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Why aren't CD's Cheaper? - read- very interesting

Discussion in 'Recordings [BG]' started by BigAlex, Jun 14, 2000.

  1. BigAlex


    Jun 12, 2000
    I found the following at guitar.com and found it kinda eye opening. If all the stuff in here is true it kinda pisses me off. I knew record companies were greedy but GEEZ!!!

    Why are CDs so Expensive? 4/13 by symonx

    by Negativland

    Reproduction of this essay is strongly encouraged.

    So, why is that new "Oasis" CD so expensive?

    In the early eighties, sales of vinyl, cassettes, turntables and cassette players were "flat". This means that sales were stable, not rising or falling. For the makers of all this hardware and software, that wasn't quite good enough. They needed a new angle. A new way to sell music and the stuff you play it on. Luckily, someone at the Phillips Corporation (owner of PolyGram Music and Island Records and one of the worlds top defense contractors) had the bright idea that it would be good for their stockholders and investors if they could get the music consuming public excited about buying music again by introducing a new format and a new machine to play it on (i.e. how can you convince that aging baby boomer to buy yet another copy of DEJA VU by Crosby, Stills, Nash and Young when they already have one?)

    Thus was born THE COMPACT DISC in all it's shiny, aluminum, plastic and digital glory. It's maximum playing time, about 75 minutes, was chosen because the president of the company wanted something that could play his favorite piece of music, Beethoven's 9th Symphony, all the way through without stopping.

    Well, compact discs weren't as successful as they had hoped. For one thing, their price was too high. The higher price was blamed both on the fact that they were mostly being made in Japan and that they had a high defect rate, with approximately one out of every three discs being tossed out before even leaving the CD factory. Early on, the economics of this led to an industry wide decision to continue paying recording artists a royalty rate based on the sale price of vinyl instead of the higher sale price of compact discs. And nobody was buying those new CD players either, because they were just too darned expensive.

    But then, in the spring of 1989, something wonderful happened for the music industry. Everything changed! Almost overnight, CD's were everywhere! Suddenly they were a huge success and suddenly it became almost impossible to get anything on vinyl at all..

    This change must have occurred because it was what the consumer wanted.....right? We live in a market-driven economy and the market was demanding more compact discs.....right?

    Wrong. What actually happened was this - a flexible return policy had always existed between record stores and the seven major distributors, i.e. stores could "buy" something from a distributor, and if it didn't sell, they could return it. This allowed stores to take more chances on new releases or on things they were not so familiar with, because if it didn't sell, they could always send it back. Well, in the spring of 1989 all seven major label distributors announced that they would no longer accept "returns" on vinyl and they also began deleting much of the vinyl versions of their back catalog. These actions literally forced record stores to stop carrying vinyl. They could not afford the financial risk of carrying those releases that were on vinyl because if they didn't sell they would be stuck with them. Very quickly almost all record stores had to convert to CD's. The net effect of this was that the consumer no longer had a choice because the choice had been made for us. High priced compact discs were being shoved down our throats, whether we knew it or liked it or not.

    As we mentioned earlier, record labels were paying artists a royalty rate on sales of CD's based upon the $8.98 or $9.98 list price of vinyl (or achieved the same end result by using contractual tricks like "packaging deductions"). As CD's took over and the majors all acquired their own domestic CD pressing plants and the defect rate dropped to almost zero, the cost of manufacturing compact discs dropped dramatically as well. One would have expected the price of CD's to also drop and for the profits to now be split evenly and fairly with the musicians who were making all the music.

    This, of course, never happened. CD prices have continued to rise to a now unbelievable $16.98 list price (soon to be $17.98!) while manufacturing costs have now dropped to less than it costs to manufacture a $9.98 vinyl release. A CD, with its plastic jewel box, printed booklet and tray card now costs a major label about 80 cents each to make (or less) and a small independent label between $1.50 and $2.50. Meaning that CD's should now cost the consumer less than their original prices over a decade ago, not more. But the music business got consumers used to the idea of paying the higher price and the labels got used to the idea of their higher profit margin, and record labels continue to this day to pay almost all artists a royalty rate as if they're selling CD's for the list price of vinyl. That extra 4 or 5 or 6 bucks goes right into the pockets of the record labels. It is not shared with musicians. And of course, we all had to go out and buy a CD player (which had mysteriously dropped to a more reasonable price) if we wanted to hear any of the music on this "popular" new format. So, all in all, it's no wonder that the record industry and stereo manufacturers loved the compact disc. In fact the following year (when our economy was in a recession) the music industry had its biggest profits, ever!

