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FTC Settles With Big CD Makers-Cheaper CDs Coming? 152

Posted by Hemos
from the could-be-maybe dept.
kid_wonder writes: "The FTC today announced that they had '... reached separate settlement agreements with Universal Music and Video Distribution, Sony Corp. of America, Time-Warner Inc., EMI Music Distribution and Bertelsmann Music Group (BMG), the five largest distributors of recorded music who sell approximately 85% of all compact discs (CDs) purchased in the United States to end their allegedly illegal advertising policies that affected prices for CDs.' "
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FTC Settles With Big CD Makers-Cheaper CDs Coming?

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  • This doesn't actually mean prices for cd's are being lowered. What it means is resellers now have the right to have "sales" on cd's. It may take a while for consumers to benefit from price wars if all the resellers decide to keep prices high. Second thing that could happen is this could be good for large resellers but small business owners may suffer if they can't afford to match the prices of larger resellers who buy bigger quantities and have less overhead. It is potentially good for the customers but perhaps bad for small business
  • Oh my god It'S flatlined!

    Quick! Call the Code Blue!

  • CD prices are set at the price that the record companies think people will pay. Cost of production doesn't make a difference.

    If you ask me, its no good buying a CD and then complaining about the price. Obviously you could afford it.
  • In quantities of only a couple of thousand you can get music or data CDs pressed and inserted into jewel cases (with multi-color printed sleeves) for around $1.
  • Actually most, at least a year ago, hovered around the 3000 yen mark, or just under 30 bucks. Though I did find all three Beatles anthologys for 1800 yen once, that was during the economic problems so that was less than 15 bucks each at the time
  • It's not as simple as you make it sound. Yes, you can probably buy a local band's music for a reasonable price. However, if that local band ever wants to be able to move beyond it's local band status they HAVE to sign a contract with one of the RIAA's member companies. At that point they also sign away any rights they have to distribute their music on their own, regardless of whether they _want_ fans to have access to their music at fair prices.

    The libertarian recourse in this sort of situation is typically that they should "start their own distribution company". Small, starving start up bands don't have these kinds of resources, if they did they would have done it all ready. This is one area where Libertarianism is terribly naive.

    Because of the monopoly status of the RIAA musicians have only two choices. Either remain insignificant forever, or sell out to the recording industry.

    Obasan

    If a tree falls in the forest, and kills a mime, does anyone care?

  • it's hard to vote with your pocketbook when there's no competition.

    There is competition, and it's on two fronts.

    First, the consumer can choose not to deal with the retailers. Just as an example, specialized places like Century Media [centurymedia.com] sell for $11 per CD for things on their label, and $12 on other labels. And of course, CDs from mp3.com [mp3.com] is even cheaper and carries a much wider variety of genres. These also have a secondary advantage in that they have a lot more selection that Best Buy. I recall browsing through Best Buy several times, and for all the CDs they had, they just didn't .. well .. have anything.

    The second front of competition is one that is still just emerging, thanks to technology and The Internet. The creators of music have the option of not dealing with the big media companies. Independent production is possible now without requiring too much capital, and The Internet is capable of competely obliterating the distribution problem. Musicians have a choice of whether to deal through the big labels and retailers, or going indy and selling other ways. Up to now, that choice has been quite lopsided. But that's changing fast, and it may soon be lopsided in the other direction.

    I suppose one might argue (as many have) that the MP3 explosion did represent a popular response to the problem. But that too is outside the libertarian system which, if I recall, does respect IP.

    Keep in mind that there's two sides to the MP3 explosion. It's not just about disrespecting IP (as mp3.com showed prior to their dumb idea of offering the my.mp3.com service). I don't see any reason why MP3s (or something like them, such as Ogg Vorbis [xiph.org] files) cannot be sold, and they've already proven themselves for marketing and promotion outside of the megacorps' channels (MTV, radio, etc).

    (BTW, although I consider myself pretty libertarian, I must admit that I'm sometimes stumped as to how the market can fix certain types of problems. I just think that the current music situation isn't one of those cases.)


    ---
  • Thats more than likely a case of the unit actually honoring the special music bit. Many high end CD players and most DVD players won't play CDRs because they are made on "computer CDRs" and not "Music or VCD". There is a difference... Sure its only a bit placed at the start of the disc *before* you get it and burn it, but many players check for it.
    ---
    Openstep/NeXTSTEP/Solaris/FreeBSD/Linux/ultrix/OSF /...

  • For a lot of major video releases, the initial prices are set high so that movie rentals are boosted. The price of these releases tends to drop a month or two after the initial release.

    It has nothing to do with DVDs, it has been common practice for quite some time with video cassettes as well.
  • To coin a term used by someone else in the music industry. Although this FTC finding is more in line with a protectionist interest it still gets me mad that CD's today still go for $16.98 yet my Phantom Menace tape last month cost me $13.87. I believe that copying wouldn't be so prevalent if the prices were lower or we were paying for the Intellectual Property only and not for the media. (some remember VHS video tapes at $69.95 for a movie) Also, how come Metallica wants MP3 be financially liable for every person who copied a song (Millions of $$$) but the industry cannot be held liable for the $480 million that they have deprived the public of?
  • I got a pricelist from a local place that does CD duplication. $1.90 per CD including jewelbox, 4 page full-color insert, and shrinkwrapping. That's when buying 1000. I'm sure it costs significantly less as you increase the volume.

    Link to pricelist [warehouse-studio.com]

    numb
  • It is amazing to me that the record industry has been able to fleece consumers for so many years. How long has it been cheaper to produce CDs than cassettes? Five years? Ten years?

    When stamping CDs in bulk, the cost is next to nothing. I don't have any references off-hand, but I am positive that it is actually less expensive for the record companies to produce a CD than it is to produce a cassette.

    So if the record companies can make a profit when cassettes are sold for $10, doesn't that mean that the extra $5 for a CD is pure profit? Doesn't that mean that the music companies have basically been sticking consumers $5 a pop for the millions of CDs that have been sold?

