The charges alleged that the big five had illegally coerced retailers to artificially inflate retail prices of new CD's. To fail to do so would have meant disallowment from carrying the said CD's.

Without admitting guilt, the big five have promised not to behave in such a way in the future, hoping to avoid further probes by the FTC.

In the past year, the FTC had found against the big five in a similar suit, which showed that the studios did not permit the advertizement of sales on new CD's.

The CD's on average were jacked up by one dollar or more.

This does not necessarily mean that all cd's will take a tumble, but now smaller retailers will have access to the new releases that they did not have before. And they can sell them for whatever price they want.

This can in time, force the major retailers to demand lower wholesale prices in order to compete. This would mean an overall lower price on CD's.

Last I checked, I think we decided that this was the best way to beat piracy. You know, to make music affordable.

It will take a few months to implement the settlement. In fact, 5.5 million CD's are bieng donated to libraries across the nation as part of the settlement. In some states, you may even be eligible for up to a one doller per cd refund, depending on the cd, and when it was purchased.

So here is hoping something good comes out of this.

Dave
 

[rant]

A measly friggin' dollar!? CD's can -- and should -- be cheaper, dammit!

[/rant]

The original intent was to force the big chains such as WalMart, KMart, etc. not to use CDs as a loss leader. The intent was to keep record stores in business. Also, it never really affected the price they could sell records for...it only affected the price they could place in advertisements.

Also (and I say this even though I think the big-5 record companies are scum), CDs are not overpriced as compared to vinyl albums in the mid 1960's if you consider inflation.

Around 1966, most stereo pop LPs listed for $5 and sold for around $3.66. That translates to $27.78 and $20.33 in 2002 dollars and most CDs are priced way below that. Most new releases are discounted to $14 and classic albums sell for anywhere from $8-$12 at places like J&R in New York. Just this weekend, I purchased the latest Dylan CD for $10. If you go to the J&R website, you'll see them selling any of the following for $7.99: Very Best of Aretha Franklin, Blue-Joni Mitchell, Kind of Blue-Miles Davis, Tapestry-Carole King, Bat Out of Hell-Meatloaf, Moondance-Van Morrison, Greatest Hits -Aerosmith, John Coltrane-My Favorite Things, Sinatra-Greatest Hits. Frankly, I think this is a great value.
 

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3% Body Fat. 1% Brain Activity.
 

I'm seeing CD prices ranging from about $12-20 around here. The largest record store in Boston (Virgin Records) prices most recordings at about $18.99, though some independent stores charge less.

Even used record stores seem to be raising their prices; a few years ago, I was paying about $3 apiece for used vinyl in good shape; now it seems that most LPs are fetching $5-7. Ouch.

I'm not going to go so far as to say that recorded music is overpriced, as I know that the production and distribution costs are huge, but I will say that these prices are high for many peoples' budgets.
 

I WOULD CERTAINLY BY MORE CD'S IF THEY WERE CHEAPER!
 

THE 11th COMMANDMENT:
Thou shalt not pay $15.99 for a CD. Neither shalt thou accept $12.99 as a sale price.

($11.99 was a standard sale price the first few years of CD, you could even get new releases at Target for $10.99.)
 

And no, I don't download all my music - only the stuff that is otherwise out of print, and unavailable anywhere else.
I have a favorite 'record store' chain - Bull Moose Music. There aren't too many places where you can get insense, body jewelry, and hair dye - and still be a 'record store'! Typically, the CD's I've purchased at their locations have been priced at $14.97 or less. The exceptions include double disc sets, and imports. Brand-new LP's tend to be marked around $9. Couldn't tell ya about cassettes - I never buy em, unless they're blank!

Oh ... and it's my opinion that record stores in malls are evil! Everything in malls is overpriced!

Okay, maybe that's an exaggeration ... maybe not ...

Overly high prices is the devil!
 

quote:

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Also (and I say this even though I think the big-5 record companies are scum), CDs are not overpriced as compared to vinyl albums in the mid 1960's if you consider inflation.

---

Also, CDs (new releases) generally contain a lot more music than vinyl LPs did. LPs were typically ~40 mins total playing time. CDs routinely exceed 60 mins these days. That alone could justify prices being 50% higher. I don't like CD prices any more than anyone else, but if you look at the big picture, it can be argued that they aren't all that over-priced.

I really do have a problem understanding the logic that people use to justify theft of music (or movies). "CDs are too expensive and I can't afford them, so therefore I am justified in stealing the music I want". I guess I'm weird or something, but I wouldn't be caught dead with a bogus copy of a CD, videotape, or any other copyrighted entertainment. Don't want to hear one or watch one.

The big five will no longer artificially inflate wholesale prices, and will allow them to all retailers.

As for if prices will take a tumble, hard to say, only time will tell. If you don't see a tumble now or for a year or so, don't just say it will never happen.

