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States Sue Record Companies For Price Fixing
Logic Bomb writes: "Twenty-eight states filed a federal lawsuit today against the five largest record labels alleging price fixing on compact discs. The Federal Trade Commission has dealt with this before, through an out-of-court settlement that was supposed to fix the problem. A Reuters article provided by Yahoo gives good details."
A professional album costs upwards of $100,000 to record.
You've been taken in by the studio hype.
A $100K production package is entirely unnecessary. Quality writers, vocalists and musicians have been creating top quality music at near zero cost for millenia, and they haven't suddenly lost that ability now that 1000-track, billion-dollar digital studios are available. This applies even in totally electronic genres --- the keyboard/MIDI scene is so incredibly buoyant and rapidly churning that the kind of equipment that would have set you back dozens of thousands of pounds just 5 years ago is available at near-student prices now, and that's not just your instruments but the whole production outfit.
Your argument is basically back to front. The industry has created an expensive production and hype machine and uses this as an excuse for keeping prices high, as if using that environment were some sort of precondition for creating music. It isn't. If you buy into that standard MO then all you're doing is feeding the already-overfed beast.
"The question of whether machines can think is no more interesting than [] whether submarines can swim" - Dijkstra
Spitzer said at a press conference the states were still calculating the exact amount of the damages, but said they amounted to ``hundreds of millions of dollars'' or ``several dollars per CD.''
so... i have around 400 cds. by my calculations, the riaa owes me $1200. empeg, here i come!
but joking aside... what will happen to the cash that the courts make the riaa cough up? as a major purchaser of cds, i'd sure like to be refunded for some of the cost of my music.
--
Why do you talk about the cost of a blank cd as being part of the issue? For instance, a Redhat Linux CD costs $50 from Redhat. That's a helluva a lot more markup than ever occurs with a single mass produced music CD...
Music single: 6.00
Full Length CD: $12-$17
Video game: $30-40
"Free operating system": $50-120
Windows upgrade: $90
Windwos fullversion $200
Office Suite: $500
Yet they all ship on the exact same media. CD's...
Not once in the entire antitrust trial, did the DOJ hold up a blank CD and wonder why Microsoft charged so much more than that... They wondered about microsofts pricing yes, but they never considered the actual media as being a large enough of an expense...
Same as for music. Software has developers, QA, graphic designers, lawyers, executives, etc... Music has musicians, producers, executives, lawyers...
Makes no sense to my why people openly advocate stealing music yet cry fould when someone violates their GPL by not releasing source... Get on one side of the fence or the other, please...
DiabloII, as well as many other networkable games of today, provide people who bought (or pirated) the game with the ability to play the game online. Those servers do not cost the end-user anything, but they do cost a lot of money to maintain.
You can argue that the users have already paid for those servers, even if they don't use them, since they've paid the steep mark-up for the game. You'd be right, that's where the money comes from. But, this is the same sort of reasoning that the RIAA and MPAA use all the time. Money not made is not money that's lost. Money that's spent on the game alone is the same amount as that spent on a game you intend to network. The person who networks DiabloII is getting more bang for their buck. Simple.
Now, where's the extra bang for the buck with a CD? As another poster on this thread suggested, a CD is no more expensive to produce then a book, yet a book tends to sell more cheaply (unless you're in college, in which case you're the victim of extorsion, but that's another topic entirely).
There isn't anything really special about a CD. No, not anything more special than a DVD - both are the 'cool thing' in our culture. We provide the suppliers with a ready market. They set the maximum price that most people are willing to, begrudgingly, pay.
If prices dropped, record sales would undoubtedly rise; but not in proportion. Even if they sold the CDs at a buck a piece, I would not buy the same dollar-amount as I do now. There are not 30 albums per month that I would want to acquire.
Now for the cost of production - and here we get to see the actual price-fixing at work: Say an album costs the aforementioned $100k to record, another $100k to distribute and yet another $100k to promote (though most promotion is in radio play - paid for by advertisers, and in performance tours which are paid for at the gate). So, we have $300,000 in investment. Let's add $200k for the artists and another WHOPPING $500k for all others involved.
Now, we've got a cool Million to work with (funny how that worked out). Say an album sells a million copies... That's a dollar per copy. We pay what?? $20 a piece?
