I remember a while ago the big music companies got convicted of a big CD price fixing scandal. I sort of remembered they would have to, as part of their punishment, give some rebate per CD to all CD owners. This really sounds like a UL, but I swear I saw it on the news about 6 years ago.
My question is, does anyone remember the specifics on this? That was the last I ever heard of it, and no one I know has ever gotten a dime from the music industry, and prices of CD’s seem to be as high as ever. So tell me, what’s with this?
I was about to write this one off to delusion on your part when I decided to do a little net search. I’ll be damned, you’re right. Well, sort of.
Evidentally, the FTC has conducted probes into the dealings of Sony, Time-Warner, MCA, Polygram, Bertelsmann and EMI Music regarding their practices, including whether or not they offer advertising assitance to retailers in exchange for the retailers setting a minimum price on CDs. Also, a law firm filed a claim that said companies were fixing prices at a wholesale level which are artifically high (2000% above manufacturing costs). Alas, the case was dismissed, then reinstated in appeals, and as of the 24th of Feb 2000 has yet to actually go to trial. From what I understand, the case is for treble damages (standard in this case, if I remember my one business law course) and has yet to mention damages to be paid to you or I.
“I guess one person can make a difference, although most of the time they probably shouldn’t.”
Can you name an industry where the prices aren’t fixed?
The airline industry is by far the worst. One day United will raise fares by $20 and the next day every other airline has done the same. They always seem to espouse the “they did it, so we had to” mentality. That is not a truly competative marketplace.
Gee, I don’t think any of us expected him to say that.
Jophiel, thanks for your reply.
As for price fixing in general, I’m sure it happens a lot - companies probably aren’t punished nearly as severely as they should be. The CD price fixing is particularly loathsome, though, since it fixes the price so much higher than the manufacturing costs (about or less than $2 per CD).
granted the price of manufacturing cds are small, but you also paying 7.1 cents or so to ascap, bmi, or sesac per song, paying for best buy’s rent, their (non existant) employees, the shipping, the advertising and promotion that originally told you about the artist or album, the record label’s workers, etc…
so while the price is expensive (that’s usually why i shop best buy…if they have it, and it’s new, it’s probably 11 dollars or cheaper), you are paying for many things, like mall rent if you shop in a mall (and i don’t)
i think SATAN spelled it out in some pit thread that i don’t feel like looking up right now.
Avumede, if my math checks out and the information I gave was accurate, on a $16 CD the manufacturing costs were about 80¢
Granted, stores need overhead and all of that, but the standard retail markup in any place I’ve ever worked has been about 2-3x. Now mind you, I have no idea what the wholesale price of a CD is and I imagine that Best Buy makes enough money selling crappy computers and VCRs that they can pay the rent on a $13.99 CD as opposed to MusicLand needing that extra few bucks to stay afloat.
There is, however, a large difference in “remaining competitive” and price fixing. Air travel is more of a service industry, so I don’t know how well the comparison pans out. What the record companies are doing (allegedly) is working on a retail level through offered assistance to fix prices. Going back to the MusicLand/Best Buy comparison, I figure that the specialty chains need all the help they can get to stay in business. From what I understand, CD sales are in a lull right now partly from things like MP3’s and partly because the initial rush to convert vinyl and cassette collections to CDs has come to an end. Regardless of how companies need to cover their costs though, price fixing is illegal in the States or else the FTC wouldn’t be involved.
Anyway, the OP has been answered so I’ve little desire to turn this into a debate. I don’t buy enough CDs to think much about it and those I do buy, I buy at the box stores (a la Best Buy) to save cash.
“I guess one person can make a difference, although most of the time they probably shouldn’t.”