    It's no wonder that the music industry so fears online music. One way or another, it is signalling the end of their consumer fleecing.
  • Is anybody still selling CDs as loss leaders? Regardless the whole reason this policy was created was to protect small mom and pop music stores from large electronics chains such as Best Buy, etc. who were selling CDs at a loss in order to entice customers into the stores. Most of those retailers abandoned that practice after they grew their customer base sufficiently, and I doubt they'll be going back to it any time soon (i.e., this will probably have very little effect on the price of CDs, which are already very low anyway).
  • now i can buy alvin and the chipmunks greatest hits on cd without worrying about the price!

    woohoo!
  • >...spare a thought for those of us in the u.k.
    >who (sometimes) buy a cd for around 17 pounds
    >(probably about 30 dollars).

    Silly brit, the most mundane UK import costs
    $30-50 in the USA.

  • I've been using CDs now for a long time, and I believe that the quality of the CDs themselves (i.e. the physical production quality, as opposed to the music quality) has declined over the years, to the point where the CDs I buy today don't last as long as ones I bought ten years ago... They're thinner, scratch easier, etc.

    Anyone else have similar experiences?


    D.
    ..is for DJ Dot!

  • by NMerriam (15122) <NMerriam@artboy.org> on Thursday May 11, 2000 @04:45AM (#1079586) Homepage
    I know that the instant reaction is "hooray", and ultimately this will result in lower proces at places like Best Buy (remember when they used to sell new releases for $9.99?).

    But this isn't necessarily the case of record companies gouging consumers, so much as record companies "protecting" stores.

    Every store buys their CDs for pretty much the same wholesale price (maybe $11), and the MSRP is $15-20. But Best Buy was a new kid on the block and was will ing to lose a dollar on every CD to get you in the store, hoping you'd pick up a CD player or a video game while you're there.

    Now this sounds like a good deal until you realize that a Record Store can't sell their music for less than what they paid, and essentially have no chance of competing with a megastore that can treat music as a loss leader. So record stores have been closing, and our musical choices at Best Buy are (needless to say) more along the lines of Britney Spears than Indy Imports.

    Granted, this is pretty much the same issue as brick-and-mortar places will face in regards to online retailers offering significant discounts, even willing to lose money to build business the same way best Buy did the first few years.

    But economics doesn't go away just because CDs are cheaper for a few years. What happens when everyone but Best Buy (or CDNow or whoever) has gotten out of the CD business? When all the local record stores have closed, and Best Buy decides to start charging $15/CD again? You're screwed, because there's no more record stores. Best Buy can survive a war of attrition a lot longer, and once they win they have no requirement to keep the proces low.

    Not that this will necessarily happen (in fact i consider it unlikely simply because online retailers will always be available for CDs at the lowest retail cost).

    But it isn't an imaginary fear that the record stores have -- look at the stores that have closed in the wake of the Wal-Martization of america...
  • Actually the prices of DVD movies, to me at least, are fairly reasonable when compared to music CDs. I usually pay about $19.95 for a DVD movie and $14.99 for the music CD. Concidering that the DVD is a chuck full of data compared to the music CD, the DVD is a better value. About my only concern about DVDs is the potential to force me to buy advertising along with the movie I want. Even though I work for a magazine and a TV network, I am pretty much tired of seeing advertising being rammed down my throat at every turn. My freaking apples from the bodega have dot com ads on them!!!
  • by mobiux (118006)
    You gotta wonder how these companies can reach a settlement, but they claim not to have broken the law, and don't have to repay anything. Sucks for consumers.
  • They like that Weezer song that goes, "If you want to destroy my sweater ..."
  • by jafac (1449)
    $480 million? I think thats WAY low.

    That amounts to only $2 per american (if we all bought 1 CD) - which brings the prices back down to oh, $18/CD. Which is still outrageous. Like someone else said - $10 is highway robbery. More like $5 is fair.

    I just remembered this old Metallica song. . .
  • by pallex (126468) on Thursday May 11, 2000 @04:29AM (#1079591)
    ...spare a thought for those of us in the u.k. who (sometimes) buy a cd for around 17 pounds (probably about 30 dollars).

    Cant think why mp3 sites are so popular...
  • by LordNimon (85072) on Thursday May 11, 2000 @08:31AM (#1079592)
    1. Commissioners Swindle and Leary have previously stated ...

    It took me a few seconds to realize that Swindle and Leary are the last names of two commissioners on the FTC! FTC doesn't like swindlers, and they're leary (leery) of any minimum advertised price policies.

  • I don't need an excuse to download mp3s. . .i have a reason. To me, mp3s are a form of protest. . .but not a protest against something as silly as the high prices of CDs. CD prices are ridiculously high, but that's not why i sometimes use napster to download those few songs i've been itching to hear. . .it's because i don't think the recording industry is worthy of my support (money). The RIAA, the lawyers, and the industry execs are all leeches who suck on the talent of the artists and who insist on trying to squeeze as much money as possible out of an antiquated distribution model.

    And no, this isn't about disrespecting the artists. Even though i don't think it's a right (as many music industry lawyers would have youbelieve), I think that musicians should be able to be compensated for their work. This is one reason why i buy as many independantly released lps and cds as i can afford. This is not only because indies generally put out (in my opinion) better music, but because they actually treat thier artists well. If you want proof of how majors shit on thier artists, read this. [indiecentre.com]

    So please, before you post another reactionary rant, think about the fact that there are actually people out there using napster who are not whiny, spoiled little kids and who have put more thought into the implications of thier use of mp3s than the fact that if they download rather than buying, they'll have more of mommy and daddy's money left over to buy pot.
  • by the_other_one (178565) on Thursday May 11, 2000 @04:29AM (#1079594) Homepage

    If the resulting lower prices reduced pirating, increased cd sales and made these companies more money.

  • Feh...yeah, remember when DVDs were going to come out? They were supposed to offer us better quality AND cheaper prices, because it just cost pennies to stamp a DVD. And now what happens? The VHS of a movie is $12, but the DVD is $30? Hunh?

    I'm sorry...I'm ignoring all of those 'special features' that we get with the DVD version, like audio commentary by the producer's pet dog. Forgot about all that value added crap.
  • by Anonymous Coward
    You see, its OK for the recording industry to screw consumers, but it's not OK for consumers to trade music over the internet because it costs the recording industry too many lost sales. Whatever.