Even if an album sells (ONLY) 100,000 copies (pitiful), that's still $10 a pop to break even - remember the bills are paid now. Where's that extra money going? Britney Spears next boob-job? New 'Stangs for NSYNC? Bail for Snoop Doggy Dog?
-- What you do today will cost you a day of your life.
Well, not for those making money on it, but still.. In a greater, moral sense, Napster has served it's purpose.
It was in the wrong, and we all know it - but by allowing individuals to rip off the Record Companies, it has prompted the bears to charge. They're now out of the cave, and everyone knows they're a bunch of greedy hypocrites.
Two wrongs do not make a right, but apparently, doing the wrong thing for the wrong reasons will sometimes bring to light another wrong, which has been swept under the rug in the hope that no one notices. It's about damn time.
But, I just hope that this is not a sign of things to come. The FTC/DOJ/Fed seem encouraged by their 'victory' over Micro$oft. Are they now starting to chase down other monopolists? In the case of the RIAA, it may not be a bad thing. But I hope that it doesn't turn into another witch-hunt. We've seen over-zealous government agents cause a lot of harm in the name of doing good.
-- What you do today will cost you a day of your life.
CD's haven't been around for 15 years
Not to take away from your main point, but [scrabbles around in desk drawer, pulls out a disc, checks the date] the Dire Straits "Brothers in Arms" CD was released in 1985 -- fifteen years ago. And that wasn't the first CD by a long shot, although it is one that convinced a lot of people (including me) that it was time to get a CD player. (It was one of the first 'DDD' discs, digital recording, digital mixing, digital playback, vs some of the 'AAD' discs made from analog masters. It also had more music on it than the vinyl LP version.)
-- Alastair
I have seen this quote in nearly every article I've read about this situation, "The labels say they started the MAP policy in an effort to help smaller music retailers compete with chains such as Wal-Mart Stores Inc. and Circuit City Stores Inc. They say smaller retailers do not have the option of offsetting losses from cut-price CD sales with sales of other products." It makes you say to yourself, "Awww..those nice big record companies were just trying to help out little record stores, that's sweet."
My question is, why were they doing this? Why would juggernauts like Sony and Warner Brothers do a damn thing to help out small stores at the expense of huge business partners like Wal-Mart? What was in it for them?
Question 2: What kind of damages would they have to pay and to whom? The only case like this that I remember is when Nintendo was found to be price fixing (way back in the day). In the Nintendo case, they sent coupons to everyone that had bought games that were good towards the purchase of new games. What sucks about that system was that the company that was price fixing (Nintendo here) ends up making more money by mailing out coupons good for less than the profit margin of the product. Also, while you're at the store with a coupon, you are quite likely to pick up another game/CD at full price. Someone with some info, please chime in.
-B
This just cannot be justified
Since when should you have to justify the price you want for something. You price it.. people either say "X is worth $Y" and buy it, or people say "X is not worth $Y" and don't buy it.
Next thing you will be complaining that some companies have too high of profit margins.
DrLunch.com The site that tells you what's for lunch!
I'm not a real big record company apologist, but:
At that time, large department stores and consumer electronics retailers began selling CD's below cost as a "loss leader," in an effort to get people into the stores to buy big-ticket items, labels said.
The labels say they started the MAP policy in an effort to help smaller music retailers compete with chains such as Wal-Mart Stores Inc. and Circuit City Stores Inc. They say smaller retailers do not have the option of offsetting losses from cut-price CD sales with sales of other products.
Granted, those guys have a way of lying through their teeth, but that sure makes sense to me. If I were running a small music store which only sells CDs, I can't afford to lose money on CDs. A Best Buy can pick up the slack by selling impulse items like CD cases and, ehrm, refrigerators.
The labels say they received no financial gain from the MAP policy. "The wholesale price we charged retailers was the same whether or not they participated in MAP," one label executive said.
But the states claim in their complaint that if a retailer advertized a price below the agreed-upon minimum, the retailer risked "the loss of all promotional funds available from that (label) for a period of 60 to 90 days...(and) would jeopardize promotional funds for an entire chain."
