What if movies and music are actually overpriced?

Cafe Society
1

In the context of Wall Street, people might say that the market is overvalued. Soon the prices will drop.

What about music CDs and movies? Are they overvalued, too? And by that I mean, are people paying more than they are worth?

I read an article in the Wall Street Journal the other day that was discussing the movie industry’s anxiety concerning the technology hitting the shelves so soon: DVD recorders. “Oh me oh my,” they chanted in unison in my paraphrased recollection, “we’re headed straight for the same rabbit hole the music industry fell down!”

You know, the one where record companies and artists are purportedly losing millions or billions or their souls to filesharing?

But the context of reading this in the Wall Street Journal made me think to myself, “Maybe music and movies are simply overvalued. Maybe it isn’t worth as much as we’ve been forced to pay all these years. Or maybe it was worth that much then, but now technology has changed and the value does with it. Maybe we’re purchasing the recording and film industries expectation, and not what we actually think of the product.”

Far-fetched, I thought. But then I went to my desk and sat down and noticed my Fugazi CD with a recommended sale price of ten bucks. Sure, Ian is all up in the Discord label, but all Discord CDs are quite cheap, not just Fugazi’s.

Is Madonna’s Ray of Light worth $15.99 or $17.99 because that’s what I’m willing to pay for it or because that’s all I can pay for it? Surely I’d buy it if it were cheaper. But then, of course, what else does “price” mean if not what the manufacturer can sell it at and turn a profit that satisfies him?

But then, I can steal the music for free. I didn’t, I want my money to go to Madonna. I’m just a wacky anarcho-capitalist like that. I’ve purchased all the music I own except for two specific songs… the club song from the film Blade and the Nerf Herder theme to Buffy the Vampire Slayer. Just those two… but I’m not saying it was ok for me to do that.

So what if it isn’t that the price is currently governed by what I previously said it was any longer? Technology has brought with it something new. People are obtaining music for virtually nothing now (the cost of media space and time downloading). And because of Peer-to-Peer networks, the distribution of this music is also done everywhere the internet is, instantly (more or less).

And now it looks as if these monolithic recording industry giants are more or less becoming useless. And they are begging the question of how much media is worth: it should be worth what they say it is, not what the market will bear, because now, with the technology available, the market ceases to “bear” price shifts and simply eliminates the middle-man in a profit slashing initiative that would make Marx blush.

No, I don’t think artists particularly love the idea of having their music passed all over the world for free without any cost to them. Why would they when they can make a nickel off every CD sale? Oh, wait, some sarcasm slipped through there. I meant to ask, why would they when they can charge for copying like a copyright implies?

But what would happen to pirating if CDs cost, say, $5 instead of $15? What if the solution here isn’t to mutilate technology to fruitlessly serve some Machiavellian end of the record companies (they can never stop me from recording the audio straight out of my “line out” on my sound card, those silly, silly beasts) but to simply adjust the price to something more palatable?

2

There will always be some people who will steal whatever they can, either because they’re poor or they want to stick it to The Man. As for me, I’d buy a lot of CD’s if they dropped to a third of their current price–probably more than three times as many–and I suspect that a lot of people feel the same way.

3

I usually don’t care much about grammar or spelling mistakes, but if a mod pops in here, can someone fix the title so that it correctly uses “are” instead of “is”?

ultrafilter, and that’s something I neglected to mention, too, that I originally wanted to. I want to own much more music than I do, but it is currently at a prohibitive cost for this. Hell, I think I own between 250-300 CDs, most purchased at around 12-15 dollars a piece. I rarely buy used for the same reason I don’t use P2P file sharing… I want some money to go to the artist. But I think you’re right… I would most likely purchase more than three times the CDs if they fell three times in price.

Of course, this won’t really make anyone more money if pirating rates stay the same. But again I wonder… would they?

4

I think the Internet will eventually allow us to cut out the middleman. Soon musicians will be able to sell copies of thier albums over the internet off of thier own web pages. Authors will be able to sell Ebooks off homepages, giving them nearly all the profit.