    -D
  • I was in a band [mutant-renegade.com]. Our bass player started a record label [mutant-renegade.com] and zine [mutant-renegade.com]. We sold our cd's for $8 a piece. We did undercut the big names. Dischord [southern.com] undercuts the big names all the time, and has been for about 10 years. The major labels make ridiculous amounts of money, but they also waste it on Backstreet Boys lifesize cardboard stands and Britney Spears breast implants etc. It doesn't LOOK like they have a huge profit margin because they put it against the costs of every stupid penny they waste on advertising and lawyers that sue Napster and mp3.com.

    As for soda; it's the restaurants (and movie theaters) that have the gigantic profit margin there.
  • Of course there is no free market for entertainment content.

    I'm amazed at all these naive posts on /. saying they don't "know" what's CD printing cost. Just do a search on "printing CDs" [cdworks.com] and you would find that in a qty of 1000 you can have them printed for $0.90 a piece, with a box and a paper insert, DVDs - same for $2.00.

    So, what is reasonable sale price for them - I would say with over 400% profit - $5 is very reasonable. So, all you RIAA agents vining about "Napster Kids" asking for $5 pricing - shut up and enjoy this illegal (in terms of antitrust) situation while it lasts. And if you sell DVDs at $5 - then you'll have to "starve" on a 150% profit...

    The fact that CDs and DVDs are not selling at $5 proves that there is NO such thing as a free market for these goods and services. Learn to live with that all you libertarian buddies :-) And $2 profit per CD is more then enough to feed the artist, as well as run the studio and other supporting services.

  • Maybe these companies should charge less for their CD's and fire some of their lawyers, fire NetPD and drop some of their stupid lawsuits.

    kwsNI
  • by uqbar (102695) on Thursday May 11, 2000 @04:31AM (#1079600)
    This agreement has more to do with allowing mass merchandisers to advertise their low, loss leader prices without losing ad dollars from the majors. So in certain ways it's a blow to stores that deal exclusively in music. They sell only music, and make their money at this, while stores like Best Buy really just want to sell you a new Microwave.
  • Doesn't that mean that the music companies have basically been sticking consumers $5 a pop for the millions of CDs that have been sold?

    No, it means consumers are apparently willing to pay that much for a CD, nothing more and nothing less.

    Well, actually, it may mean that the record industry had been underchaging of cassettes and records for quite a while, since the increase in price associated with CDs hasn't really killed demand that much.
  • but what if you want the latest import Blur or Super Furry Animals single?

    Order it from Amazon, they carry damn near everything.
  • Most of the music I listen to is on small independent labels (Fat Wreck, Honest Don's, Lookout, Mutant Pop). These cds sell for $9-$12, and often that includes shipping. You would think that MASS PRODUCED cds would have much lower prices.

    But they don't, and I think this settlement gives us a glimpse as to why.
  • Perhaps we should collect our mp3s at a higher quality and then just send the cash directly to artists? They get more money, we don't have to leave our homes, and it removes that pesky, bloated middleman.

    The big distribution companies would hurt, but they have taken in a fair bit of cash already, and I like the idea of being able to pay half the price for a CD and give the artist three times what the would get had I bought music at a store.

    -DB

  • Open your eyes! This is a government-initiated plot to kill Napster et al. -- if THEY can initiate a CD price war, music downloads will decrease as purchases become easier. With the MP3 fans placated, there will be far less popular support for Gnutella and Freenet! Used only by a small population of privacy-lovers and computer-intelligensia, these powerful tools for anonymity and privacy abandoned will be easy pickings for the Jackbooted Thugs! Then they'll come for /., and then for my precious bodily fluids!

    Friends, we must RESIST this manipulative plot! Don't be bought with the promise of cheap music! Rise up and DEMAND your right to be overcharged for CDs!
  • Can you cite actual proof for those figures? I'm not being crabby, it's just that everybody throws them around. As far as I know, the profit margins for these companies is in line with other businesses. If they really have such extraordinarily profitable business models, though, why don't more people enter the market? Just wondering.
  • by jbarnett (127033)

    The FTC estimates that U.S. consumers may have paid as much as $480 million more than they should have for CDs and other music because of these policies over the last three years.

    No wonder the RIAA hates .mp3 so much, $480 Million

    That is a huge rip off man..
  • You may be forgetting about some unsanctioned mind altering substances.

  • CD Prices aren't high - look at Columbia House I have bought hundreds of CDs from them at 11 for a penny! I think I've spent a total of about .20 for my entire collection of over 200 CDs! - but it does get harder and harder to think up fake names - maybe i should try Slash Post (the first) or OOG OS CAVEMAN
  • A moment's thought about the magnitudes involved would show that this couldn't possibly be true. If legal services were a significant factor in making CDs more expensive then 1) it would be the legal practices making huge supernormal profits, not the record companies, and the FTC would have no case against the record companies. 2) Music industry lawyers would be as rich as rock stars; there are rather fewer lawyers working in the entertainment industry than there are recording artists with record deals. 3) Utterly implausible things would have to be true about the economics of CD manufacturing. But of course, a moment's thought is far too much for the average slashbot.

  • UK folks have nothing on Japanese CD prices, where one disk can easily set you back 4300 yen (40 bucks or so). Ever tried importing one of these babies? Get ready to shell out $50 per disk.

    --------
    meta4
    dw2-dont-spam-me-@opencontent.org
    http://davidwiley.com/
  • You see, its OK for the recording industry to screw consumers, but it's not OK for consumers to trade music over the internet because it costs the recording industry too many lost sales. Whatever.

    But you don't understand how true this is. It is in fact ok for CD makers to screw cusumers, as much as the consumers (inluding me) may not like it. This is a capitalist society, in which the companies are supossed to look out for their own good, not for ours. They are here to make a buck, not to make us happy.

    If you dislike the way a company works, your job is to stop purchasing they're products, which a lot of us have stopped doing.

    However: it is not ok in any way to steal intellectual property by trading music over the internet. This analogy is perhaps a strech, but I will make it anyway: Trading MP3s becasue you dislike the high prices of CDs is similar to robbing your local grocery store becasue the price of bread is to high.