Remember once upon a time that Nintendo once controlled the video game industry. After an out of court settlement that barred them from demanding that retailers carry only thier decks and games, the competition began rolling out.

It took a few years, but now Sony and Sega are now major competitors.

So it takes time, but you have to wait it out and see what happens.

Also remember that the refunds are about one dollar, not actually the overcharge. Sorry if I did not make that clear earlier. This is an out of court settlement, not a judgement.

Dave

An even more apples-to-apples (and extreme) example would be how I paid more money for my copy of The Eurythmics Greatest Hits CD than I did for their DVD. The plain CD has 14 songs. The DVD has 21 music videos, complete with Linear PCM 2.0 audio every bit as good as a CD. It is easy to see which is the better value.

CDs are highly overpriced, particularly in terms of the events that brought on the justifiable lawsuit. CD prices had been dropping, particularly through big discount warehouse stores like Best Buy. It was not difficult in the early to mid 1990s to find new releases for as little as 10.99 or even less than that.

Then the collusion happened between the major labels and some key retailers. That drove prices skyward toward the stinking $18.99 and $19.99 levels you can easily see when visiting a Sam Goodys store (one of the retailers named in the suit).

The recording industry is losing money for two reasons.

Reason One: CDs are priced in a level the market will not bear. DVDs, video games and lots of other sensory entertainment is available as alternatives to pre-recorded music. So, to sell more CDs, they have to be priced much more competitively. And, believe me, it doesn't cost much at all to replicate CDs. You can get a glass and stamper master set made for $2000 or less and use it to replicate many thousands of CDs for perhaps no more than a penny per blank. The disc, printed packaging, jewel case and shipping cost make the total cost around $1.50 per disc --if even that. Production costs? If you are a major label shipping hundreds of thousands, or even millions, of units you can amortize that cost within that $1.50. The rest is all profit.

Reason Two: much of today's popular music just plain sucks. I don't even want to waste my time listening to half the shit on the radio much less waste any of my money buying it. I mean, damn, I have Morpheus on my computer and haven't fired it up in months. I can't even think of any listenable MP3s to download! The RIAA needs to turn around and have the people they are "protecting" improve their freaking product!

But the prices for cd media has always been hi here.

Since getting my cd burner i have found that i have been buying atleast twice as many cd's (pre recorded) than before, i've found that burning a copy of a friend's cd has given me more time to fall in love with the cd and convincing me to purchase either the retail version for the collection or buying another selection from the artist's catalogue.

BOBBY...i think you need to find a better radio station, as a last resort you could listen to my local radio station which is at www.rtrfm.com.au , it is better than most, they play everything from theatre organ music to dark goth to reggae to anything else you could think of?

25.00 to 48.00 pounds
 

Our taxes are high, but we have free hospitals, healthcare for all, free schools and education, "free"ways (get the joke!), government funded pension and a lot more which we just take for granted these days.

------------------
Cheers, Thomas
www.in70mm.com
www.dp70.com
www.70mm.dk

Market studies the RIAA chooses to ignore show computer users with CD burners and how avidly download MP3s buy a great deal more prerecorded music than people without CD burners. They don't say anything about that since it would water down their stance that MP3 downloading and CD copying are the root cause of their profit losses.

On better radio stations, yeah, I try to check out Internet based ones that play hard to find music or music that is out of print. But so many of the over-the-air stations in my area have been swallowed up by Clear Channel. Regardless of the station's music format, Clear Channel pretty much guarantees you will hear the same 10 songs every two hours for nearly a year. The short playlists they enforce make my collection of around 400 CDs look like an expansive music museum.

Thomas, considering 10 million more Americans no longer have health insurance than the number just a year ago, you make me want to move to Denmark.

quote:

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New Cd's generally cost between 5 and 7 dollars wholesale. The artificial inflation was for newer cd's and only were sent to large retailers.

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If only that were the case (unless you know somethinig I don't know, so I wonder where you're getting your information from). I think you're referring to Super Saver CDs, which sell for $8-$10. Most CDs cost a minimum of about $10.60 wholesale. Wholesale prices in the record industry are much higher than the publishing industry. Generally, if you buy from a major distributor in publishing in bulk (at least 6 copies), you get at least a 41% discount from list. You can get as high as 48% discount buying directly from the publisher. And even with those discounts, independent bookstores have a hard time staying in business.

In music, the discounts in the US are only 25-30% and that's if you buy directly from the big-5 distributors, which smaller stores can't do. If you buy from a one-stop, discounts are far less.
 