Why exactly is this price-fixing? The instrument industry does the same thing -- they sell instruments at a wholesale $X. They don't allow you to advertise below a certain MSRP in-print, but you can sell it for any price you want, hence the haggling which is an unalienable part of the experience of buying an instrument.
Doesn't the blame lie on the retailers?
darius
The three words that scare the crap out of the RIAA?: Northern Mariana Islands. That's right, we're not just talking about the full sovereign force of twenty-four states plus Puerto Rico. This action has been joined in full by the Northern Mariana Islands. Don't you see? The Northern fucking Mariana Islands!
"If one is really a superior person, the fact is likely to leak out without too much assistance" -- John Andrew Holmes
.. from the book "Our Dumb Century", which is essentially a set of newspaper parodies from the year 1900 to 2000 (starting with the assassination of President McKinley and ending with the ascension of the Christian Right to heaven.) The headlines marking the beginning of World War I looked something like this:
WAR DECLARED BY ALL
States Sue RIAA Sues Napster Sues Metallica Sues Courtney Love Sues Orthodox Jews Sue Barney the Dinosaur Sues Dr. Dre Sues Puff the Magic Dragon
TIME-WARNER ALMOST SUES ITSELF
Companies Struggle to Remember Allies
We're going down, in a spiral to the ground
It could also be considerred "price fixing".
It is about time that legal action be brought against the RIAA. They have been using monopoly-powered mafia-like tactics to hold onto their control of the industry. Simple fact of the matter is, that these record companies control just about every aspect of the music business, and competition is nil. Look at Britney, N*Sync, Backstree Boys, etc. A free market would have never allowed these performers to sell, let alone be sensations.
I would really like to see the MPAA sued for "bundling" their DVD players with their DVD's. That is, in order to play a DVD, you MUST use one of the players that are officially sanctioned by the MPAA. It always struck me a bit like the old railroad (J.P. Morgan?) thing where you had to use THEIR railcars if you wanted to use THEIR tracks. The forced youi to buy multiple product, because they controlled the monopoly. Exactly the same thing that MS has been pulled into court for.
So if its good enough to pull MS in on, why cant they go after teh MPAA?
Next, the MPAA needs to
tagline
... hi bingo
I'm glad they're going after the companies, and I hope that when the states win the class action suit against the companies that will follow can get each of us a couple of bucks for each CD we bought. We've all known that 17 bucks was way too much for something whose production costs so little, and things like Napster are mostly the result of the absurd cost of CDs.
Q:Doctor, how many autopsies have you performed on dead people?
A:All my autopsies have been performed on dead peop
Since the RIAA takes its cut, and the major labels take their cut, and the distributors take a cut, the cost of raw materials takes a cut, and finally the artists get .003 cents for the sale, then you can see where the money goes. Note that the cut the RIAA takes does not go to the artists, they get to keep 99% of the collected artists royalties for overhead. Cut out the RIAA, and force the labels to use straight forward accounting practices for royalty distribution. Then the artists will see the money they deserve. A system like that would allow many more artists to make a living doing what they love, rather than have all the money get lost on the way to them.
CD prices are even more outrageous here in Europe, with even less money going to the artists. I'd expect the EU to follow up with a similar investigation now that the US has shown the way.
the AC
Hemos is like...sci-fi fans;he thinks technology is cool, but he hasn't bothered to understand the science it's based on
Seth
$5 / month hosted VPS on linux = awesome!
That would be all good and great, if the price of a CD was reflective of the record company's effort for that particular artist, but I bet it's not.
Way more promo effort (i.e. money) has gone into Britney Spears and the Backstreet Boys than say, Pitchshifter or Fear Factory. But their disc prices are just about the same, even when each was first released.
Now, that kinda tells me that the money I spent on my latest Pitchshifter disc didn't all necessarily go to efforts solely directed at selling Pitchshifter and their disc to the public. Am I helping fund the latest boy band's promotion?
If my $18 (after compensation, manufacturing, etc.) were going totally into efforts (or reimbursement of efforts) to promote the band I just bought, I wouldn't necessarily have a problem.
