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We'll have to agree to disagree that the most sought-after producers are people of average talent who simply use ProTools. I believe that in music production as well as many other industries, the cream rises to the top.

The 4% drop last year was just the latest in a multi-year trend. Remember five years ago when new releases at $18 were common? That's almost a 33% drop since then, not even accounting for inflation. I was paying $16 for CDs in 1984; that would be about $28 in today's dollars. If only cars and clothes and food and rent had fallen as much!

"$12.95 is too expensive for what you get on a CD. I'd be willing to pay maybe $1.99 for the average CD. $1.50 might be more reasonable, but I'd go as high as $1.99."

Not going to happen, of course. The record company typically pays the factory north of a buck for the finished CD. A model that allowed for a price of $1.99 per CD would rely on everybody from the artist to the folks at the record store operating on a volunteer basis.

FWIW the average price was reported by NPD; they're a market tracking firm that covers a lot of industries. I use them for tracking data in the PC peripheral industry and their data is usually rock-solid. They get the pricing data not by talking to manufacturers, but by doing store checks. Their music arm is here. An older but more complete announcement, which has a nifty graph showing the price drop over the past few years, is here.

We'll have to agree to disagree that the most sought-after producers are people of average talent who simply use ProTools. I believe that in music production as well as many other industries, the cream rises to the top.

The 4% drop last year was just the latest in a multi-year trend. Remember five years ago when new releases at $18 were common? That's almost a 33% drop since then, not even accounting for inflation. I was paying $16 for CDs in 1984; that would be about $28 in today's dollars. If only cars and clothes and food and rent had fallen as much!

"$12.95 is too expensive for what you get on a CD. I'd be willing to pay maybe $1.99 for the average CD. $1.50 might be more reasonable, but I'd go as high as $1.99."

Not going to happen, of course. The record company typically pays the factory north of a buck for the finished CD. A model that allowed for a price of $1.99 per CD would rely on everybody from the artist to the folks at the record store operating on a volunteer basis.

FWIW the average price was reported by NPD; they're a market tracking firm that covers a lot of industries. I use them for tracking data in the PC peripheral industry and their data is usually rock-solid. They get the pricing data not by talking to manufacturers, but by doing store checks. Their music arm is here. An older but more complete announcement, which has a nifty graph showing the price drop over the past few years, is here.

The troll logic here really is so stupid that I have to bite. Sorry, common sense, I apologize.

Isn't it 2005? If you're going to refute the parent, at least get some recent sales numbers

Isn't it 2005? If you're going to refute the parent, at least use some brainpower. I know that it's been 2005 for almost, 0M6, 2 D4Yz0RZ now, and I'm sure your 31337ness gives you access to NPD's live feeds or something, but I'll go with what's been published. The article also points out the stigma that Nintendo faces in the press, that which makes no sense.

It seems like MS has been moving quite a few units during the holidays

This is an interesting statement. You accuse me of using out-of-date data, and yet you fail to provide any link to a source that would back up your claim.

it's very difficult to get accurate sales figures in regards to consoles.

Yeah, there's no way to add up the total numbers of how many units are sold. No company would ever attempt to do that.

(sig)--> I hate liberals. If you are a liberal, do not reply.

Move every sig, for great trolling.

"I love how DVDs' prices are decreasing and will one day be lower than audio CDs' prices. How is it possible for such an old technology to be so expensive? (I know the answer but I'd really like their point of view...)"

The average price of a CD is down to $13.29. That's a historic low, and the price drop is accelerating. DVDs are typically priced at $19 or $20, so DVD prices have a long way to go before they meet CD prices.

The "old technology" involved in a CD -- the pressing -- is one of the less significant costs of production. A finished CD with jewel case and artwork runs around a buck in the quantities typically produced. Even if that cost were to magically go down to zero tomorrow, the cost to the consumer of a CD would only drop by a couple of bucks. The rest of the costs of a CD are things that have risen with inflation -- ie. rent, salaries, shipping costs, and so on.

