CD Prices

The BBQ Pit
1

IMHO record labels are stupid!!!

So if anyone hadn’t noticed Circuit City had a great “day after Thanksgiving” sale. Every music cd in the store was 9.99! Even if it wasn’t the the most busy shopping day of the year no one can pass up a $15 cd for less than $10. Seems to me record labels should take note of the fact that the cd aisles in the Circuit City I visited yesterday were jam packed. CD’s were practically flying off the shelf. And I’m not just saying this from observation. Twenty-three of those CD’s jumped right into my cart.

Maybe it’s not all the people illegally downloading music thats hurting the music industry, maybe, just maybe, it’s the PRICE of the CD thats killing them. Just my opinion though, after all, what do I know!

Add greedy to that…stupid and greedy!!!

2

Circuit City has always had the best prices I can find for CDs, normally $13. I buy most of my CDs either there or at Best Buy.

I agree that if they lowered prices to $10 per CD their sales would shoot skyward and the Great Downloading Scandal would be a thing of the past once they saw sales that reflected what competitive prices can yield. Please, labels, anything over $14 or $15 is too much.

3

You have to mention that many people were doing just that, buying a $15 CD for $10… If all prices are lowered to $10, then consumer mentality doesn;t kick in.

And I agree RIAA afilliates are greedy. CD’s are cheaper to manufacture yet they cost more than audio cassettes. The content is the same, why charge more?

(obvious answer)

4

Remember what lowering the price does to the net profit. Many people think that cutting the price 33% cuts the profit 33%, so a $15 item lowered to $10 would lower profit from $7 to $4.70 (just making up numbers). So you sell 2 CDs instead of one, and you’re ahead of the game.

But this is not true. Cutting the sales price cuts the profit dollars directly, and not as a percentage. So if you make $7 on a $15 dollar CD, and cut the price to $10, your profit drops to $2.

This isn’t a 33% decrease, it’s an 82% decrease, and you have to sell 3 ½ CDs to get the same gross profit as you previously had selling only 1. And that doesn’t count the overhead per item in handling, transaction processing, keeping inventory, etc. So you may find you have to sell 4 CDs just to get the same profit you had, let alone make any additional profit.. Not much incentive there.

And that assumes an almost 50% margin to start with. If you only make $5.50 on each $15 CD, you have to sell 11 CDs at $10 each to make the same money. Your CDs truly have to fly off the shelves to keep you in business.

Granted, this only takes into account the last step in the supply chain and my guess of the profit at that level. But the numbers stay the same if you move through the supply chain. You just spread the losses out over more places.

This is wrong. A CD and cassette don’t have the same content. Even assuming they have the exact same tracks (sometimes they don’t), the CD has higher fidelity, is more resistant to damage, has features such as instant random selection of any track, instant shuffle or programmable play, longer playing times, etc.

Many consumers find at least one of these features to be worth something, and some consumers find all these features to be worth something. Myself, given a choice between a $3 cassette and a $13 CD, I’ll take the CD in nearly every instance.

All this isn’t to say that there is some extra fat in the CD profit. I think the industry as a whole, not to mention the musicians and consumers, would benefit from extra competition, and a general slight lowering of prices. But I don’t think the fat is as easy trim as most people think. And to say that they should just lower their prices by 30% is ignoring the reality of the situation.

5

Maybe I wasn’t specific enough. I understand that CD’s have an added value, which is why we’re willing to pay more for it. When I was referring to content I was talking about the COST of content. I thought this would be implied since I was talking about cost in that paragraph. The cost of paying royalties is the same for both. Recordings don’t have to be made to have higher fidelity. ALl the other features are built into the CD.

My point was, the COST of making a CD, including the content is lower than a cassette. Why charge more?

My obvious (I thought) answer was that we are willing to pay more.

6

Moving this to the BBQ Pit.

7

CD prices? DVD PRICES ACKAKCKAKKKK SPUTTER!

8

Nice pre-emptive move, buddy. This will get thrown into the abyss pretty quickly.

I would be willing to bet anything you’d care to lose that this is bullshit. Lowering the prices won’t effect downloading except at the extreme margins.

The contrast between $15 and FREE and the difference between say $12 and FREE is effectively ZERO. In both cases lazy (and cheap) consumers can still receive something at NO COST and less inconvenience. There is simply no motivating factor in cost reduction to bring the music buyers out of their PCs and over to record stores.

Call me a cynic but I don’t think any amount of price reduction will change such patterns. People CAN get something for free so they WILL get something for free. If all the members of the RIAA simultaneously lowered their prices to $10 per CD within a year we’d hear complaints that the average price should be $8.

Like a commons without a protector the music industry is doomed to tragedy.

9

I always buy my CDs at Best Buy. A CD that costs $12 there would cost $16 or more at a music store.

10

Johnathan,

I say BS. For me, there is very much a difference between $17-$19 (what some CD’s used to cost) and $10. Call it whatever you want, but I, and many consumers simply feel that $10 is fair, $19 is a rip off. $10, I often feel that it’s worth it to support the artist, get a high quality, unscratched, uncompressed reproduction, and the album art, and that indefinable quality of actually owning a physical print of a CD like owning a piece of art vs. the poster. At $17, I feel like telling the RIAA to go fuck itself.

Hence, if I see a CD on sale, even if I already have a direct copy of the CD (not an MP3 version), I often feel like supporting the whole music business. It dosn’t feel like getting screwed. It makes a huge difference to me in terms of buying or downloading/copying music.

Of course, all of this is hypothetical. Not like I’ve ever done anything beyond purchase CD’s. Certainly never downloaded.