What this will do to quality I don’t know. Perhaps nothing. However, I would think that with such easy acess to displaying a product, the internet will become swamped with artists and titles, thus making finding a decent song/book/movie will become difficult, and people will set up web pages offering quality (books, music or movies). They will of course charge for this. Soon prices and percents those web pages charge will go up, and people will be “overpaying” for quality art.

Or perhaps I am misunderstanding the OP?

5

I think the only way you can meaningfully apply a definition to “overvalued” in this sense is to define it as “the price they are charging is not the price at which they will maximize their profit”. Otherwise, you’re just applying a bunch of subjective and unrelated comparisons. Obviously, any time somebody shells out $15.99 for a CD, it means that they decided $15.99 wasn’t overvalued. Some people wouldn’t pay more than $5 for it, some people may pay $25 for it. But that’s obvious and uninteresting.

So, in the way I defined it, is the music industry overvalued? I think so. In fact, I think it’s greatly overvalued. Moreover, I think the industry execs know this. If it wasn’t overvalued, so many people wouldn’t be resorting to piracy. However, those in charge of pricing decisions are trying (unsuccessfully, I believe) save their precious effective monopoly through legislation, rather than competetive pricing. I think if they would just bite the bullet, alter their business model a little to embrace current technology rather than hide from it, and drop prices somewhat, they’d end up making more money in the long run.

The movie industry, to me, is a little more complicated. For one thing, we currently have two viable media, whereas with music CDs are effectively the only medium. We have cassettes for the budget-minded, and we have DVDs for those willing to pay for higher quality. DVDs tend to cost a little more than tapes (sometimes a lot more, if you take into account things like special editions), yet they still sell like hotcakes. I would think that if DVDs were really that overpriced, people would be sticking with VHS. Consider that it’s as easy, if not easier, to copy VHS movies as it is to copy CDs, yet the piracy problem isn’t nearly as large with movies as with music. You could argue that it’s due to quality degradation in the copying of VHS tapes. Maybe, but I believe it’s just because prices are low enough that people would rather just buy the thing than go to the trouble of pirating.

One more reason I think that movies aren’t overpriced: The rental industry. You can run down to the local Blockbuster and rent a movie for a couple bucks. You have to rent the average movie at least 5 or 6 times before the cost equals that of buying the movie outright. Even figuring in less obvious costs, like gas and time, figure you break even at 4 viewings. Really, how many movies that you buy do you watch more than 4 times? With me, precious few. Yet I have a collection of almost 200 DVDs. Then again, I’m a movie aficcionado, so I’m far from ordinary, but I still know tons of people who are, at best, casual viewers, and who still have large libraries of movies. If movies were really too expensive, I don’t think this would be the case.

So, short answer: Music, overvalued. Movies, not.
Jeff

6

I think commonplace piracy is evidence that music is overpriced. For tangible products like cars and computers, if the price is too high, people just won’t buy it; however, when the product is information, people can have their cake and eat it too, by obtaining the information for free.

Instead of weighing the price of a car against the inconvenience of not having a car, potential music consumers can weigh the price of a manufactured CD against the risk and inconvenience of illegally obtaining the music and converting it to their preferred format. (They can also buy the CD used, which is the same as pirating it, from the record company’s perspective.)

However, the underlying problem is the same, and the music industry’s response should be the same as the car industry’s: find out why these people aren’t buying the product, and either adopt a different strategy or keep the same one and accept the “loss”.

I see three solutions:

  1. Drop the price of CDs to reflect their real value. These days, CDs rarely come with liner notes or even lyric sheets, and many new CD-shaped discs are in fact crippled discs that won’t play in a PC or MP3-CD player. Yet, they cost more than full-featured CDs did five years ago. The consumer isn’t getting $18 worth of product, so don’t charge $18.

  2. Make a better product to justify the price. Put lyric sheets and liner notes back in the case. Throw in interviews with the band, or coupons for merchandise and concert tickets. Give the consumer his money’s worth.