You mentioned $17 for a CD... the average price of a new CD is now down to $13.29. That's a historic low, particularly when you take inflation into account. Some CDs will cost more (those pressed in smaller amounts, those that cost more to produce) but if you're still paying $17 for a typical new release, you're shopping at the wrong store.

You're correct that a CD doesn't cost anywhere near $50MM. The typical cost of sale for a CD is about six or seven bucks. This includes accruing for marketing, but I don't believe that it includes accrual for returns (which is a big cost at retail... the profit margin of a product is zero if it doesn't sell). They sell it into the channel for nine or ten bucks, so their net profit , if they're lucky, is two or three bucks, or around 25% - 30%.

If that makes your blood boil, believe me, you don't even want to think about the money-grubbing bastardship (I love that phrase!) behind the retail sales of food at your supermarket or clothes at the department store. Record companies would love to get those kinds of margins. I work in the computer peripheral industry and our margins when we sell into the channel start at 30% and go up from there.

As somebody else has pointed out, DVD sales of a film are just frosting on the cake. The film company makes most of their money on the theatrical release. A record company has one shot and one shot only to recoup their investment on a CD -- by selling the CD. The money collected from radio airplay, public performance, etc. goes to the artists who wrote the lyrics and music, not the record company.

CD prices are dropping; more importantly, the speed at which they're dropping is accelerating. The average price of a new CD is down to $13.29.

Back in the 80's when audio CDs were first launched, $18 - $20 was a common price. Part of it was building the infrastructure, part of it was testing the market. Had prices stayed constant, that $18 CD in 1990 would have cost you about $25.50 in 2004 dollars, and the $16 CDs I was buying in 1984 would be about $28.50 today. In reality, prices have dropped by more than half. This is in the US, so YMMV. You mentioned a $20 price for CDs -- I'm guessing you're in Australia?

For what it's worth, the recording industry operates on profit margins that are below many other industries. It's hugely speculative and most CD releases don't make money. To your point about the cost of the media dropping, you're absolutely correct, but the cost of the media (typically around a buck for a finished CD given the quantities produced) is a small factor. If the cost of the media went to zero, that would likely lower retail prices by two bucks at most.

NPD's MusicWatch Digital service, which monitors household usage of P2P services directly from panelists' PCs, reports that the number of households downloading digital music files was up 14 percent in November 2003 compared with September. This up-turn comes after six straight months of declines in digital file acquisition, since April 2003 when the Recording Industry Association of America (RIAA) began a well-publicized campaign threatening individual file sharers with legal action resulting in fines.

The average price of a new CD is down to $13.29.

I'm not sure I follow. The average price of a new CD is now $13.29 in the US. A 10x markup would require that the cost of sale is in the neighborhood of $1.33. It's nowhere near that.

"Markup" is an imprecise term but it generally refers to the delta between the cost of sale and the retail cost. If we look at the cumilative markup between the manufacturer and the end user, with a cost of sale of about six bucks, that's about a 100% markup, not a 1,000% (10x) markup. Is that what you meant?

If I can summarize your post, you feel that $18 is too high a price to pay, and $9 is an acceptable price point for you.

If so, you're in luck: the average price of a new CD in the US is $13.29, and it's dropping fast.

I agree with you that it would suck to pay an average of $18 for a new CD. Seeing as new CDs haven't been priced at an average of $18 for years, I don't think this is a huge issue.

No problem, that figure surprises a lot of people. The data is here (note I was a little high; it's $13.29 now, down from $13.79 last year). The reason why many folks balk at that average price is because it's a mathematical average of all new CDs sold, and I think many if not most Slashdotters don't buy the most popular music (but they might be "sharing" it ;-) ).

It's common practice nowadays for retailers to put a hot new release out at $11.99 or $12.99. During the first few weeks at that price, it will sell a metric buttload of copies, thus offsetting the relatively few copies of $17.99 CDs that are sold at the same time. Thus $13.29 is the average price, and not the typical price when you look at all the CDs on the market, unweighted by their popularity.