    Of course, people are bound to argue that you don't actually take anyone's property by trading MP3s, you simple reproduce it. Consider counterfieting money. You don't have to rob anyone to print a bunch of twenty dollar bills for yourself, but it is sitll legally and morally wrong. It may seem silly that you shouldn't copy music that is so poorly secured (the wax lock analogy) but it is still wrong, and does in fact cost the recording companies money to produce CDs. Trading music that you do not own the rights to is damaging, and crimanially so

    If you're upset a about the way CD companies treat cunstomers, boscott them, but do not use their high prices as a justification for a criminal act.
  • I always wondered why they were so expensive... I underestood it when they came out (late 80's) because of limited capacity, but now?

    I bought my player in 1983. At that time disks were typically C$19 in the big cities and C$21 in the small town where I lived. The price dropped to about C$17 / C$19 a couple of years later, then swiftly rose to the mid twenties (say C$26). I guess this is where you came in.

    The price very gradually dropped from that peak towards 20. I stopped buying much music about 5 years ago. Someone from my city has already said that typical prices are now mid teens.

    I also found it odd that some small bands sell there CDs at 10$ a pop for a small cd run, vs 18 dollars for a mass produced cd.

    Blank CDR's are somewhere under $2. A recorder for them is US$100. A band member's time is worth $7/hr and he doesn't even have to sit there watching the progress bar chug for the hour. I would be very surprised if the stamped disk is more than 50 cents in 1000 lot runs (not counting printing, case, or case printing.) I'd be surprised if the media were more than 20 cents in the very large runs. Your $18 is paying for the artist's lifestyle, the massive ad campaign, and for DMCA lawyers to harass websites.

  • This tends to depend where you live. In really big cities you can still find enough independent stores to get things for £13..14 about $20.50..22.50. This is typical if you shop around in London.

    But in smaller towns and cities the independants have taken a pounding. When I was a teenager in Newcastle there were over 10 independant stores in the city, there seemed to be about 3 or 4 left the last time I went back, and they weren't all that much cheaper than the majors (HMV, Virgin). They've all been squeezed out of existence.

    Going into an HMV in the local mall, I found most of the albumns were priced at around £18. This is $28.80. I nearly passed out!

    Sales Tax (VAT) in England is 17.5% (not nearly the highest in Europe) so that would make up about £3.15 of the £18 total. Yup that $5.04 tax, so the CD costs $23.80 before Tax. Sales Tax in NYC is 8.25% and CDs cost $13..14, so that's $1.55 in tax.

    So a good comparison is:
    $12.45 in the US versus $23.80 in the UK.

    Thats 91% more in the UK.
    When asked why this is, the major distributors have frequently explained that its because "fuel prices are higher". Yes, they really do have that little respect for us.


    Lord Pixel - The cat who walks through walls

  • As for soda; it's the restaurants (and movie theaters) that have the gigantic profit margin there.

    I have a friend that owns a cafe that serves Coca-Cola fountain products. He says that his cost for a 16oz soda, including the paper cup that says Coke, is less than 16.

    I also hate restaurants (usually smaller local places not huge franchises) that say "Free Refills on Large Drinks Only." WTF?

    Bringing it back around to CDs, do bands like Metallica, BackDoor Boys, Britney, etc. really need to earn hundreds of millions of dollars? How rich is rich enough? There is a point where you can pretty much afford anything you want. Metallica owns their own jet for Christ's sake. Who do they think they are? Steve Jobs?

    MacSlash: News for Mac Geeks [macslash.com]

  • I think the repayment I want is for them to leave me alone about Napster and Gnutella. I have to think that if CD's were reasonably priced there would be less pirate activity. I am not saying that it would be eliminated... there will still always be a core group of pirates (me included)... but if CD's were priced correctly there would be much less incentive.
  • While you're absolutely right that the high wholesale costs are what kills everyone involved, that's not addressed in any way by this FTC settlement. The wholesale cost is going to remain exactly the same.

    So yes, if the cost of getting the CD to the distributor (whether by reduced profit, marketing, R&D, or royalties) were to go down then everyone could afford to sell CDs for $9.99...
  • *shrug*

    Or start mostly local, DON'T go in for RIAA contracts yet, and distribute particular tracks of their choice for free, digitally. THEN if they're good enough to attract a fan base, negotiate from a stronger position, if they really want to sell CDs en masse. Under current law, that's legal.
  • It is already clear that the music distributors are taking advantage of strong import rules (as lobbied for by the music and film industry) to screw the British customer.

    What situations like these make obvious is that corporations wish to reap the cost benefits of a "Global Economy" by obtaining resources at the low price possible. When I say resources, I mean everything: Cost of Facilities, labor, raw materials, etc. At the same time, corporations are lobbying (and successfully, at that) for laws that restrict where we can buy our media, how we can view it, and where we can view it.

    It's a double standard in the worst way, and it's all in the name of God Money.

    In the case of the music industry, they think they can get what they what by throwing money into overcoming any obstical that threatens their insane amount of profits, and then further gouge consumers to make up the difference. The problem is, it's almost always worked. They've gotten almost everything they want; the DMCA is the most recent example.

    In my opinion, the situation WILL change. However, it's gonna be one hell of a battle: The music industry have rather large war chests that have been filled by gouging us for all these year.

    o/~ "They stab it with their steely knives, but they just can't kill the beast." o/~

  • I have a better theory for you. This is imunization from consumer class action AND getting the Feds off their backs. If the FTC found them guilty it would expose them to the ligation of the millions of consumers who got fleeced. Imagine if they had to pay even some of that money back to consumers in some kind of mass settlement.

    Hmmm kinda sounds like what a company in Redmond might experience.
  • Are your figures including sales tax and whatever else?
  • True, but merchadisers will be more willing to offer those low, loss-leaer prices if they can actualy advertise them. Not much incentive to cell a new CD at $11.99 just to get people in your store if you can't actually, uh... tell anyone about it.

    There might be a downside to this plan... smaller, cooler record shops can't compete on price with the big boys (economies of scale and so forth). Sometimes the smal shops are the only places you can find independant, imported, or just plain cool music... Wal Mart's nice if you want the new Trisha Yearwood CD (ack), but what if you want the latest import Blur or Super Furry Animals single?