In my day job, I work in a store which sells CDs (among lotsa other things). We are a small store, so I can tell you that we pay on the average about $11.75 for CDs. Brand new stuff that's on sale costs us around $10.50 or so. I'll be more than happy to fax you an invoice if you don't believe me. Our distributor (which is Alliance Entertainment, one of the largest in the country) pays around $10.50 for the average catalog CD. Billboard magazine quite frequently reports the wholesale cost of CDs.

Where the big stores really get helped by the record companies is in advertising. They get paid to place new releases in high-visibility locations, and they get ads run for them in newspapers. Small stores don't get that kind of help, which is why many of them have to price things a bit higher. Still, at my store we sell all new releases for around $13, not bad.

What SHOULD CDs cost? Ten bucks? That's what a record album cost 25 years ago. You're expecting to get a more durable, more compact, more user-friendly product with twice the playing time and greatly improved sound that's easily digitally copied for the same dollars as 25 years ago? Give me a break. I would guess that a $10 LP from 1978 would probably cost MORE than $15 now, in 2002 dollars.

And finally, anyone who complains about the $18.98 price should know that $18.98 is the LIST price, and anyone who pays list for ANYTHING is not shopping very carefully. In the US at least, if you're paying more than $13 or $14 for new CDs, you're just not looking in the right place. (Hint: Get away from the malls.)
 

Sure, albums may have cost X dollars years ago and so on and so forth. But using 20 year old business models to justify the inflated price of an overpriced product does not work. You can find that in marketing 101. Today, we live in a much different environment with many different forms of media entertainment competing for our attention and our dollars. Things like DSS dishes, TiVO, HDTV, DVD, Playstation2 and X-Box did not exist 20 years ago. Back in the 1970's and even the early 1980's, one could justify a high album price since there weren't many other forms of entertainment available.

The very simple fact is plain, bare bones, Red-book music CDs are just not nearly as popular anymore. Given the choice between a DVD and CD, I'm usually going to buy a DVD since it provides much better value for the dollar.

The music industry has to do something different to make CDs attractive again. One thing is making BETTER MUSIC --because most of today's pop music is watered down crap. The industry has to beef up the content and quality of the discs to justify the high price or they have to lower the price. Lowering prices is a much easier thing to do.

They may charge retailers upwards of $10 per disc wholesale. But I do know for a fact they are not paying anymore than $1.50 for the actual true cost of the disc. That is taking everything into account (the album's production, disc mastering, replication, packaging, shipping, advertising and administrative costs).

The music industry is making windfall profits off of CDs and has been for quite some time. They absolutely can afford to slash prices down to under $10 per disc. Or they can just keep watching the pre-recorded music market continue to diminish.

I totally trust that is what you pay for your wholesale cd's. Sure is fun bieng the target of so much proof!

I spend a great deal of time reading, researching, listening, chatting, asking, investigating, etc. Not everything I get is going to be 100 percent accurate, or 100 percent totally thorough.

If I missed some serious details then dammit I am sorry!!!

Who cares anyway? The music industry is on it's way out and I couldn't be happier. Nothing but hippies and freaks all of them!

Dave
 

quote:

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The music industry is making windfall profits off of CDs and has been for quite some time. They absolutely can afford to slash prices down to under $10 per disc. Or they can just keep watching the pre-recorded music market continue to diminish.

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Once again, while I think the record labels are all slime, they are NOT making money. They're all losing money. A lot of this is their own fault, because they're only interested in the big hit and they put out so much garbage, but no one is this business is making money right now.

Record companies do make a killing (usually) once an album hits 500,000 to 1 million copies, but there's only a few hundred albums a year, at most, that go Gold. And there's over 40,000 releases a year in the US alone.

For years, the labels did well on catalog product while people replaced their vinyl and tape collections. But once that business started drying up about five years ago, the business has been in severe decline ever since.
And the lousy state of commercial radio hasn't helped the record companies either.

Courtney Love once gave a speech in which she gave an analysis of her perception of the economics. With a few minor changes, this is how she perceived how labels make money:

Label advances a (4-person) group $1 million. Out of this advance comes $500K in recording costs, $100K to their manager, $25K to their lawyer, $25K to their business manager. That leaves $350K of which $170K goes to taxes. That leaves $180,000 for the group to live on for a year while the albums is getting produced (or $45,000 each.)

Album sells 1 million copies. The band is entitled to $2 million in royalties.

However, what comes out of that royalty payment is the $ 1 million advance, and half the costs of $400K in tour support, $600K in radio promotion and a $ 1 million video. The promotion totals $ 2 million of which the band has to pay $1 million. The band winds up with $0.

The label had to pay the $500K manufacturing cost, the $1 million advance, $1 million in promotional videos, $200K in tour support, $300K in radio promtion, $2.2 million in other Marketing costs and $750K in publishing royalties. This works out to $5.95 million on revenue of $10 million. The label earns $4.05 million or a 41% margin.

