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Attorney General Investigates Music Price Fixing
An anonymous reader writes "The Guardian is reporting that the US Attorney General has launched an investigation into whether or not record labels are engaged in price fixing of music downloads. From the article: 'The department of justice inquiry centers on the activities of the four largest record labels: EMI, Sony BMG, Universal and Warner Music. Subpoenas are believed to have been issued to all parties, with federal officials understood to be focusing on whether the companies have been colluding to keep the price of downloads artificially high.'"
Another pretty good article on this subject can be found at this site
Everyone is greedy to a point. Some are just able to carry their greed to the point of complete selfishness and totally ignore the high percentage of people who have a hard time just keeping a roof over their heads.
What the heck will it take? Evolution of the human species? I always think back to those old Star Trek episodes where they land on some planet where the inhabitants laugh kindly at Earth's culture because they have learned to live without greed, take care of everyone, and actually enjoy sex rather than codify it.
I don't know why I want to write this... mod at your leisure. But before you bite my head off, I want to make sure all the future commenters out there read this very key quote: Hopefully that will keep those crazy anti-Apple fanboys at bay.
Keeping the prices high? Are you kidding? If you think 0.99 per song is high you ain't seen nothing yet baby. As soon as we can get people to stop using iTunes and a MS based system instead with no Steve Jobs to protect consumers, and his bottomline, we will really be ramping up the price!
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
...they have to pay a $50 fine and publish a press release including the words "We are vewwy, vewwy sowwy." Rinse, repeat 10 years later...
I've been curious why it costs more to buy an entire album via download, than it does to buy the cd... IIRC it cost the lables more to make a tape, than to produce a cd, and the prices for cd were greater than tapes. Now without having to produce a pyhsical tangible disc or tape, the costs are higher still, witrhout packaging and liner notes, and printing costs. smells like price gouging to me.
http://politics.slashdot.org/article.pl?sid=06/03/ 03/1543256
Sorry guys, but leeching off the works of others is old hat - time to find really, genuinely good acts, or put up "for Sale" signs.
Physics is nothing like religion. If it was, we'd have an easier time trying to raise money!
But we're talking about music and music here. Your parable and the attorney general's actions are like apples and oranges.
They are 10 years late and investigating the wrong medium. I don't see anything wrong with 99 cents per song, my issues were the $21 for a CD with one decent song.
The music industry is solely responsible for the awesome quality of music that is available to everyone, and without them, this music would never see the light of day. I don't even want to think about how we would all survive without these conglomerates!
How about a new parable that actually fits?
Once upon a time there were a couple record companies. Through the years, their product was the creation, publishing, and distribution of music on various analog media. As technology progressed, they were able to condense even more songs into a smaller product, at an even lower cost to themselves.
One day, a new technology came along that allowed customers to take songs and give them amongst each other, for free. This new technology allowed instantaneous and essentially free distribution. At first the companies attempted to stop customers by making their activities and technologies illegal. Slowly, however, they began to consider adopting this new method of distribution themselves.
But instead of reducing their prices to reflect the change in cost to deliver the product to market, these companies decided to increase their costs, in the name of profitability and growth and investors. When customers saw that the companies were overcharging them, they began to deliberately turn away, continuing to take the product, but without paying for it. In turn, the companies decided to increase their prices further, to make a greater profit off of the shrinking market. But the more they increased the cost, the fewer customers they seemed to have...
Price fixing has been a hallmark of the music industry for fifty years. Let's look at CD's.
It costs any record company, on average, about $0.25 to get one CD into a retail store. This includes:
Normally, manufacturers strive to keep their cost per unit at or below 12.5% of the retail price. The distributor then buys the unit at 30% to 40% of retail. The retailer buys the unit at 60% of retail. The customer buys the unit at (you guessed it) full retail price.
Let's see how the typical $16 CD retail price breaks down:
But Wait!!! Most record companies are their own distributors. More profit for them.
We see now that $0.25 (real cost) is about 1/8 of the production cost calculated here. Following the model, one CD should cost about $2.00.
Which is still more than most of the trite crap produced these days is worth. Music isn't a cash cow, it's a cash herd.
Now if you want to write a real analogy
*The 2 farmers would be members of the FPAA (fruit producers association of america)
*They would be actively working together through the FPAA to sue their users who make illegal copies through planting seeds
*They would be suing people for planting with no real proof they actually planted
*They would have a long history of losing antitrust cases dating back to the 60s
*The FPAA would actively be working to strongarm stores to sell their fruit at higher prices.
*The FPAA would have a long history of screwing over their fruit producers (artists)
In this case is antitrust worth looking into? Hell fucking yes.
I still have more fans than freaks. WTF is wrong with you people?
