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CDWow settles U.K. suit

Online retailer reaches agreement with Brit music trade org

LONDON — In the first battle of what looks to be a coming war, online CD retailer CDWow settled out of court Wednesday with trade org the British Phonographic Industry over allegations of illegal parallel importing.

Hong-Kong-based CDWow has come under fire from BPI for buying CDs wholesale in the Far East and selling them direct to U.K. consumers online, undercutting traditional retail prices. BPI argued this was illegal, as the copyright owners had not given their consent.

CDWow chief exec Philip Robinson argued that his company had agreements with overseas subsids of U.K. record companies and was not importing the CDs, but mailing them individually from the Far East (Daily Variety, Jan. 12).

Under the settlement, CDWow will no longer sell CDs already on the market outside the European economic area (EEA) to U.K. online shoppers.

The settlement may hit CDWow’s sales hard: Its retail prices are due to leap from £8.99 ($16.20) to £10.99 ($19.80) on Sunday.CDWow’s revenue for last year was estimated at $180 million.

One music biz insider questioned the motives behind the CDWow price hike. “Even if CDWow now is obliged to source CDs from inside the EEA,” said the industryite, “the average price for a CD in the U.K. is ($18.30) so, once again, they are stretching their profit margins as far as possible under the veil that they are being victimized by the BPI.”

BPI is continuing its crusade to halt illegal parallel importing, which it claims undermines the industry’s ability to invest in new talent and cover costs.

Test purchases from Amazon.com are ongoing, and legal challenges have begun against New Jersey-based online retailer Play.com under the same principle as the CDWow case.

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