The only problem (aside from the fact that the band gets nothing aside from the advance) is that most groups don't sell a million copies of an album. If the album goes Gold (500,000 copies), the band winds up owing the label $1 million and the label itself only makes $300K in profit. Below 460,000 copies the label loses money on the deal.

Conversely, if the album manages to sell 2 million copies, the band gets another $ 2 million in royalties, but the label really does well - they earn $11.55 million on income of $20 million or 58% margin. This is why they spend all of their time looking for the really big hit.

But in most cases, the entire label/marketing/artist compensation system really doesn't work very well. The only way this can work is if labels cut way back on marketing, promotion and videos and they can get radio to "sell" albums the way that it used to. And the music creation process needs to be simplified. You can't spend $500K in the studio.

The cost model you are showing only works if the labels are behaving in an honest and fair manner toward their artists. Much of the time they are not. And some of the cost quotes don't make sense. $500K to manufacture a CD? Maybe for a major pressing of 1 million units. But that is in a mere handful of cases. 40,000 CD releases a year? That's not all from major label output. Much of that is indie work pressed in small quantities.

A mere fraction of recording artists can count on getting a significant percentage of album sales. Most artists get nothing except for a creative accounting statement showing a loss. The labels practice the same "rolling break even" accounting model movie studios use. Sometimes the artist even gets a bill, with the recording label demanding percentages of their concert ticket sales and merchandise money. Most recording artists are signed to very unfair contracts that pretty much enslave them to a bad deal.

At the other end of the spectrum, you have those few A-list acts that get a lot of pampering from the studio at a great deal of cost. And that is just plain bad business. Totally stupid really. It is all on the labels if they want to waste money kissing some brat snob's ass. Just don't pass that extra cost onto the customer --I won't pay for it. Sony dumped out of Michael Jackson's contract because the fellow's lifestyle was busting their budget. Mariah Carey pretty much fell out of her contract for the same kind of thing. We need to see more of this kind of thing happen. It might actually make the A-list recording acts produce some better quality music to finance their jet-setting lifestyles.

Music labels have to control their costs and get records produced more efficiently. And they can do it. I don't have to spend a year shooting heroin and drinking Jack Daniels in New York's Electric Lady Studios to come up with a good album. You can put together a professional home recording studio for as little as $20,000, if even that, and produce professional quality material. CD replication is cheap to do. It is cheap enough that many garage level bands have produced their own CDs and even gone so far as to get them distributed without being signed to a major label. And very often, you can buy those CDs for under $10. If the little indie acts can manage that, the major lables better figure out how to do so as well.

More likely, the scenario is more like:

"You mean we can get the music, like, for free? Like, without paying for it? Dude, I am so there!"
 

quote:

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And some of the cost quotes don't make sense. $500K to manufacture a CD? Maybe for a major pressing of 1 million units. But that is in a mere handful of cases. 40,000 CD releases a year? That's not all from major label output. Much of that is indie work pressed in small quantities.

---

My example was if the group sold 1 million copies. Manufacturing cost on this quantity was calculated at .50 per unit. In actuality, it's a bit higher, but since some of the manufacturing is owned by the same companies that own the labels, the 50 cents made sense. In small quantities, a CD dup with 2-color label, a jewel case, a booklet and rear jewel case insert can easily cost $1.50 or more and that does not include mastering or plate charges.

Indie labels are actually part of the industry problem. While major labels control 83% of the sales, they actually release only 29% of the product. And if you look at the numbers, indies aren't making money either:

In the year 2000, Soundscan tracked almost 289,000 albums. Of those, 71% were released by indies. But indie sales were only 16.6%. The average indie title sold only 635 units at retail. (These numbers probably do not include internet sales, and especially not sales of CDs directly by artists web sites.)

In terms of new releases, Soundscan tracked just under 36,000 albums. Of those, 83% were released by indie labels. The average new indie title sold under 1000 copies. No one is making money selling 1000 copies of a new album. And the market cannot handle the flood of product from both the big labels and the indies.

In addition, less than 1% of all titles = 50% of all units. The industry sold 942.5 million units in 2000 (in the US). This means that the top 2886 albums (which obviously includes catalog product) sold an average of 163,000 units each. The next 285,705 albums sold an average of 1650 units each. In the days when albums were made in a few days in the studio and the labels didn't have to make videos and "pay off" promoters to get airplay, everyone could make some money selling 163,000 units of an album. But today, almost everyone gets screwed, the artists most of all.

As of earlier this year, only 86 albums in the entire history of the album format have sold 10 million copies or more. The top five albums of all time, all selling over 20 million units, are:
Eagles Greatest Hits
Thriller (Michael Jackson)
The Wall (Pink Floyd)
Led Zeppelin IV
Greatest Hits Vol 1 and 2 (Billy Joel)

Of course, these artists and their labels both made a ton of money on these albums.