If you don't get why Japan is where the console wars will be won or lost, let me point it out to you. 99% of all successful console games in the past 20 years have been from Japan. The only exception I can think of is Halo -- and that was a PC game which had it's XBox port released a year before the PC version. Unless Microsoft can invade and make progress in Japan, they will NEVER make any headway in the console market. Period.

Do you have a reference, or are you just making assumptions?

Top 10 selling console games in the US for 2003:
1 MADDEN NFL 2004 PS2 ELECTRONIC ARTS
2 POKEMON RUBY GBA NINTENDO OF AMERICA
3 POKEMON SAPPHIRE GBA NINTENDO OF AMERICA
4 NEED SPEED: UNDERGROUND PS2 ELECTRONIC ARTS
5 ZELDA: THE WIND WAKER GCN NINTENDO OF AMERICA
6 GRAND THEFT AUTO: VICE PS2 ROCKSTAR GAMES
7 MARIO KART: DOUBLE GCN NINTENDO OF AMERICA
8 TONY HAWK UNDERGROUND PS2 ACTIVISION
9 ENTER THE MATRIX PS2 ATARI
10 MEDAL HONOR RISING PS2 ELECTRONIC ARTS
Source

6 of those 10 are from US developers. And since your other comment about the US console market being smaller than Japan's is provably false, I think it's safe to say these are reasonably "successful" games.

"They have? That's news to me. When I got my first CD player in 1985, the average price of a new CD in a record store was $12. In 2004, the average price of a new CD in a record store is $18. Now, granted there are bargain-basement $5.99 CDs these days, as well as sale-priced new releases at the $12 or $13 price point, but as a whole, CDs aren't cheaper today than they were nearly 20 years ago."

Per NPD MusicWatch, the average price of a new release has dropped to $13.42. That's the mathematical average, which means that some retail for more, and some for less, and geographical differences will apply. If the average price of a CD in your area really is $18, consider shopping on Amazon, or using an online service like iTunes, where an entire album can be had for $12 or so.

I also got my first CD player in 1985, and I remember CDs being $18 or so, but I probably lived in a more expensive part of town than you, figuratively speaking. Let's use your $12 number to save time. $12 in 1985 dollars is about $20 in 2004 dollars; if prices hadn't gone down, we'd be paying $20 per CD today.

As you know, when you spend money on a CD, some of it goes to the artist, some of it goes into a record company's bank account (if they're profitable), but most of it goes to somebody's salary, whether they work at the CD pressing plant, or they're behind the counter at the record store, or they're one of the many people in between. As the cost of living has risen in the past 19 years, so have salaries, and the cost of physical goods have risen accordingly. If what you really meant is that CD prices haven't dropped enough, remember that it could be worse -- look at what's happened to the price of automobiles during the same time.

Michael, on your page, you write:

"When compact discs first appeared, they were much more expensive than vinyl LPs because there were only a couple of factories in the world that could manufacture them. The equipment to make CDs was very expensive, and the factories' production was very limited, so the cost was justified. But years later, although the cost of pressing a "glass master" compact disc has dropped to a few cents, the retail price of CDs has not dropped at all."

This is entirely false. First, you completely ignore the effect of inflation. Those CDs that you paid $18.99 for in 1988 are the equivalent of $29 today. Yet, the average price of a new release has dropped to $13.42 according to NPD Musicwatch. CD prices have dropped by more than half and you state "the retail price of CDs has not dropped at all." I'm not sure if you don't understand the effects of inflation, or you're deliberately being misleading (naturally, I'm hoping the former) but for your article to be effective, you really should fix that.

Additionally, you imply that the pressing cost of a CD is the most important factor affecting the final cost. This is incorrect. Remember, in the case of typical CDs, at least 80% or more ends up going toward somebody's salary, whether they work for the record store, the distributor, or the record company. Most CDs don't even break even, and the recording industry as a whole operates on a net margin of less than 30% -- far less than many of the other industries we deal with each day.

Lastly, you state:

"I know that in the US at least, there are more people sharing files on peer-to-peer networks than voted for George Bush in 2000."