  • by Anonymous Coward on Thursday May 11, 2000 @04:53AM (#1079623)
    Gee, so if prices drop down to $10 US, what excuse will all the Napster kiddies use? I know, they'll just insert the new price and make the same argument! "Dude, CD's are way overpriced at $10 bucks. I'd buy them if they were priced at $5, they way they should be." Moderate away
  • I know a little of topic.... What will the record companys do about the Kingston dubplate cutter [vinylium.ch]?. I know i'll be cuttin some of my mp3 collection to vinyl. Will we see the dinsour record companys try to kill this wonderful invention ?
  • Can you cite actual proof?...

    Well, my brother has played on a variety of Sony and MoJazz albums, and his ska band just turned down a Sony contract because they wouldn't see any money from the disks until they sold approx. 75,000.

    I know a lot of musicians, particularly, jazz ones, who lost money selling 50,000 CDs.

    Not sure if that falls under "proof", but that's where my numbers/info come from.

  • These distributors are making the same mistake as Apple by charging $11 per CD. Apple enjoyed fat profit margins finishing out the 80s and it very nearly killed them.

    If CDs cost the consumer, say, $3 or less, the industry would simply explode, and make a small lucky group even more astronomically wealthy. Let's say it cost $1 for a CD. People would buy them like Coca Cola at a vending machine; I'd buy a few CDs all the time and just throw out or give away those that were duds, which in the long run is a hell of a lot more profitable for the distributors, because they'd be moving an avalanche of product.

    The first distributor to get their CD prices instantly down to $2 at retail will win big.
  • (CAD == Canadian dollars, USD == US dollars)
    It varies across Canada, with BC (the province above Washington state) having cheaper prices (12-15 CAD) than, say, Saskatchewan (14-18 CAD)--largely because of the a&b sound music chain in BC and the larger population. With the PST (provicial tax) and GST (federal tax) a new CD in BC will end up costing you 14-18 CAD. But 1 USD = 1.5 CAD (well, more like 1.47 right now), but this still means that new CDs in BC end up costing you only 9-12 USD! Of course, living in California this doesn't help me much :-)
  • This post leads me to a question: Why is the cheapest medium (CD's) the most expensive, even in indie recording (compared to vinyl and tapes). In my mind, EP vinyl, the cheapest way to buy music (around here) is probably the hardest and most expensive to produce, followed by tapes. Is this true? Why do people release music on vinyl for cheaper than CDs or tapes? thanks...
  • But the beauty of the capitalist system is supposed to be that if we don't like the way business X is treating us, we can take our money to business Y. With CDs, however, as the FTC showed, X and Y collaborated to make it so that taking your money elsewhere didn't work. And for sound quality, unless you want to buy vinyl and not play it more than two or three times, you can't really match CDs.

    Except, of course, with MP3s. *smile*

    Now, if record companies were forced to sell their commodities to more than one distrubuor -- say, make MP3s a competing medium where the two could go back and forth, we might have something.
  • But the beauty of the capitalist system is supposed to be that if we don't like the way business X is treating us, we can take our money to business Y. With CDs, however, as the FTC showed, X and Y collaborated to make it so that taking your money elsewhere didn't work

    Great King Capitalist (the man who invented capitalism) thought up a solution to the problem of Corporation X and Y collaborating. If you can't tkae your money elsewhere, leave it in ytour pocket. Sure, you have to go without CDs for a while, but if enough people feel strongly about it, the CD comapnies will either change their ways or go out of business. It may not be very fun, but no one made a rule saying the CD companies must produce CDs at a reasonable cost for your enjoyment.

    Now, if record companies were forced to sell their commodities to more than one distrubuor -- say, make MP3s a competing medium where the two could go back and forth, we might have something.

    Another nice thing about capitalism, is if you don't like way corporation X or Y works, you get to start corporation Z. Get some venture capital, ge contracts with some recording artist, and produce your own MP3 albums. If your way is acutally better, you will win, and CDs will lose.
  • $480 million in 3 years. Here [cnn.com] is CNN's article, which informs us that these companies cost us around $480 million over the last 3 years. When the industry starts playing fair again every CD should be $2-5 cheaper. This is ridiculous. And my local paper said the FTC doesn't plan to pursue fines. So we all lost out. And they wonder why we turn to napster, while they are constantly screwing us with illegal business practices? I'm through, from now on I buy only used CD's, or use napster.
  • I just finished taking intermediate micro, and one thing that I came away with is that libertarians spend way too much time explaining away how public goods will be provided, and all the efficiency arguments, and way too little time on antitrust.

    Anti-trust is probably the biggest weakness on the economic side of libertarian theory. The biggest weakness overall is probably what do you do with children? I mean, babies are supposed to be pretty much property, but adults are supposed to be free to do whatever they want. So can a 16 year old refuse to go to church?

    The first thing to say about anti-trust is that it isn't as big a problem as people think it is. Sure, we're getting overcharged for CDs, but most of that is just a transfer from consumers to record companies, but money never actually disappears from the economy, so the stockholders in record companies have more money to spend. This is becoming more obvious to people now than in the past, because people are starting to realize that big companies aren't own by rich megalomaniacs (they just run them), but by retirement funds, mutual funds, and that guy down the hall who doesn't have any kids to support.

    But there is an actual loss caused by incorrect incentives for the number of CDs produced. You buy less CDs because they're too expensive. It's hard to estimate what this is. A figure mmy econ professor gave was that these Dead-Weight Losses add up to about 1% of the economy, according to a study in the 1950s. There are a lot of reasons this is so small. One is that most things you buy aren't controlled by an oligopoly. Another is that the number of CDs sold at oligopoly prices isn't that much different than the number under a competetive industry.

    The one that probably offers the most hope to libertarians is that it's very hard to keep a cartel going. OPEC is around 10 members, and they have trouble keeping everyone in line (remember, OPEC is "legal"). In the music industry, it's probably fairly easy for the producers to keep the price a little above the competetive price, because there isn't much incentive to try to sell more CDs by lowering the price from $17 to $15 when your total cost with all the middlemen is $13, since you wouldn't necessarily sell twice as many CDs at the lower cost. But if the cost is $13, and the cartel price is $25, you've got a lot of room to make some money. Drop the price to $20 and you can make $7/CD on a higher number of CDs. So the higher the price is, the harder it is to keep the cartel going.