11

On a $15 dollar CD…

Between $1-2 goes to the artist.

Between $1-2 goes to the retailer.

About $2 goes to creation, distribution, etc.

The remainder is eaten up by the boondoggle that is the record industry. And they’ve been doing it so long they have no clue how to cut $10 in cost down to $4 in cost.

Circuit City lost money on every one of those CDs (except the Universal ones - they went to a $9.99 pricing model - at least IIRC it was Universal, might be one of the other entertainment conglomerates). Hopefully for Circuit City, the people packing the record aisle also bought something with margin in it.

12

Here you are mistaken. Downloaded music isn’t completely “free”. You’re assuming the risk of running the sharing software, both in what it can do to your computer and what you can get sued for by using it. You’re spending your time finding and downloading the tracks you want, and you keep trying until you get a good, clean version of it, and if you don’t have broadband (like the majority of america) you’re investing a significant amount of time in this hunt.

Not dealing with that crap is worth something to many people, myself included. $10/cd sounds about right.

-lv

13

Well I didn’t mean this to be a pit thread but I guess it works!

Anyway, I do understand that cutting the price of the CD not only affects Circuit City (CC), but also the recording industry. And I know that CC wasn’t just being nice to it’s shoppers, the $9.99 thing was just a gimmick to get us in the store to buy the latest greatest plasma tv’s and such.

Another thing to say is that I fully agree with what threemae said earlier. I myself may have at some point had direct copies of others CD’s. Over time, however, I have saved up and purchased the CD at the store. I did this because I, and in my opinion many others, like to have the original CD with all the artwork and sometime lyrics. (Thats another thing that bothers me, CD’s that don’t come with lyrics! That’s a whole new thread though.) If the recording industry would just take a hit and give stores such as CC the ability to sell a CD for $10 while still making a profit there would still be a large increase in CD sales to those listeners that feel this way. Being able to purchase 7 CD’s at $10 a piece is a lot more appealing to me than dropping the same amount of money on 5 CD’s at $14 a piece.

Of course there will still be the cheap listeners that will gladly take “free” downloads over a $10 CD but I feel there will be many more people that would check out a few songs and then drop the $10 on the entire CD.

14

Is it really $1-2 dollars? I was under the impression that most artists, working for major labels, received little to nothing for CD sales.

I’m not calling bullshit or anything, I just always had the notion they got a shiny quarter for every sale instead of a dollar bill. :wink:

15

No cite, but that Salon article by Courtney Love that’s been passed about, stated that something like 11% of CD sales went to the artist, and out of that eleven percent, the label paid for the band’s studio time, advertising and promotion, etc.

A similar online article, which again, I can’t find, note that for most bands, the only money they’d make in a year would be from concerts. Unless they were a superstar-level band (IE, Metallica, Rolling Stones, etc) any money they’d make from their music sales went to cover the cost of production, promotion and filming videos.

It is, apparently, not uncommon for a band to have to use money from their concert tour to help cover shortfalls in the sales/promotion costs.

While, of course, the label uses a small fraction of it’s 80%-plus on payola; paying to have the music played on the radio and MTV.

16

UMG did reduce the wholesale prices of their CDs recently by some 25%, at least in the States. I don’t know how this has affected high street prices directly in the states since I don’t live there, but the expectation is that the other majors will have to at least follow suit to a certain extent.

I agree with those saying that despite piracy, there is still a price that the market will bear. I would consider a $10 CD to be a bargain (although I’m used to UK prices, which are often well over $20 per CD at present exchange rates). I think that the majority of people recognise that piracy is fundamentally not right; there is a powerful urge towards obtaining legitimate products. Surely this is proven by the success of the Apple iTunes Music Store - arguably, people there are getting less functionality than they could steal, and yet they pay. Why? I believe it’s at least partially because the service is legitimate. There clearly is some sort of value attached to obtaining legal copies - after all, it’s been possible for many years to buy dodgy copies of just about anything from that guy in the market, but that hasn’t killed off the high-street. Like-for-like, I think a majority of people will go with the real deal.

17

Those numbers are from someone working in on the retail side of the industry (and doing something other than ringing up CD sales at Sam Goody). Of course, an individual recording contract may vary.

Some artists get almost everything - the ones that self publish their CDs.

18

I buy most of my CDs directly from the record labels through the Internet. I know a few places where I can get CDs from $8-$12 with free shipping. I only buy from Best Buy if I just have to have it right now.

19

I had this discussion on Wednesday with a friend at work who downloads/burns a lot. I don’t download (illegally) or burn CDs, as I fancy myself something of a collector. The point of Universal going to $10 a CD came up. She said she would be much more reluctant to download/burn CDs if they were $10 apiece.

The fact that CD prices have not come down at all (and in fact have gone up) since the medium first came out means that any increased margins that they have received due to the rapidly decreasing cost of actual CD manufacture is gobbled up by someone or something. Whether this is the artist, the label, the store I dunno. But the simple economic fact of the matter is that in the era of downloading music, the value of the content has fallen. So record companies simply must reduce price if they want to sell as much.

One must develop an algorithm about music buying. If I am interested in a band, I will first check on emusic.com or iTunes and buy a few of their songs to try 'em out. With my purchase of an iPod, owning the CDs has become of less importance to me (although I do burn CDs of downloaded tracks to keep them safe). If I really want to own the CD, I check at BMG. If you time your purchase, a BMG CD should never cost over $6.50 (average). I only resort to full priced CDs if these options fail.

20

Well, they certainly haven’t gone UP since CDs first shipped. I recall paying almost $30 for Dire Straits ‘Brothers In Arms’ way the hell back when.