UK retailer threatens music biz with payment freeze

UK music retail chain Virgin Our Price has said it will freeze payments owed to record companies over allegations that its online music rivals are getting preferential treatment. Richard Branson's High Street giant met with record companies yesterday to say it was holding off on bills owing to distributors until it got better business terms. "We are not happy with the terms of trade," the company said. "We are fed up with the fact that [the record companies] are giving better terms to online start-up companies than they are giving to 95 per cent of the business." It added that it would be happy to pay up when it got better terms, today's Financial Times reported. However, a senior UK music industry source told The Register that he was sceptical about Virgin Our Price's claims, and said any threats to refuse payment until terms and conditions are changed would be "completely illegal". "Almost all retail and online stores are supplied through third-party wholesalers, not direct by the record companies," he said, "so if Amazon or whoever is getting preferential treatment it's because they've done a deal with the distributors, not the record labels." And he denied record labels were pursuing online sales to the expense of traditional retailers. "Right now, the vast majority of music sales are impulse buys, and the industry knows the best way of making those sales is by getting CDs physically in front of the punters. Sure we're interested in online sales -- we're a commercial business -- but the focus is on retail sales." Curiously, Sony Music Entertainment is being sued in the US for allegedly forcing shops to sell CDs that drive users to online stores affiliated with the company. The National Association of Recording Merchandisers, representing over a thousand record shops, lodged the charges with the US District Court in Washington, Reuters reported. Last week, Virgin threatened to pull out of music retailing if major labels failed to support the High Street over online businesses. ®