    The other libertarian argument is that a lot of cartels couldn't exist without favors from government. Some that I can think of specific to record companies would be:
    1. Government will go to a lot of trouble to prosecute copyright violations, and the violater will be severely punished. The punishment is out of line with the damage.
    2. The government will prohibit sale of stuff that might impact the record companies income, like taxing recordable media, or DCMA enforcement against Apex (regionless DVD player).
    3. Copyright is a government granted monopoly. Perhaps copyright could be modified to require everyone (including the copyright holder) to license the work in question at the going rate, and then revenues go back to the copyright holder.

    One that isn't specific to record companies is that the government allows for companies to commit criminal acts with no liability for the management. This tends to encourage very large corporations. It might be necessary to keep the capital markets working, but there might be other ways to do it.

    I'm actually an anarchist, and think that the existence of government is itself immoral, but I think there's a lot of room for improvement even without doing away with government. Some of the above may be unconsciously stolen from David Friedman's Law's Order, on the economic analysis of law. It's available online at http://www.best.com/~ddfr/ [best.com]

    --Kevin
  • That's an interesting point. However, I think it's fair to point out that people seem more than willing to pay the prices that have been set for CDs, even if they do grumble a little bit from time to time. CD sales continue to increase, despite MP3 and other forms of digital music.

    I people were really that unhappy with the price of CDs, they wouldn't buy them; they are certainly not a necessity, like food or electricity (which is also arguable). Even though libertarians in general might not be in favor of price collusion or unfair trade practices, they also believe that the federal government has no granted power to step in and do anything about it unless there is a genuine interstate commerce issue.

    People talk like the entertainment industry is the spawn of satan. I don't like them any more than most, but I see that what they are controlling is a pure luxury item. Sure, I would like it better if music recording and playback technology were cheaper and more open, but, I don't have to buy it! That I do seems a validation of the supply and demand system.

    As a side note, libertarians have a fundamental respect for personal liberty and personal property, including intellectual property (for which there is a constitutional mandate of protection). This respect would be extremely important to a society with little government control or intervention. Maybe copyright terms are a little too long, though. We could also use a better definition of fair use and a clarification of what buying music entitles one to.

    -phil

  • It is well known that if one doesn't regularly replace the laser in a CD player, the laser will wear down the grooves, causing your CDs to digitally "skip" and "pop". Occasionally, a really bad laser scratch can be put in your albums from bumping your CD deck, and you will have to go to Radio Shack and get a new laser.

    Of course, I only buy the special pro audiophile high-fidelity lasers, with the diamond focus, because I can really hear the difference. NEVER let your kids play with your laser, or they may bend or dull the tip.
  • If you ask me, its no good buying a CD and then complaining about the price. Obviously you could afford it.

    But people are not buying CDs, instead they swap MP3s on Napster. Why do you think Napster is so popular?

    What do the record companies do? Lower prices? No. They send their lawyers to stop Napster...

    ...richie

  • To increase sales you need to set your price at a more competitive level. mp3's are free. Therefore CD prices should cost less than an MP3

  • ...can I now sue these record companies for "losses" incurred by purchasing their illegally priced CDs?


    --
  • I could also afford a $5 cup of coffee, but that doesn't mean it's not grossly (and unfairly) over priced - ESPECIALLY if that price is being fixed by the coffee bean growers. Sure, I can afford to buy a cd at $17, but I could probably afford 2 cd's at $10 a piece. Think of how big your cd collection is, and then think that, for the amount of money you spent, it should be almost twice as big. Sounds like a good reason to complain to me.
  • by dave_aiello (9791) on Thursday May 11, 2000 @04:58AM (#1079639) Homepage
    As I said in my story submission on this subject (that was rejected), U.S. Federal Trade Commissioner Robert Pitofsky said, ""The FTC estimates that U.S. consumers may have paid as much as $480 million more than they should have for CDs and other music because of these policies over the last three years." If you turn over your envelope and do the arithmetic that's nearly $2 stolen by the recording industry for each man, woman, and child alive in the United States today. And this is just over the last three years.

    It's so obvious why the recording industry settled this case. Taking it to court would have raised the profile of the case, and eventually some journalist who thinks for himself would have asked the inevitable question: Is the mp3 issue the biggest problem facing the entertainment industry, or is the real story that the entertainment industry takes every opportunity to act in unison, to the detriment of the consumer.

    I argue that we ought to be looking at a lot more than CD prices here. What about the price of movie tickets? What about the cost and features of your local cable television monopoly^H^H^H^H^H^H^H^H service? What about the retail cost of (ahem) Microsoft Windows and business applications for the PC when they are not bundled into a PC at purchase?

    There are dozens of examples of consumer goods and services where no effective competition exists, at least in the industrialized countries. I am not as much of a populist as it might seem from what I've said. But, the least these multi-national companies could do is to let the retailers compete on the price.
    --

    Dave Aiello

  • Last night, on All Things Considered [npr.org] they had a really wonderful story about the thing. Check it out (ya need Real Audio).

    Basicly, the record companies pay for the ads that the stores run, but they will only pay for the ad if the store does not advertise a price below what the record company wants it to be sold at. Well, call it price fixing or whatever, but payola is payola.

    The story also goes into MP3s and how people are really fed up with paying $17 for a crap CD with one good song on it.

  • >...spare a thought for those of us in the u.k. who (sometimes) buy a cd for around 17 pounds (probably about 30 dollars).

    The last CD I bought in the uk, was for three for 18 ukp. But since I opened an account at amazon.com I haven't paid over 10 ukp for a single CD, including postage. Shame they don't get all the uk releases though.
  • Are you sure about that?

    RIAA reports [riaa.org] units shipped:
    1997 753.1 Million
    1998 847.0 Million
    1999 938.9 Million

    True, these are number of units shipped (not bought), but still, demand doesn't seem to be dropping off... I don't think they'd increase shipments by 12% if the demand wasn't there... Even more funny... there's a reported "cash value" of these CD's there too...
    1997 $9,915.1 Million
    1998 $11,416.0 Million
    1999 $12,816.3 Million

    And even funnier still, taking the "cash value" per unit...
    1997 $13.17
    1998 $13.48
    1999 $13.65
    Not a pretty trend, huh?
  • ok... i'll bite on this troll

    THe cost to manufactur a cd is significantly less than it is to manufacture a tape, let alone a good old vinyl LP (mmm... I love vinyl).