How do you know this? What is your source? I remember a while back Kazaa released some number on usership, but (famously) they counted only the total number of created accounts, and not active users. This means that if somebody had downloaded Kazaa twice and used two user names a few years back, that's two "users." This is bad statistics, but a lot of Slashdotters have gobbled it up. Do you have a more scientific source for your statement?

In short, you have a lot of great stuff on your page, but these huge errors stand to make you look uninformed at best, or outright dishonest at worst. I think most people here on the same thing -- artists simply have too many rights and we must put them in their place -- but this isn't the way to go about it.

"The record companies have a monopoly."

The record industry may be many things, but it's not a monopoly.

"They make it almost impossible for an artist to audit independently how many records they've sold, but inevitably when artists do audit (usually in a very limited area), they discover they are being paid even less than the lousy terms in their contracts."

Inevetably? You mean this happens in 100% of the cases? Can you give some examples?

By the way, there are independent auditing sources freely available, like NPD MusicWatch and Nielsen Soundscan.

"So stop calling it stealing or copyright infringement."

They're just words. If you're going to infringe somebody's copyright, why not be honest with yourself and let the Jolly Roger fly freely? If you're convinced that you're doing the right thing by infringing somebody's copyright, then the words can't hurt you. It's not like somebody's taking money out of your pocket. At the end of the day, the worst thing is that you'll be called a name, but you'll have the last laugh because you've saved the $14.

"So don't give me a sob story about the artists."

How about applying the Golden Rule in this case? As I'm sure that none of us would want somebody using our copyrighted material in an unauthorized manner (such as violating the GPL), why not extend that same courtesy to artists? Right or wrong, if they let you copy their work, then by all means do it. But if they would prefer that you purchase it, why not respect their decision rather than deciding that you know what's best for them? We don't need free music, but artists do need to pay the rent.

Interesting page! On it, you wrote:

"When compact discs first appeared, they were much more expensive than vinyl LPs because there were only a couple of factories in the world that could manufacture them. The equipment to make CDs was very expensive, and the factories' production was very limited, so the cost was justified. But years later, although the cost of pressing a "glass master" compact disc has dropped to a few cents, the retail price of CDs has not dropped at all."

To avoid getting an unexpected reaction from this, you should consider acknowledging the following points:

1. Your statement ignores inflation. The first CDs were around $18.99 when they arrived in the late 80s. That would be about $29 in today's dollars. In reality, the average price of a new CD has dropped to $13.42, according to NPD MusicWatch. Your statement that the retail price of CDs "hasn't dropped at all" is false -- it has dropped in both absolute and constant dollars.
2. You mention only the pressing costs of a CD; this gives the impression that you believe this to be a significant factor in the price of CDs. You overlook the fact that most (or all, in the case of an unprofitable CD) of the final price paid ends up going to somebody's salary, whether it's the session musician, the engineer, or the person who works at the record stores. Salaries have risen significantly since the 1980s.
3. You state that the cost to press a CD has dropped to "a few cents," implying that it's less than ten cents. This estimate is off several-fold. "Less than fifty cents" is more accurate. As an aside, people should not confuse the price to press a CD-R vs. pressing a CD. At any rate, the pressing cost is one of the least significant factors in the price of a CD.

Contrary to your article's claims, the price of CDs has been cut in half since their introduction, when you properly use constant dollars. This is despite the fact that the cost of about every aspect of CD production, marketing and distribution has gone up. Compare this to other forms of entertainment, like movie tickets, whose price has remained about the same in constant dollars since the 1980s.

Your article makes many good points, but a mistake like this may make people think that you are trying to fool readers who aren't privy to a basic course in economics -- and there are a lot of them out there.

For what it's worth, the average net margin on a music CD is south of 30%. The recording industry is speculative; the costs of producing the bulk of the CDs are covered by that rare CD that recoups its costs. For a major label, a million examples must typically be sold to break even; indie labels, whose overhead is much lower, have to sell only about 100,000 pieces, but that's more difficult to do when you don't have the marketing budget of the majors.