    If any of this bothers you as much as it does us, then you might be wondering why you've never heard about any of this or why no anti-trust action was ever taken against major labels and distributors. The answer to this is quite simple. Most of the reporting on the inner workings of the record business comes from the music press and the music press is almost totally reliant on the advertising dollars and good will of the business that they're writing about. So, in the interest of not wanting to "rock the boat" or anger the folks who essentially bankroll their publishing ventures, this story would, and will continue to remain, unreported. And with the coming "popularity" of DVD, the music industry looks like it is ready to try the same tricks all over again. -Negativland
  2. ~Loxley~

    ~Loxley~ Guest

    Apr 9, 2000
    I'm sorry. I didn't have time to read through your entire novel of a subject... I've got a bus to catch in seven hours..

    But I'd say the reason the new Oasis CD is more expensive than others, is that it's a new CD! It's brand new and lots of people will want to buy it. So the price goes up. Simple!

    I hope this was the answer to your question...


    Never trust a man who doesn't drink - Winston Churchill

  3. Acacia


    Apr 26, 2000
    Austin, TX
    just so you know, there is legislation in the works to lower the prices of CDs. It's totally out of hand right now.

    on average, a cd costs about 3-4 bucks to make, packaging included. cassettes cost more due to moveable parts.

    write your congressman and help press the issue.


    My website

    My eBay stuff

    CDs and Concert shirts for sale

  4. Two words: NAPSTER RULES!!!
  5. Acacia


    Apr 26, 2000
    Austin, TX
  6. shirky


    Apr 7, 2000
    Reading, PA, USA
    BigAlex, thanks for the info. I always wondered why CDs were so darned expensive. However, if anything I learned in the Economics class that I was forced to take was true, then CD prices should begin to decrease as DVDs and Napster give it more competition. Less Demand, cost SHOULD go down. I guess we'll see.

    [This message has been edited by shirky (edited June 15, 2000).]
  7. Or just get a friend to burn you a copy. biggrin.
    I could make money by burning CD's for my friends...but I've got some economically less ambitious friends with CD writers. And they call themselves Hong Kongers! mad. tongue.

    Über Sheep

  8. <BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by Acacia:
    i only use mp3s for review/preview purposes. i like having a massive cd collection smile.


    I like having access to music that i don't have to pay for and using mp3 to discover new acts that i may or may not spend money on. I think napster will cause the industry to stand up and take notice. acacia you inspired me so i downloaded some old Iron Maiden mps3 and am listening to S. Harris in a whole new way, it's really fun stuff.

    The economic model cited makes sense in a free market, but like the video-tape industry they are not going to signifigantly bring down the prices of the new technology (dvd) until stocks of video are used up and no more money can be made from that sector.

  9. Why don't you just buy blank CD's why pay for the music on the CD. Do you expect to get paid more than minimum wage for your gigs. We as artists need some way to get paid for our endevors. A CD can be endlesly copied tapes go away in time. That is the reason for the higher cost of CD'S. If you want to give music to napster record a cd and give it away and while your at it dont charge for your gigs. As it is most of us will never earn a good living.

  10. embellisher

    embellisher Holy Ghost filled Bass Player Supporting Member

    <BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by bassdude:
    If you want to give music to napster record a cd and give it away and while your at it dont charge for your gigs. As it is most of us will never earn a good living.

    Preach on, Bassdude! To paraphrase John Turner's tagline, Napster Bad!

    I don't give a damn how much money Metallica or Dr Dre have that STILL DOESN'T MAKE STEALING RIGHT!!!

    the fabric of reality is woven from the threads of our dreams...
    bill longshort

  11. Syrinx


    Jan 2, 2000
    I think Napster is the best thing to happen to the music industry. Anything that puts the power back into the hands of the people is a welcome change in my eyes.

    I am making more, and better, music purchases since I started getting MP3s from IRC and Napster. With so many ****ty bands out there, it's nice to have a means of previewing what you're considering throwing (way too much of..) your hard-earned money down on.

    Too much power corrupts anyone, as shown by the ludicrous costs of CDs.

    Also, I think independent artists (myself being one) are pointing the finger at the wrong entity when placing blame on why they can't make a living.

    The reason your music can't get recognized is not because of Napster, or MP3.com or what have you. It is because the labels saturate us with Britney Spears, and BSB, and this and that and the other thing that we are "supposed" to be listening to. The stranglehold that the labels have on music is what ensures that people will be content with their Nsyncs and their Kid Rocks, rather than searching out music with a little more merit and a lot less hype.