    THey use the same master recordings, so there isnt any increase in marginal cost, the cost to produce each additional unit.

    so then the question becomes why on earth do CD's cost $4-6 more than they're cassette counterparts?

    In the late 80's the records companies phased out vinyl in favor of cd's. Supposedly, there was a higher production cost for CD's at this time, and the recording industry being the nice guys that they are, they passed the increase onto us, and promised to lower CD prices once the production costs fell...

    Well, production costs fell, but the CD prices didnt... go figure...

    and as for lowering sales... well... the recording industry had an 8% increase last year... one of their best years ever. So there is no evidence that there was a negative effect from MP3's...

    The Recording industry should learn from the software industry on this one...

    A friend of mine's father is a VP at MickeySoft, and the unofficial stance at MS is that low-level non-commercial "pirating" i.e. you giving your friend a copy of Windows or whatever, actually is beneficial to MS in the long run.

    As in - you're gonna end up buying SOMETHING from them eventually....

    Now the large scale bootleg software that is SOLD... there is a problem with that...
  • With the introduction of the CD the average price jumped 35-50% even though the total cost of producing,distributing and selling a CD is 3-5% lower than the old 12" vinyls...
    And we are supposed to cry over pirates...
  • Is it just US imports that are expensive in the UK, or is it all cds? If it's all cds, then whose fault is it really? UK imports purchased in the US also cost an arm and a leg, usually from $30 on up. Pretty much any Euro imported cds are priced similarly. It would seem like both sides are getting screwed on the imports, and this case seems unlikely to affect that.

  • I only checked one company, if you go here [oasiscd.com] you'll see that for $3485 you get 5000 pressed cd's (no jewel case or sleeves). That's about $0.70 a piece. Considering how pathetic artist royalties are, this means a ridiculous profit margin for record companies (or whomever). The only thing I know of with a greater profit margin is soda (profit: about $0.95 on the dollar!), but at least in most restaurants they give you free refills.
  • It's probably a good idea to buy directly from the artist whenever possible. This can often cut the price of an album down to the 5-10 dollar range, depending on the artist. Even when the artist does charge near to what the retail stores do, you know the extra money is going to the artist.

    This may not be possible for some artists, especially those with contracts which forbid any distribution of their music not authorized by their label. That always seemed like a bum deal for the artists anyway...

    Anyway, how much of what you pay for a KRS-ONE CD goes toward Britney Spears' next video?
  • I know someone who works at a cd manufacturing plant. The total cost to manufacture, package and ship a cd to a store is just $0.25

    SlashMirror: Where to put files for fellow /.'ers

  • Since cost is closer to $1 to $1.50 (done) wholesale is a *lot* less than $11. Remember in order for a CD retail to say in business they *must* make $5 per on average, per disk. This puts wholesale closer to $4 (which I've seen).
  • Has the class action suit been filed yet. Will Metallica be named as a co-dependant? Surely Metallica new that their recording company was doing illegal things.
  • WOW!! How ironic that lowering prices would increase demand!

  • by sphealey (2855) on Thursday May 11, 2000 @05:01AM (#1079657)
    Does the entertainment industry (in the USofA) have any sort of statuatory exemption from antitrust regulation, similar to that held by major league baseball? As a non-lawyer, it seems to me that many things the recording industry does (DVD "regions" comes to mind, as does SCMS) are gross violations of antitrust regulations and potentially vulnerable to class-action lawsuits on behalf of _all_ consumers. Am I missing or misinterpreting something here?

    sPh
  • ..spare a thought for those of us in the u.k. who (sometimes) buy a cd for around 17 pounds (probably about 30 dollars).

    ... so, if we work to get CD prices lowered here, then maybe just maybe the price would also go down in the UK (and Canada, and elsewhere) too.

  • If you check out 'Behind the Music' on VH1 for a lot of bands, including TLC, you will find out that they make pretty much dirt from CD sales. TLC made $.50 per CD, divided among the 3 group members. And they had to pay all of their own production costs. So they sold 5 million CDs and were broke.

    Kintanon
  • Well, if you look at the numbers involved. According to the quoted site, US customers over paid about 500 mio. on a total volume of 15 bio. - that translates to roughly 3.3 per cent.

    Also, the prices have increased, there is no mistaking that. The artists, authors and everyone is paid more - they also have to pay more for their living. I don't begrudge them that.

    Yet I cannot help but wonder how much of the money remains with the different steps of the channel - out of the, say, 40 DEM or NLG I pay for a CD, how much does the retailer retain, how much the other salespeople, how much the record company - and how much reaches the creative people? And 'creative' includes authors, cover designers etc....

  • True, but with the rise of sales, the record industry will have a difficult time proving harm in their various mp3-related lawsuits. Granted, it might not be a requirement in every case, but if it is, i'm not sure how they would offer proof of harm. Same goes for the MPAA in their DeCSS lawsuit. I hope the injunction against the defendants is overturned due to the fact that there is simply no evidence of "irreparable harm" to the movie industry.

  • I said in the Metallica story that CDs are too expensive. You would figure that since the medium is so cheap, they would be about the same price at tapes used to be. Prices jacked up all over. What the hell do they think they are pulling? Really think everone is going to pay thousands of their salary for a few crappy CD's?
  • Which, at the current exchange rate, is about $16-17 US, but I still never bought a CD when I was there.

    (MP3 would be a lot less popular if companies would sell me the records I want. Is it really illegal if there's no other *convenient* way to get the music?)

    - A.P.
    --


    "One World, one Web, one Program" - Microsoft promotional ad

  • I'm not so sure I would go as far as saying anyone is wrong to trade as much copyrighted music as possible, for two reasons:

    1) A lot of parties want desperately to make sure intermachine communication never becomes "protected". For example, making it a crime to snoop network traffic between personal (as in "not at work") computers. Traditionally, "pirates" made money selling bootlegs. It is a modern phenomena that freely traded software and music (no profit motive) has become a crime. After all, the radio stations pay a pittance (and they earn PROFITS) for the right to distribute music to millions of people. Trading all music freely, and boycotting CDs, is a great way to bring this issue to the forefront -- "Does the government, or any other entity, have the right to control the information passed between two privately owned personal computers?" I say no -- if they suspect a crime, they need a warrant, etc. This decision, one way or the other, will have to come about some day.