Of course, CD distribution via the traditional system is inefficient as all hell; 21st century solutions like iTunes totally kick traditional distribution's ass. However, the issue of the inefficient CD distribution system has nothing to do with copyright reform.

"I don't know where you buy cd's, but the average, admitted, open, regular price of CD's in the United States is 17.99 - 18.99."

The $13.50 average I mentioned (it's actually $13.42; I rounded up) is from NPD Musicwatch, an analyist firm that covers the music industry, tracking sales and the like. It's down from last year's average price.

Note that's the average price for new releases. YMMV. CDs certainly may be $17.99 or $18.99 in your area or at the retailers near you, and I highly value your anecdotal report, but in my neighborhood (Silicon Valley) the local retail scene supports NPD's claim. New releases at the local Best Buy are typically $11.99 or less.

I don't know if NPD Musicwatch tracks e-tailers. If they do, that would swing the number lower, as Amazon moves a lot of plastic.

I hope this helps.

CF already is ahead of its competitors in terms of cents per megabyte. This is largely because it's physically bigger, I guess. Too big for a lot of handhelds and smartphones, which tend to go for something smaller these days like SD/MMC.

Who cares what format is "top" anyway? Provided the cards are still made by a large number of people and supported by lots of companies and hence are at a reasonable price (I'm talking to you, Sony Memory Stick!) a few million in sales one way or the other doesn't really matter, does it?

Just for reference, The NPD Group reckons SD has 30% of the market, CF has 28.8% and MemoryStick has 22%, in the United States.

I can't vouch for their credibility. But they didn't do the stats themselves, those were collected by the NPD Group (who works for over a thousand companies finding out information). The ESA (apparantly the IDSA is now the ESA, which I didn't know when I wrote my original post) has members which include Microsoft and Nintendo, and it hosts E^3 every year. What do they have to gain from dishonest numbers? Sure, take some of the stats for what they're worth - parents might be inclinded to lie on a couple of questions - but they've only got something to lose when they start messing with gamer preference and gamer population stats. This is a six billion dollar industry.

The problem with the article is that it is a summary of a press release, not a summary of the actual study. Unfortunately, since we aren't in the position of being able to purchase the study from NPD, the next best thing is to realize that NPD is a company that performs statistical analysis of marketing research. Also, since the press release provides a hint at the methodology used to collect the sample data, it is quite safe to conclude that they used statistical analysis methods to obtain their data.

I refer you to this link.

-h-

Kudos to you for actually going to the NPD site and finding out the basis of their claims before bitching on /.
And to answer your question:
Hmm I wonder if people who know their computers are being monitored are more likely to delete their digital music files... Maybe that would affect the validity of this study, you think? :p

Yes; this is called voluntary response bias in statistics. People with large collections of illegal files are much less likely to volunteer to have their PC watched, as you implied. Note from the official press release :Eighty percent of the consumers who deleted files had fewer than 50 files saved; just 10 percent had more than 200 files.
I think most people will agree that 80% having less than 50 songs is not an accurate representation of the file-sharing population.

A related NPD survey of consumer perception, however, found that consumers' overall opinion of the recording industry is suffering due to the RIAA's move to sue hundreds of people alleged to have illegally shared music online.

A MusicLab survey fielded by NPD in September noted that consumers' overall impressions of the recording industry were negatively affected by threats of litigation. Two-thirds of consumers who had recently shared files on P2P networks reported that the lawsuits caused them to have a "much more" or "somewhat more" negative opinion of record companies in general. Just over 40 percent of consumers who had not downloaded music in the previous four weeks felt similarly.

The number one defacto problem with sample based studies is that we know for a fact that people who take part in surveys are not necessarily representative of everyone else. The magnitude of this problem is debated (see John Brehm's book The Phantom Respondents).

Read the social science classic Designing Social Inquiry: Scientific Inference in Qualitative Research by King, Keohane, and Verba.