But I don't think that it is. It's going into promotion of a small handful of record-company-constructed "musicians", who, as a result of this promo machine, will make back exponentially more for the record company than they put into it. Honestly, the strategy makes sense to suits who don't care about the art. But what about a band who, if promoted properly and paid fairly, would make a decent profit that, though not on a Christina Aguilera-scale, would be decent enough to satisfy and support that band? Well, the RIAA companies don't really care, for the most part. Sure, the smaller RIAA labels do, but they're usually not rolling in cash, either. They're just owned by the big RIAA companies so that when the small labels find the 'right' band, the parent RIAA company can be ready to exploit.
And that's why I hate the RIAA.
-JimTheta
---
My stupid web site
The problem with this suit is that it doesn't really help consumers. Why? Well, basically all MAP pricing has done is to keep Walmart, and Circuit City and the ilk from closing down smaller stores. These types of retailers sell the CD's under cost. It's a marketing tool to get people into the store to but high buck items.
The record companies sell CD's to Walmart for the Same price they sell to Mucisland or some other smaller chain.
While MAP pricing stinks I think it's really the small part of the puzzle of price fixing. Really, it's icing on the cake. And keeping companies liek Walmart in check isn't that bad of a thing.
The real point is a effort to keep the industry wholesale prices inflated. In order for this case to work out there has to be proof that the music companies have acted together to that ends.
Actually in a case life that, "out-of-court-settlement"="RIAA threatened to pull all their lobbying money, states saw that the general public really didn't care they were paying $18/CD, so one of the state lawyers went over to the RIAA members, said 'Bad RIAA' and slapped them on the wrist, and all was forgotton".
Which is exactly what will happen this time. Napster is all over the news, so a bunch of state senators and State Attorney General's got together to get a little face time on the local news, while taking a "brave stand" on a "hotbead issue" in the face of "corporate greed". And in 2 months, when consumers are still breaking their ankles running to Best Buy to get the latest Metallica album (on sale for $15.99!!!), the suit will be settled "out-of-court", and status quo will once again be restored.
You're wrong (but not totally). Under the law 17 USC 10, section 1003, the manufacturer of "digital audio recording medium" must pay a royalty, defined in section 1004 as "3 percent of the transfer price", the manufacturer's wholesale price. Section 1001 defines "digital audio recording medium" as "any material object in a form commonly distributed for use by individuals, that is primarily marketed or most commonly used by consumers for the purpose of making digital audio copied recordings by use of a digital audio recording device". It specifically exempts media that is primarily used as computer media, and a computer and/or CD burner fail to meet the definition of a "digital audio recording device" (unless they're specially marketed as such).
Last I looked recordable CDs still didn't have to pay royalties, and 3% of 40 cents doesn't have an impact even if that's changed...
Here is the wired article
$_='while(read+STDIN,$_,2048){$a=29;$b=73;$c=142;
There is a problem with this two-tiered pricing you propose: production costs. To illistrate my point, I will use Anime as an example. When you purchase an Anime title on VHS, you generally have two products to choose from: The english dubbed, or the Japanese language with english subtitles. Anyone should be able to realize that it costs significantly more money to dub the title than subtitle it, as you have to hire voice atcors, buy studio time, hire a sound engineer, etc... Yet the subtitled VHS tapes are usually $5-10 MORE EXPENSIVE! Why is this? Because the anime distributers sell 10 times more copies of the subtitled tapes.
Enter DVDs...
On a DVD you can store up to 8 language tracks, and 32 subtitle tracks, and switch between them dynamically. Thus, subbed and dubbed become one product, and everybody buys that one product, thus quantities go up and cost per unit goes down. The DVD's are usually the same price as the dubbed VHS.
The point I'm trying to make is that to do the two-tiered pricing you suggest, they'd have to split the market in two. The expensive disc that contained pretty packaging would wind up costing more like $40, due to VERY limited demand. Also, they would be a "collector's" type market, which means they would be purchased regardless by a limited few, so theycould jack up the price even higher.
Also, most of the cost of CD's is artificially inflated. Audio cassets cost a good deal more to manufacture, and only cost a fraction as much. What the RIAA is doing is building in another $8 or so because they know CD's will never wear out like a cassette will, thus you will never need to buy another.
"Evil beware: I'm armed to the teeth and packing a hampster!"
Lex orandi, lex credendi.
Why do the CDs of old stuff still cost the same as the ones keeping the marketing staff busy?