    2) Western tradition has many instances of "The People" getting fed up with racketeering capitalistic monopolies and taking the law in their own hands. People like you say "Well, if someone rips you off, don't buy anything there--just turn your back". This action may be valid for you, but not necessarily for someone else. Our culture has a long history of hatred, violence and law-breaking in the name of freedom or just exhaustion from the "gutting" these (few?) renegade corporations do to us. I simply WILL NOT abide by the rules as laid down by the RIAA. In my opinion, they are a far more criminal organization than any person trading copyrighted CDs for free. By their actions, thay may set a precedent for legalized corporate intrusion to our personal computers -- machines with microphones, and sometimes cameras attached--that will take hundreds of years to roll back.

    The goal, as I see it, is for intermachine communication, of a non-commercial nature, be as protected as speech. No intrusion, for any reason, without a warrant, on a case-by-case basis. Let Let Lars, Mustaine, Dre and the RIAA search door-to-door for all I care. They have to ask for permission to enter my house--at least through the door. They can get their fscking nose out of my network.

    By the way, here's a great piece of art [sulaco.org] that sums up what the RIAA thinks of your freedoms.

  • by nicedream (4923) <brian&nopants,org> on Thursday May 11, 2000 @04:34AM (#1079675) Homepage
    How many people think that this is just a quick fix by the record companies to get the feds off their back? Maybe cd prices will go down, but I can't see the prices going down any more than a dollar or two, but nowhere near where they should be.

    In other words, this is probably just for show. Then when mp3 pirating continues, the monopolistic pricing excuse just won't be able to hold up.
  • by acomj (20611) on Thursday May 11, 2000 @04:34AM (#1079678) Homepage
    I think CDs actually cost less to make than tapes (in large quantities).. I always wondered why they were so expensive... I underestood it when they came out (late 80's) because of limited capacity, but now?
    I also found it odd that some small bands sell there CDs at 10$ a pop for a small cd run, vs 18 dollars for a mass produced cd. I couldn't figure out how the additional promotional/engineering/mixing cost would not be offset by the "mass production"

    This explains it.. Illegal tactics al-la microsoft.

  • They didn't mention DVD's in the article, but it would seem that the arguments for cheaper CD's could also be applied to DVD's - I wonder if this descision does apply to DVD's, or if they have the same kinds of issues with a lockdown on advertising below a suggested price.
  • I definitely have made similar experiences. I'm working for a small Disco-Team here in Luxembourg and one of our CD decks is really picky about the discs it reads. It doesn't read CD-Rs, refuses scratched discs and don't even think about trying CD-RWs. Anyway over the years we've noticed that it refuses to read more and more of the newer discs. (The old ones are still fine)

    The same applies for some of the CDs I've had on several mags. (I encountered some that were absolutely unreadable and I tried multiple different drives)

    Greetings,
  • by Alan Cox (27532) on Thursday May 11, 2000 @05:36AM (#1079695) Homepage
    Competition will I think help. The big vendors will continue to rip off the music stores who will continue to rip off the customer in self defence.

    Independants and people looking for better margins will pick up music from outside the expensive megamedia cartel. This is classic business technique. You break into a new market by selling a product to the stores at a higher margin for them but similar RRP to the competition. The stores love you, they want to sell your product more so you get better coverage. If they make more selling one of your CD's versus 5 of the cartels whose CD's will they push. If small bands start granting cheap radio play deals to radio stations who are they going to play more of.

    MP3 is just one of the tools, the time is about ripe IMHO for an incomer into the industry to make an absolute killing by making consumers and bands far happier. In fact if they were smart a group of big name bands probably ought to get together to found such a label and get out from under the thumb of the cartel.

    Alan
  • I can't think of anything sold today
    which enjoys a higher profit margin than a music CD... except perhaps for software...

    The sad thing is that, of the seven or eight bucks made by the music companies, only a dollar or so usually goes to the artist, and even that only after they pay their promotion fees et al. And then the poor artists are expected to turn around and serve as mouthpieces for the anti-MP3 folks!

  • Up in Vancouver, BC, Canada, I pay 13 to 18 dollars per CD. Most brand new CDs that come out are on sale for 13 dollars. 13.00 = $8.84 USD 18.00 = $12.24 USD
  • by JamesSharman (91225) on Thursday May 11, 2000 @04:37AM (#1079702)
    If this is going to cause CD prices to drop for US customers this will further increase the (already significant) difference between CD prices in the UK and the US. It is already clear that the music distributors are taking advantage of strong import rules (as lobbied for by the music and film industry) to screw the British customer.

    Even now, before this agreement you can expect to pay 50% more for a cd in the UK than in the US, does anyone know if this will affect prices across the board or will it (as I suspect) just serve to further increase the price difference between our countries? If this is the case what can we in the UK do to improve our situation, we are fed up with our own government supporting this kind of abuse of the British citizen.

    Exactly the same situation exists for DVD (that is why I am strong support of the DeCss case) and for a while their was a strong import market until the police/ce (prompted by the government, who were themselves prompted by the US movie industry) raided all the distributors to enforce the region coding system.
  • As the past few years have clearly demonstrated, nearly everybody does, in fact, blow their cash on high-priced music CDs. Where have you been? -DB
  • by laborit (90558) on Thursday May 11, 2000 @04:41AM (#1079721) Homepage
    The distributors who own the vast majority of popular music were collaborating to fix prices at a level higher than retailers wanted to charge and customers wanted to pay. This is the kind of situation I'd like to see libertarians explain away. Although I agree that many things are over-regulated, it seems like government intervention on antitrust grounds is in this case positive for the consumer and good for business (i.e., the retail businesses gain more than the distributors lose). A small group of companies were using their power to our detriment, while their wide-ranging IP rights made a selective boycott impractical. I can't see how market forces could have solved this one; it's hard to vote with your pocketbook when there's no competition.

    I suppose one might argue (as many have) that the MP3 explosion did represent a popular response to the problem. But that too is outside the libertarian system which, if I recall, does respect IP...

    - Michael Cohn

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