for all pop releases.

Two new cassettes--New Kids on the Block’s “Step By Step” and Madonna’s “I’m Breathless”--have already been released with a suggested $10.98 list price and now an MCA Records executive has told The Times that all of the label’s new “superstar” cassettes will have that price tag.

Several music industry leaders also suggest the price hike as threat to the dominance of cassettes in the pop marketplace as the price gap between the tapes and compact discs narrows. The latter are commonly sold for around $14.99, but frequently discounted to $11.98 on hot new releases.

“That’s unfortunate,” said Jim Dobbe, vice president of sale merchandise for Torrance-based Wherehouse Entertainment, the nation’s fifth largest retail record chain with 261 stores.

“I don’t know why they’re doing it, but they’re narrowing the gap (between cassettes and compact discs),” he said. “I think it’s a mistake.”

Dobbe said that many people buy cassettes for their car or portable player in addition to CDs of favorite releases. With the higher price of cassettes, he sees that practice becoming less common.

Russ Solomon, president of the 54-store Tower chain, agreed. “What happened is that Warner Bros. got away with (increasing the price without it apparently slowing down sales) on Madonna and Columbia on New Kids, and I think that’s the trend that’s going to go,” he said in a phone interview from his Sacramento office. “The truth is that in anticipation we’ve changed our attitude about sales prices. . . . We’ll have to raise those a little bit.”

Solomon said that special sale prices for cassettes--which usually include most new releases--will be rising from $6.99 to $7.99. Regular price for most cassettes at Tower is currently $9.44. Tower’s sale price for new-release CDs is generally $11.99, with regular prices of $13.99 and $14.99. Many budget-line catalogue CDs range from a low of $6.99.

At Tower, CDs have already surpassed cassettes in both dollars and units sold and Solomon believes that the new prices will hasten that development throughout the retail world.

Solomon would not predict the complete demise of cassettes as has virtually happened with vinyl LPs, though a Tower vice president made that prediction in a story on CDs that appeared in this week’s Billboard magazine. (Cassettes still outsell CDs on a unit basis about 2 to 1 nationally, with vinyl accounting for only about 2-3% of total sales.)

Paul Smith, president of the distribution of CBS Records, denied the suggestion that there is an incentive for manufacturers to accelerate the rise of CDs. “We’d just as soon sell cassettes as CDs,” he said.

Pete Howard, editor of the International CD Exchange (ICE) newsletter also rejected the idea that cassettes are nearing extinction. “I would be real surprised if 10 years down the road CDs were the sole configuration,” he said. “I don’t see CDs completely gobbling up cassettes.”

But Howard and others pointed to the increased portability of CDs, with automobile and Walkman-type players becoming less expensive and more common, possibly rendering the cassettes obsolete for many consumers.

The higher list price has done nothing to hurt cassette sales of the New Kids album. CBS’ Smith said that that alone was responsible for cassettes jumping to 70% of all CBS sales in May, up from the 64% reported in the first quarter of 1990. The New Kids audience, which consists chiefly of teens and preteens, still tends overwhelmingly to buy cassettes rather than CDs, which are favored by an older age group.

Meanwhile most major record distributors defended the initial price increases, but said that across-the-board jumps are still some time off.

“There’s no indication that we’re going to take this on a broad scale,” Smith said. “Any time the industry changes prices like this it starts slowly. I’m sure you’ll only see superstars (at the higher prices) for the foreseeable future.”

Said Henry Droz, president of the Warner/Elektra/Atlantic distribution group: “Will we at any other time come out with more $10.98 cassettes? Sure. But I don’t see any immediate transition or rapid one.”

He does, however, suggest that CDs sales may overtake cassette sales by 1992.

Russ Bach, president of the CEMA distribution group (which includes the Capitol-EMI Music Corporation) also said that any price increase would be done on an item-by-item basis. At this time the only $10.98 cassette in the CEMA catalogue is the “Pretty Woman” sound track.

Traditionally, price increases for sound tracks and star releases have signaled the coming of across-the-board hikes. It was the Barbra Streisand “A Star Is Born” sound track album that led the way for the increase of vinyl list prices increasing from $7.98 to $8.98 in 1976.

Richard Palmese, executive vice president and general manager of MCA Records, would not identify which or how many artists fit into the “superstar” class, but MCA’s roster includes such big sellers as Bobby Brown, whose new album is due next January, and Tom Petty, who is currently putting together a greatest hits package.