Your argument has holes in it.
Oh yeah: "Doom I,II,III, Descent I,II, Diablo I" All $4.95 in the clearance bin. That's 90% off the original sale price for software a few years old. Where's the 90% off an all 80 music?
10 Repeat after me: They're gouging us. Goto 10
I have serious doubts about the artistic effort being among the most significant chunks of the cost of a CD. Typically artists get only a very tiny fraction of what each CD sells for. I'd love to see some real numbers on this. The industry made $15 billion in profit last year. Doesn't sound like they're having a tough time of it to me. There's no way in hell I'm going to take their word for it. I want the full investigation done. They aren't telling us everything, you'd be a fool to believe they are.
It's not enough to bash in heads, you've got to bash in minds. - Captain Hammer
Absolutely correct. Why should the record companies have to watch their spending? After all, large parties, extremely pricey advertising and the costs of keeping non-signed bands off the charts are of vital importance.
If the record companies actually had to worry about receiving income, they might start having to satisfy the customer. Satisfying the customer would be a bad thing... Right?
Seriously though, by not having to worry about what bands they pick up is a bad thing. You get artists that are nothing more than advertising tools that the media companies create themselves. Putting a little responsibility into the equation would probably help stop record companies from deciding what they want to sell and instead focus on where the customer base wants to take the market.
Keep in mind that the worst thing that the record companies did to themselves recently was not supporting Hip Hop, that opened the door for a lot of independant publishers and started the move to liberate the music industry.
Lando
/* TODO: Spawn child process, interest child in technology, have child write a new sig */
Nice choice of years. Now try this one, taken from RIAA's own U.S. market data report: between 1990 and 1999 the average cost of a CD rose by 13%. And yet, sales volume continues to grow by 10% annually. Isn't it a shame that piracy is destroying the CD market?
At that time, large department stores and consumer electronics retailers began
selling CD's below cost as a ``loss leader,'' in an effort to get people into the
stores to buy big-ticket items, labels said.
Someone's got to have a really inefficient distribution system if they can't make money off a $18 CD.
--
--
Mod up a post Rob doesn't like and you'll never mod again
...sued Microsoft? What is it with these 28 states? Did all the Attorneys General go to the same law school or something? I don't get it, why would only 28 states sue? Do record and softare companies only operate in these 28 states? If anyone has any enlightenment to spread, I'd much appreciate it...
The government is supposed to protect citizens from force and fraud. Price-fixing is not good capitalism, it is a type of both force and fraud. Price-fixing distorts the market, preventing people from being able to freely negotiate price. Therefore it is a legitimate function of government to prevent price fixing -- along with other acts of collusion and conspiracy -- from happening.
---- ----
Napster-to-go says "Fill and refill your compatible MP3 player", which is a lie. It's not MP3. It's WMA with DRM.
Besides, RedHat isn't charging just for the media. They are charging for the customer support you get when you buy the boxed product, as well as a set of printed manuals.
-Vercingetorix
-Vercingetorix
"Necessitas non habet legem." -St. Augustine
Ok, I for one am fully in favor of this lawsuit, but please don't make the mistake of saying that $.30 is all it takes to make a CD. A professional album costs upwards of $100,000 to record. Plus advertisements, plus distribution, plus the amount of money the industry "eats" for all the bands that don't sell. Don't forget for every Spice girls there are 100 bands that get printed, promoted and distributed and never sell crap. CD's should be cheaper, that is for sure, but your argument just doesn't cut it here.
The companies shined attention on themselves by going after Napster, and I rather imagine they aren't enjoying the results now.
Don't expect this to be the last lawsuit either - you know that once people smell an easy target, those things multiply.
"The Sage treasures Unity and measures all things by it" - Lao Tzu
An essay describing the history of CD manufacturing and price-gouging can be found at:
http://www.negativland.com/minidis.html
Lots of other information on the record industry, copyright, and intellectual property issues is available on their site.
This comment is quoted verbatim from an RIAA website. The original page can be found here.
;)
Frankly, this is a big load of shit, and doesn't deserve a +2 insightful
Anthony
"I think any time you expose vulnerabilities it's a good thing." -Attorney General Janet Reno
A careful consideration of the facts in the case, as well as the legal precedents set forth beforehand can lead to only one reasonable reaction to this decision by the states:
BWAAAAAHAHAHAAHAHAHAAHAHAHAHA!!