...wait a second, I thought that you could fix prices all you wanted to on non-essential products. Wasn't The Sherman Anti-Trust act addressing critical comodities, such as food, fuel and similar vital products that are important to the economy?
I think the RIAA is inhuman scum as much as the next slashdot basement troll, but who really cares if they collude to set the price for old Tiffany songs at $8 or $16? I don't need them to live, so they can form a big evil cartel and charge ONE HUDRED BILLUN DOLLARS if they want to.
HA! I just wasted some of your bandwidth with a frivolous sig!
Where was this investigation a decade ago when it was price fixing and racketeering of the music printing and distribution business that resulted in $18 CDs as the cost of doing business and bringing the product to market declined?
It's funny too because all the clean-up this investigation could possibly lead to won't save the labels of the RIAA. They long ago crossed the line, laughed, and STILL refuse to acknowledge their misdeeds. It's a good thing consumers aren't suffering their tyranny anymore.
Don't they realise that 90% of albums make a loss?! That marketing and distribution is incredibly expensive? That the few artists who do make a profit essentially provide a subsidy so the record companies can go out and find new talent?
Do these busybodies not grasp that record company executives need to have two new luxury cars every year?
Do they not realise that by the time you've bribed DJs all around the world to play your music rather than the interesting demo some promising new band sent them, there's only enough money left for bonuses in the region of $20 million/year? How can record companies hope to continue attracting the best chief executives if they can only pay $20million in bonuses?
I don't care about price fixing of music downloads. Look at price fixing of physical CDs instead. How can a music CD cost the same as a movie DVD? And while they're at it, make them use the true CDROM standard, without drm hacks.
1) Cold hard cash will be transfered under "campaign contribution" from the mysterious Big Four to the US Attorney General.
2) Investigation will reveal nothing.
3) Profit!
How about a new parable that actually fits?
What did you expect from BadAnalogyGuy?
You're right, it is worth looking into. Unfortunately, it was the federal gov't that set up farm protection schemes far worse than you're envisioning (like paying for the destruction of crops in order to keep prices artificially high).
Do you even lift?
These aren't the 'roids you're looking for.
Anybody notice whenever something happens an investigation is started and you never hear about it again?
"You're everywhere. You're omnivorous."
This is a long time ago, but this post is what you are looking for.
Everyone lost.
Even if the attorney general did decide to take some action, it would undoubtedly be some slap-on-the-wrist fine or equally ineffective measure. Nobody seems to ever consider doing something that might be effective. In this case, the problem is at its root caused by the government-granted monopoly of copyright. No copyright, no problems! If the government is unhappy with the copyright monopolies they have created, why not strike the problem at its root and weaken the copyrights of those who abuse them?
This would work not just on music companies but on any business built on copyright; for example software businesses such as Microsoft. Instead of a fine, simply slash the duration of copyright on the company's assets, or even release some portion of them to the public domain immediately. This would not only serve as a deterrent to future abuses; it would actually reduce their *ability* to commit abuses in the present, and it would measurably benefit the public as well.
main(c,r){for(r=32;r;) printf(++c>31?c=!r--,"\n":c<r?" ":~c&r?" `":" #");}
...your numbers are just plain wrong.
Hell, it would cost more than a quarter just to *ship* one CD.
Let's look at some more realistic assumptions.
First: Let's say a "typical" CD sells 100,000 copies (they don't, on the average, but we'll go with the 100K number).
We'll assume the band is made up of five guys.
If they're using a good studio (not the cheap-ass garage-based kind), you're looking at $10,000 for studio time alone. A good producer will want to pay for a good engineer, so there's another $10,000 or so. Add in design costs, and actual physical production, and you're looking at upwards of $50,000 for a serious production (yeah, you can get an album hammered out at your cousin Phil's for a couple of thousand, but you can also drink Budweiser).
So you're up to 50 cents a pop, just for recording and preproduction.
CDs in bulk cost about 25 cents each for actual physical production in huge quantities, with labels and in boxes.
So there's 75 cents in real production costs, and everyone concerned is going to make *zero* profit.
Now, the label gets into the act, they have a bunch of people out there looking for the Next Big Thing, and they have to be paid for. The people who own the studio also need to be paid. Then there's the band. Suppose each of these groups make 50 cents a pop for each CD sold (a not-extreme number).
So you're up to $2.25 in actual physical production costs plus royalties and a moderate amount of profit.
Now, here's the hard part: Moving the damned things around. They have to go from the factory that prints the CDs, to the warehouse owned by the label, then to the first middleman. You're up to $2.50 a pop now.
That first-level middleman is going to want to make some profit, too. So he's going to take that $2.50 in costs and double it (he has to pay his warehouse crew, plus his staff, plus pay the rent on the building, et cetera - doubling is pretty common in order to make a decent profit). So you're at $5 a shot, and it's in a big buildding out in St. Loius or something.