  3. Become a better Napster than Napster. Anyone who’s used P2P file sharing knows about the problems with incomplete files, poor quality rips, disconnections in the middle of a download, mislabeled files, firewall issues, and so on. I think people would gladly pay a reasonable price to avoid those issues, and the record companies could easily corner the market by setting up dedicated download servers, if they can get past their fear of unrestricted formats like MP3. But no one wants to pay $10/month plus $1/track for songs they can’t even play in the car, which is all the industry has offered so far. If you build it, they will come.

7

Moderator’s Note: I think this one can actually go over to Cafe Society.

8

How much product is the consumer getting? In terms of monetary value. What is thier real value. Better yet, if the record company is charging 18 dollars for a CD, how much of does it cost to make the CD? To exist, the record company needs to make money, you start cutting prices because you feel you as a consumer are not getting full value, they go under.
What percents of the sale of the CD go to the record company, the music store and the artist? Could the Music store exist if they didn’t make a profit? If they cannot pay the employees? What about the record company? Should they drop all profits, have all employees work for free, and charge just enough money to cover the costs of the plastic the CD is made on? The costs of hours of recording, rent for the building, utilities, etc?

9

Respectively: A metric ass-load, a little, and a few cents. You forgot an expenditure: The cost of buying off politicians to pass blatantly unconstitutional laws to infringe upon our property rights. I highly doubt the record industry would go under if they dropped the price of their CDs. Indeed, I think their profits would increase.

Jeff

10

Of course the record company would hire lobbyists, any company that wishes to protect it’s interests would do so. To what unconstitutional laws do you refer? (IOW cite?) The right to protect its business? Paying off politicians? You take such liberties in what you assume to be fact or what could be but might not. (Unless I am missing an important announcement, AFAIK if a politician is caught taking a bribe it is a big deal and there would be lots of news coverage over it)

Record companies themselves would need to take an ass-load of the money as you so put it. You see, I don’t know if you run a business, but there is alot of expenses. Lawyer fees, taxes, rent, employee pays, insurance, utilities, computers, office equiment and the likes. Sure, there seems to be alot of money floating around for Executives to get six digit bonus’ every year, but that is in every company. (and that could turn into quite the economic debate)

Companies generally hire consultants to figure out the best way to make a profit. People with experience in these things and schooling in economics. Alot of thought is put into exactly how to charge the most they can get away with. I would say that if they thought lowering the prices would bring in more net profit, they would do so. Of course if you are such a consultant I would be interested in hearing some figures, and why the company you work for does or does not employ these breakthrough plans on increasing profit.

11

Actually, there have been cases within the past 2 years where the record industry has been convicted of price fixing. Here’s a cite involving a Three Tenors CD. I don’t condone theft, but by repeatedly indulging in price fixing, I’d argue that the record industry is stealing from the consumers.

As far as the production cost of CDs goes, I believe a CD costs less to produce, but one of the initial justifications for the higher price of CDs is that audiophiles would be willing to pay more for better quality audio.

CJ

12

Hmm, Interesting link cjhoworth. I think saying “record industry” is misleading though. It would be more accurate to say “some companies in the record industry”.
Is it alright to say that because this price fixing thing was attempted a couple times in the past, that it is play now?

I dunno, this smacks of discussions I hear at work about taxes. They don’t want to pay the taxes, but they dont seem to want to accept that it is a necessity. Sure, there are things that could be done to lower things (like taxes or record prices), but at what cost to the system? How are these things going to be implimented, enforced, and handled? Theory is great, but like socialism, it’s practice may not be so pretty. Untill I see current facts and figures with reasonable sounding plans on how to impliment changes and deal with the reprocutions, I am going to just say that these are merely interesting musings.
I like the rest of the consumers out there, would love to get more for my money, but I am not conviced it is possible.

13

Popular music is overpriced. Just look at the indie labels for proof.