Chapter 5 on "What to Avoid" explains how selection bias works, and why, for example, asking 40,000 people who agree to have their computers monitored by a commercial research marketing group is probably a heavily biased sample.

That being said, its interesting to note that the same research firm notes that while file sharing has an impact on record sales, the music industry is still to blame for declining sales.

"Methodology Note: NPD MusicWatch Digital information is collected continuously from the PCs of 40,000 volunteer online panelists, balanced to represent the online population of PC users. NPD's MusicLab survey was fielded in September of 2003 to a representative sample of 5,000 respondents aged 13 and older."

The most telling part of that release is that "Eighty percent of the consumers who deleted files had fewer than 50 files saved; just 10 percent had more than 200 files." Of course it's quite possible people aren't telling the true. I wouldn't.

Methodology Note: NPD MusicWatch Digital information is collected continuously from the PCs of 40,000 volunteer online panelists, balanced to represent the online population of PC users. NPD's MusicLab survey was fielded in September of 2003 to a representative sample of 5,000 respondents aged 13 and older.

Still, you have to believe their volunteer panelists wouldn't fess up to having any downloaded music given the current RIAA intimidation tactics.

How isn't the distribution system horribly out-of-date? The very concept of taking data, sticking it onto physical discs, putting those discs inside plastic wrappers, moving those discs via trucks, holding them inside stores, requiring the consumer to transport themselves several kilometres to buy the disc, then transport it home, simply so the customer can play music? That system makes sense for physical goods; not for pure data.

Indeed, how right you are! Hardly anyone uses those antiquated means of data delivery anymore!

There's nothing wrong with their delivery methods -- it's cost : benefit ratio for the consumer is losing balance.

Except that they'd find that there wouldn't be very many people left over here to buy the RIAA's stuff.

Now, I'll be impressed when there are more LCDs in use than CRTs.

I can see how it's sort of ambiguous in the original article, if however you go to the NPD web site you can read their original press release where it's actually clear that they are refering to # of units sold for LCD's. It also turns out though that they are indeed refering to percentage of money for Desktop/Laptop sales.

I can see how it's sort of ambiguous in the original article, if however you go to the NPD web site you can read their original press release where it's actually clear that they are refering to # of units sold for LCD's. It also turns out though that they are indeed refering to percentage of money for Desktop/Laptop sales.

Even high-quality Windoze-centric shops have gone away - just look at Looking Glass studios for one. Gone! And they didn't do ANY linux. And they had great games, and excellent sales. And they were liquidated just last year.

Your analysis is a bit superficial. I recently spoke to one of the senior people at Looking Glass who specifically told me that the failure of Looking Glass was due to a rocky relationship with Eidos, the publisher on the Thief series and System Shock. While their games sold relatively well, their business relationship assumed that an acquisition would occur at some point, and since this never occurred Looking Glass went under.

Strangely, these days, the home console market is the only place where sophisticated computer games have a fair chance of being profitable. The sales volumes are significantly greater than those sales for Linux... and Windows.

You're substituting hearsay for actual sales numbers. A typical PS2 or Dreamcast title is considered to sell well at around 200K units; sales of over 500K are uncommon. Hit PC titles regularly sell upwards of a million units, with no royalties paid to the platform manufacturer. That's why TRSTS breaks out game sales by PC and then by console; hit PC game sales, at this time anyway, always eclipse sales of hit console games.

The reason why PC games are not very profitable right now is because the retail channel is stuffed with PC games. It's much harder to sell into the retail channel if you're a PC game publisher than it was 2 years ago. I would say that all US game publishers have laid off staff within the past 12 months.

Loki took a risk by developing for an unproven game platform. They took a further risk by trying to sell games into a slower game market; consumers last Christmas bought more lower-priced software and spent less money on A+ games. In other words, more people bought more games at $19.99 and $29.99 and there was less of a market for premium games. So even though the size of the market increased slightly, margins dropped on those games, and developers and publishers took it on the chin. NPD says things are looking up. I hope that's the case. Until then, take a clue from the dot-com plague and try not to develop any games for unproven markets, kids.