    Napster breaks that stranglehold and levels the playing field. At least it will if the RIAA doesn't crush it.

    Competition in business is good. Anti-Napster artists are supporting the very thing that relegates them and their music to obscurity.

    Here endeth the sermon. lol


    I'm sorry Mr. Sound Guy. Did you just say "Too much low end"?

  12. Bassmonster


    Mar 24, 2000
    While it's good that Napster is "putting the power back in the hands of the people". The way they're doing it is going to wind up doing more than harm than good. Check out the "What's gotten into Metallica" thread and you'll see why.
    Yes, the CD prices are ridiculous. One thing that I do is go and buy used CD's. With an average of seven bucks a pop, it's a wise economic decision. It will work until something else happens that will make the costs go down.

    I'm the Bassmonster....ROWWAAARRRR!!!!

  13. funkastorious


    May 26, 2000
    Mpls, MN.
    I take that article with a grain of salt. CD s weren't invented because of a new way to screw people out of money. They were developed along side the optical memory market that was forming at the same time.

    As for DVD, same thing. It's not a way to remove VHS. It's a technological improvement on the the memory spaced used. Magnetic memory is not reliable, optical memory requires moving parts and can be scratched.

    Now, the Mp3 market is becoming large simply because 1) it's a new file format that drastically reduces the files size of a typical song from 60Megabytes to 3.5Megabytes. 2) The Flash EEprom market has emerged along with digital cameras which creates more market share. Good news is that Flash memory is monly getting cheaper. The bad news is that the lower memory capacities are now being phased out. So, within the next year, you won't be able to find 2,4,8, or 16 MB Compact Flash or SSFDC cards.

    The economics of the music industry is certainly depressing, but it's nice to see that the quality of sound and reliability has improved over LPs and 8 Track tape.

    Yes, I spent several years in the semiconductor industry.......
  14. Blackbird

    Blackbird Moderator Supporting Member

    Mar 18, 2000
    Great topic. Let's see if it gets some more attention in "Recordings".

    Will C. cool.

    You can't hold no groove if you ain't got no pocket!

  15. RAM


    May 10, 2000
    Chicago, IL
    <BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by bruknow:
    "...but like the video-tape industry they are not going to signifigantly bring down the prices of the new technology (dvd) until stocks of video are used up and no more money can be made from that sector."

    That's just not so. Back in the early days, a movie (at first only adult was readily available) cost at least $100 on VHS. They were down to $9.99 or less long before DVD came around.

    Back to CDs though, it's just a flat-out scam.

    Some essential reading on the Mp3/Napster/future of music issue.

    "A radical democratization." http://www.salon.com/tech/feature/2000/06/14/love/index.html

    "With convenience can come apathy." http://www.salon.com./ent/log/2000/05/09/metallica_fan/index.html


    Those videos that only cost $9.99 are not done because it's now cheaper to pass the savings on to consumers. WAKE UP!!! This is a form of very intelligent capitalism at its finest!!!

    Those videos that only cost $9.99 are not new videos. If you believe that, go to Blockbuster and ask them what it would cost you if you rented one of their movies and never returned it. They'd tell you about $120!

    So, why are movies so cheap? Once they are mass marketed in the video stores as rentals, the only way to make additional money is to retire the "previously viewed" movies and sell them at a price competitive with rental prices! RENTAL PRICES!!!!

    It's actually an ingenious way to suck additional dollars out of something after its useful life has expired. This cannot, by its very nature, EVER happen in the record industry. CDs are not rentals and don't cost hundreds of dollars per piece.

    As far as the music business goes, I got my degree in Accounting and am getting my MBA. Does that tell you anything? Way less competitive, AND I get the luxury of keeping music in its purest form...not HAVING to make a living at it. The only people that can tell me what to play, how to play, or when to play are my band mates. And, they all have full time jobs also!!! All because the record industry is the third most "greedy" industry around. First is insurance companies. Second is banks. Third is the record industry. Nothing else even comes close!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  16. john turner

    john turner You don't want to do that. Trust me. Staff Member

    Mar 14, 2000
    atlanta ga
    as if i hadn't ranted enough on the whole napster concept (see "what's gotten into metallica" thread), i have one more thing to add.