Dischord records recently upped the price for their CDs to $10. Go to Sam Goodie or Borders Books and albums from Dischord bands like Fugazi or Jawbox sell for $15+.

Same thing goes for Fat Wreck Chords. $10 bucks from them, $15+ from the chain stores.

Kung Fu Records: a relatively indie high of $12, $15+ in the stores.

…and these labels feature bands that don’t charge $35 for stadium tour concert tickets.

14

Wow, 35 dollars for a concert ticket. Most of the ones me or my friends go to are 70+. (I would agree that concert tickets are overpriced though). :slight_smile:

Independent records have less expenses; less publicity, less libel and copywrite lawsuits, and probably put out lower quality CD’s. There may be other factors that I am not even aware of. I am sure some of the prices are inflated because of the name of the band. Demand usually increases prices, nothing short about that. If popular records prices are inflated because of extra expenses or because they are milking it for what it is worth is yet to be seen.

As for the chain stores charging more for thier records, I don’t know. Why they would charge 5 dollars more is beyond me. Apparently people are buying them or the chains would be more competative with thier prices. That, however, is up to the stores, not the record companies.

15

This very thing occured to the home video industry. Pre-recorded videos used to cost ridiculous amounts of money, upto $90. The ability to tape movies off HBO and Showtime during the early 80’s, then swap and duplicate those tapes with others, caused the price to plummet. Nowadays, at $15-$20 for a DVD that comes with special features, at high quality, it just isn’t worth the bother for many people to tape all their movies off the premium channels. If the price of a common DVD was $50, you can bet piracy of films would be as commonplace today as it was in the early 80’s.

So the music industry is hitting that same wall. The prices they have set survived for so long through inertia, through consumer expectations, and probably through agreements on setting prices. Remember when the recording industry actually ANNOUNCED that the recommended price was going up from $15 to $17? Doesn’t that indicate some collective agreement to set prices and not to undercut the opponent?

Piracy has no cost in dollars, but it has a cost in time and hassle. If the price of a CD drops to something that more accurately reflects what consumers feel the disc is worth, piracy would drop because people wouldn’t be inclined to hassle with all the mislabeled or incomplete songs they can pirate through the internet.

Excellent solution. A combination of a price drop (as low as $9.99 would probably do the trick) and some DVD-esque bonus features could revitalize consumer interest in buying the pre-recorded product through legal channels.

16

Publicity is an issue due to an interest in making loads of money, just like having CDs sell at the chain stores for a lot of money. Record companies often pay chain stores money for prominent product placement.

Libel and copyright could be reasons, although I don’t know if it justifies such an increase. The indie labels do well enough to profit when selling in only the tens of thousands; the major labels need to sell millions of albums at a higher price due to possible suits?

The quality of indie label releases has improved greatly over the years. It’s one of the main reasons why indie labels have thrived. If not, every indie label band that was offered money from a major label would go for it in a heartbeat. Besides, I have albums from many bands who spent time on indie labels, then “sold out” and went to the major labels, and the album quality is the same. I have also heard some of these bands return to the indies, once again with no discernible difference in quality.

Now throwing money into a production… that I can believe. Once again, good albums have been made without millions of dollars thrown into them. It’s like comparing well written, directed and acted films with summer blockbusters.

$70 for a concert? Forget $17.99 CDs, $70 concerts are overpriced :stuck_out_tongue:

17

I disagree. A Blockbuster rental is $4 and change, and you can buy any video for under $20, sometimes well under – most BB stores have a decent selection of almost-new releases for $9.99 or less.

I have never understood why the video rental industry has been so successful. These days the bottom has fallen out of prices for pre-viewed VHS tapes, but most rental stores are shifting into DVD rental, which makes more sense as DVD purchases are still more expensive, and the practice of releasing a particular film on DVD 2 or 3 or more times with different ‘features’ on each release are unique motivations to rent DVDs.
As for the music industry, I think the point has been made that indie labels frequently price CDs at $8 or $10 and make a decent profit by cutting out the middleman. They are also supported by people who like the indie ethic. In terms of ‘quality’ I’d say indie labels are at no disadvantage – sound quality of an indie CD is equal to that of a major-label CD, and the music quality is vastly superior, and I’ll argue that all day.

