Pop quiz time: Who is America's biggest CD retailer?
If you said "Tower" or any of the other usual chain megastores you're way off. America's biggest CD retailer is Wal-Mart.
Now, what is Wal-Mart known for? Low prices. On everything. When Wal-Mart customers don't get low prices, they complain. When customers complain, Wal-Mart flexes its enormous muscles and suppliers' necks pop like so many Bazooka bubbles on the lips of teenagers.
Except these suppliers are the Cartel, who have used every trick in the book (including illegal ones) to keep CD prices high. They sell the CDs to Wal-Mart (and Target and other mass retailers) at about $12 per disk. Stores that retail the disks for less do so as a "loss leader" - a way to get people in the door where their total purchase can make up for the couple of bucks lost on the disk sales.
However, losing money is not something Wal-Mart does. It wants to retail CDs at $9.72. And it has a very long history of playing hardball with suppliers that won't give it what it wants. Apparently in this case it threatened the Cartel that if cheaper CDs weren't forthcoming, Wal-Mart stores would start replacing CD rack space with DVDs and video games. These things sell like hotcakes at cheap prices and make money for Wal-Mart. See above.
Result - cheaper disks to Wal-Mart, $9.72 CDs on Wal-Mart racks, and relative calm, for now.
The Catch-22 in this is that Wal-Mart sales are also probably bad for the consumer, since they stock far fewer titles, no back catalog, and have no space for new or developing artists. Wal-Mart is part of the mass production machine for mass produced manufacturing of mass product to a mass audience. The fact that this even matches up slightly with the music business is appalling.
The Rolling Stone article has a nice in-depth exploration of the "bad marriage" between Wal-Mart and the Cartel. It's hard to feel sorry for either party in this sumo match; I reserve my sympathy instead for the creators who have to cope with an industry like this. As the table at the very end of Warren Cohen's story shows, they're still only getting about 10% of the money we spend...
"...where the money goes for a new album with a list price of $15.99.
$0.17 Musicians' unions