    "POWER TO THE PEOPLE"???!?!?!?!? what the _F#C%_ is that? the power of the mob to steal?

    all the pro-napsterites love to pi$$ and moan about the record industry and all the crap that the industry pushes off on people. do you think that that's going to change from napster? the record industry has immensely deep pockets. if they want to ramrod some kiddie-porn singer like britney spears down everyone's throat they will, and they will manufacture the "hits" just like they have for the past 40 years.

    napster is going to _KILL_ the bands that are trying to make it, that are trying to finance their tours and their future recordings off of record sales.

    the only performers that have not had to rely on the sales of their previous cds to maintain their careers are the Record Lable Bit@hes like britney spears, bsb, and n'sync. these are the last people napster is going to hurt - if the label is going to finance their careers, they still will with no cd sales. the label can afford to, and napster can't facilitate the trading of britney spears t-shirts and action figures, so the label still can make money off of all the side crap.

    every band you every loved has relied at one point or another in their careers _SOLELY ON CD SALES_. here, i'll say that again slowly for the reading impaired among us :


    that means that their whole future music careers relied on their ability to sell their cds. many good bands would've died off at their 2nd or 3rd release if not for their cd sales, and for all of these bands it was very tight.

    napster is just going to make it that much harder for the future versions of those bands.

    you think the music scene is bleak now, wait till the only concerts you can see are those that are bankrolled by the music industry. after all, how are the cool artists going to afford to go on tour when they don't sell their cds?


    "Bad Muttluk, No Anuses!!" - our own lil'biski

  17. Brad Johnson

    Brad Johnson

    Mar 8, 2000
    Gaithersburg, Md
    DR Strings
    every band you every loved has relied at one point or another in their careers _SOLELY ON CD SALES_. here, i'll say that again slowly for the reading impaired among us :


    Showing your age again, JT biggrin. You probably meant "recordings" sales, not CDs.

    Even with that correction, I'd disagree. There have been dozens of bands that I've liked that never recorded. I've also known of bands that, because of the way their deals were structured, practically didn't make a dime AND couldn't play anywhere. They weren't living off record sales, they invariably had day jobs.
  18. john turner

    john turner You don't want to do that. Trust me. Staff Member

    Mar 14, 2000
    atlanta ga
    actually, i was going to say "album" but then i figured most of our pro-napsterites wouldn't know what i was talking about.

    as for the stuck-in-a-loophole and live only bands, they obviously aren't trying to make a living as musicians off of recordings, right? if they have day jobs then that isn't part of their career path, right? maybe i should've prefaced this with the caveat that "Every Band That You Have Ever Liked _That Wished For a Career In Music Playing Their Own Music_ ..." i just sorta thought that was understood, i guess not.

    you know, on the flip side of this, i went to border's books and was checking out some cds, and i happened to notice Kid Rock's cd cost $18.99! _1_8_._9_9_ !?!?!?!?!?!?!?!?!

    what the F#&K?!?! that's totally ridiculous!!! the record labels spent all of $1.25 manufacturing the CD, the "artist" such as he is, gets maybe 1.25-1.50 at most, so where is the other $15 - $16 going? distributor and record label profits. how vile!

    you know, between napster and the record labels and distributors i don't know who's more vile, or more damaging to the concept of a professional original musician.

    sometimes it all just makes me want to quit the whole thing. then i listen to our tunes biggrin.


    "Bad Muttluk, No Anuses!!" - our own lil'biski

  19. ChelseaC


    Jun 27, 2000
    I may be wrong, but isn't buying a used cd almost as bad as downloading mp3's? I'm pretty sure ALL of the proceeds from the sale of a used cd go to the record store, not the artist. (someone set me straight if i'm wrong) I personally think that downloading music is a great way to check out new things before i buy them, but it is up to the individual to choose not to abuse the system by downloading and enjoying an artist's work, burning a copy and such, with no intention of ever giving the artist one cent.

    If all i've heard is true, the amount of profit record compinies make is criminal. (akin to the disguisting low amounts club owners get away with paying live bands, but that's another issue.) i've also heard that the sound quality of cd dosen't compare to records because non essential frequencies and overtones are left out of cd's --again so the company can save a little $ and make another buck they will use to promote the next p.o.s. fad-- so they don't sound as warm and realsitic as vinyl.

    The whole thing stinks and it's not getting any better. it's up to music lovers like us to raise a fuss because the public at large seems willing to let the record co.'s walk all over them. I admit, i wouldn't even know where to start... Is there anyone out there who feels up to leading the revolution?

    one angry voice who dosen't know where to shout, chelsea
  20. Brad Johnson

    Brad Johnson

    Mar 8, 2000
    Gaithersburg, Md
    DR Strings

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