Anyway, count me among those who would spend far more on new CDs if their prices were reduced, and among those who think record labels would see profits increase if they decreased prices. Any solution along those lines can only be temporary, though, as eventually the industry as a whole is going to have to move into the information age.

18

Prices could certainly be higher than they are now. Here in Japan, new releases by Japanese artists are usually $25 or more. Singles are $9-10.

19

When I see something I believe is priced too high I don’t buy it. For some reason the music business is different. If someone says cds cost too much, they feel they are justified by stealing it. I would really like to steal, I mean file share, from internet thieves, maybe break into their house and take the tv or washer and dryer. If caught I would stand up in court and tell the judge that I stole from someone that I believed was charging too much and that I had the right to steal from these ‘over-chargers’. I don’t think the judge would buy my argument nor would anyone else. So why is it ok to steal music? Because it is easy to do it with computers. Notice how internet thieves say they are justified in stealing music off the web but if music is over-priced why don’t they go into a record store and steal the cd? Because they have a greater chance of getting caught.

Most people will say they want the artist to get some money but screw the record labels. Record labels are the ones spending ALOT of money finding and recording the people we want to listen to. There is alot of expenses involved in recording. Expenses cusumers ignore because when they listed to a cd they don’t hear recording fees, license fees, marketing, manufacturing distribution, promotions,buy-backs, warehouse, payroll, contracts, getting out of contracts(like the Mariah fiasco), … And then they get to distribute earnings to the highly paid CEOs, board members, employees involved in profit sharing, stock holders…

Much has been said about the indie labels. People talk about indies like they were saints. Indies get acts major labels don’t want. If an indie act get popular they usually will sign to a major label- why? Money. Why do some acts stay with indies? Some can actually make more money with a small label if they have a deal giving them more of a cut than they can get with a major label. in other words acts usually go where there is more money.

Is music over-priced? Would all the people who say that music is over-priced form their own record label and release their own cds at what they consider a fair price. And if I think it is over-priced I’ll just steal it from you.

20

Indies get acts that the major labels don’t want and the acts that don’t want to be on major labels. When Rancid start selling platinum albums, Epic records offered them $500k up front to sign with them, and Rancid refused, opting to stay with Epitaph records and form Epitaph subsidiary Hellcat.

While many indie bands do sign with major labels when offered major label contracts, many don’t. Money isn’t the only thing motivating bands.

As for getting bigger cuts, most indie labels provide bigger percentages than major labels. The Offspring’s Smash sold less copies than Green Days’ Dookie but the Offspring made more money off of record sales due to getting a bigger cut from Epitaph.

As for indies being saints, I don’t know if you got that from my posts or not, but indie labels are companies just like the major labels, and making money is important for the indie labels too. I do think, however, that the major labels place a higher importance on making money than the indies. Sure, money is important for indie labels too, but it’s also about promoting bands the labels like. For instance, Fat Wreck Chords often signs bands because label owner Fat Mike of NOFX is a fan of the bands. Dexter Holland of the Offspring has used his Smash money and the money from the Offspring’s eventual switch to the major labels in order to promote bands on his indie label Nitro.

Major labels, on the other hand, will dump bands once they show they’re not making enough money. Jawbox signed with Atlantic records, put out two albums that outsold all of their previous albums, and was then dumped from the label because the albums didn’t make enough money. By the way, Jawbox started on Dischord Records. I remember going to a Sam Goodies a couple years ago and seeing the Jawbox album Grippe. Released by Dischord, the back of the CD read “available for $8 postpaid from Dischord Records”. Sam Goodie was selling it for $15.

Money is important, and another major reason for the development of the indie labels is that bands on such labels can actually live off their music, whereas in the past band members usually had “real” jobs aside from their music because without a major record deal such bands had to live off of other income.