You fucking greedy bastards! We knew it all the time! You have absolutely no moral authority to tell Napster users what to do when you're criminals in your own right! Take a long walk off a short cliff, you RIAA scum!
Wow, that was totally juvenile. But I feel SO much better.
- Rev.One might also argue that the advertising and distribution might not be necessary but for the big name labels and their promotion of crap like the Spice Girls. How many ads have you seen on TV for Johnny Welfare Garage Band? Not to many. You might have seen them in your local pub though - and the RIAA didn't have diddly to do with that.
I can't quote you what a recording session at a studio costs, but I would hazard a guess you can get reasonable work done for less than 100 kilobucks - maybe 25? That's not a justification for record prices as I see them. Especially given most artists only see a few dollars at most - and all those promotions, ads, and radio play are taken off THEIR cut - because that money was an advance from the label. Hole had a pretty good rant about that (linked of some /. article last time we all debated this).
The industry is a crock of shit and screws over a lot of people that care about their music. Don't think otherwise. They're scared shitless the internet is going to take away their "distribution model" aka "gravy train", and all the power to them.
Ever ask yourself why you can't walk into Sam's with a Rio, download a song for $0.50, and walk out?
..don't panic
As far as this case goes I am glad to see it happen. I think that the whole Napster ordeal should have been a clue to the RIAA that they need to lower their prices but it wasn't. Though the record companies might not see it this way, this case is going to help them. If the prices are lower people might not feel the need to pirate. And if you sell more product, even at a lower cost, you can still make more money.
Besides this issue has been huge, Napster versus RIAA is huge. The government has already been made involved by the RIAA and thier actions against Napster, if they don't do something that could stop the madness, then they will have to put up with Napster cases until the end of time. Just be thankful that they are doing something that helps us instead of something that hurts us... like shutting down anything with the name MP3 in it.
Oh joy, yet another US-centric article griping about imagined flaws in the American legal system.
Did it ever occur to you that Slashdot is based in the US and is obviously going to be a little slanted in that direction? This is news that is happening in our "backyard", its important to us.
When I see an article about things going on in France or England or anywhere else in the world, I look at it as an opportunity to learn a little about the problems facing the people and the country. I don't make an annoying post about how much coverage that country has been getting lately.
Furthermore did it ever occur to you that all legal systems are flawed and that only through critical discussion can those flaws be found. Its much more productive to discuss the problem then to whine about it.
Price fixing is normal in other countries, and, believe it or not, none of them have been taken over by massiv evil corporationsy et.
Well now that's settled we'd might as well start homogenizing the world. What's good for one country must be good for everyone.
Come on! There are a lot of things in this world that are completely normal in one country, but are completely alien to others. Some of us call it culture, and some of us even respect other people's culture.
Whether or not Price Fixing is normal in Japan is irrelevant. In the US its illegal, and as long as its illegal we as citizens and consumers have a right to ask that the law be upheld. We aren't always listened too, but it certainly is nice when we are.
For example, many sectors of Japan's economy are controlled by huge monopolies (yes, including the record companies), and people the world over look up to Japan's amazing economic success.
Some people look up to Microsoft too. Some people thought what Adolf Hitler did with Germany in the Pre-World War II days was something to look up to. He even got Time's "Man of the Year". You know what though? The end doesn't justify the means.
It's only when the government tried to deregulate the economy that it crashed.
Isn't oversimplification grand. I suppose that the Boston Tea Party was the only cause of the American Revolution. That the invasion of Poland was the only reason World War II got under way.
Price fixing is not the end of the world.
No it isn't, but it is illegal.
Sure, it might mean higher prices for consumers,
Which is precisely why it is illegal.
but it doesn't mean that there's some huge illuminati-like conspiracy out there trying to "get" consumers.
Damn, did I walk into a Katz article by mistake..
So you have to pay more for a crappy CD. Who cares? Price fixing happens -- get over it!
Another brilliant statement.
Cop: "I'm sorry Mrs. Smith, but murder happens, you'll just have to find another husband and get over it."
"The words of the prophets are written on the Slashdot walls."