Now, the middleman takes orders from all of those little retailers, plus all of the big retailers, and ships them out UPS (or the like). Every Tuesday, those retailers get that week's stock of CDs in, and what to they do? They double the cost (what the middleman charged with shipping coss, then a markup for the store's costs, which include rent, staff, and al otehr costs).
So even for the "cheap" model of production, you're looking at $10 CDs.
Which is, oddly enough, what the price is for "discount" CDs of fairly popular bands, and what most local bands charge or their locally-producred discs.
NOTE:
The numbers above assume a fairly high number for a "typical" CD. The real average is closer to 5,000 than 100,000...
There's also the "risk taker" model to be included. They don't charge $16.99 ($12.99 at Best Buy) for a successful CD to rip you off. They charge that much to pay for the next CD they put out that tanks in the market, where they eat all production costs yet still have to pay those folks all up and down the line.
I think the point is that price fixing fosters piracy, so you can't both claim that piracy is hurting your business, and then charge 'a hundred billun dollars' for some song(s). Anyone who wants those has to steal them, just like with prohibition... making something that is already extremely popular illegal just makes everyone an outlaw and fails to address the problem.
stuff |
"So even for the "cheap" model of production, you're looking at $10 CDs."
Impossible.
Sony BMG has once-a-month sales where they ship CD's to your house at $6-7 per disk. Presumably when I buy a $6 CD, Sony is not losing money, so it suggests the cost is significantly lower than you calculate.
You were mistaken. Which is odd, since memory shouldn't be a problem for you
The price of mainstream DRM-less downloaded music is still infinity.
(The various attorney generals should just stay out of it at this point; they're a few dacades late to the game. There were two monopolies and they're both getting broken. Distribution, of course, was broken about five years ago with the widespread availability of broadband. The second, airplay, is in the process of being broken with the advent of satellite radio. It'll further get broken when/if they finally come out with EVDO Internet radios.)
How about a new parable that actually fits?
Rewind a bit...
"Pop" music depends on hype. I, for one, do not think that the screaming teenage girls in the 50's phenomenon was entirely "spontaneous". That was staged and aggressively promoted. Thus, pop music hysteria was born, and what better pent-up group of emotions than pre-adolescent, innocent females would there be to manipulate?
A few reasons.
I'm not 'flaming', or trying to be a prick in any way. It just seems that most Digg users don't understand why we aren't deserting Slashdot in droves for their site. You asked, I answered.
AG: Did you four callude to raise the price of music?
EMI: ahhh, no.
Sony: no.
BMG: er, no?
Warner: what was the question again? oh, yeah, definetly not.
AG: Well, that settles that, sorry for the inconvenience. BTW, hot dogs and hamburgers at my place tonight.
1) The sales they have are $6-7 including shipping
2) BMG has at least gotten into the 1990's. They email their monthly choice and I decline on their web site. Still not free, but cheaper than sending letters back and forth
3) Their choice is better than a department/5-10, but not as good as a real record store.
4) I understand the business model, but if they can sell CD's out the door for $6-7 (right now the sale is $6 shipped), that suggests they could easily sell CD's retail for $10. I think if these guys dropped prices to under $10 retail, we wouldn't be having many discussions on piracy. But at $18? Yikes. That's an investment. The band better be really really really good to get $20 ($18 plus tax).
You were mistaken. Which is odd, since memory shouldn't be a problem for you
Let's cut to the chase, shall we?
The "product" costs $2.50 to get out of the factory to the distributor. That sounds reasonable, I'll buy those prices.
I don't buy two more doublings from there to the stores. If there's 300% profit between the distributor and the public, then someone's going to come in and buy from the distributor and ship directly to their stores, and sell them for $5.00.
If you can't do that, because none of the distributors will sell direct to retail, then guess what... that's price fixing.
I always thought that the high price of ringtones was some sort of a 'stupid tax' designed to protect the general public from having to listen to the latest Snoop Dogg obnoxiousness every time some asshole's phone goes off on the train.
Obviously it's not working. Verizon, would you please, PLEASE increase the price on ringtones? How about $19.95? Wait -- I've got an even better idea -- why don't you bill it at 20 bucks per ring? You'll get right on that? Thanks.
"Ladies and gentlemen, my killbot features Lotus Notes and a machine gun. It is the finest available."
"I always think of how it can cost 99 cents to download a full song from iTunes... but then a ringtone... costs 3 dollars"
That's because p2p networks still keeps prices on downloads down.
$0.99 per song isn't "cheap"... iTMS attraction is that I don't have to buy 10 songs I don't like to get one I do. If I like the music enough to want the whole album, I buy the CD.
It's the album price that limits the iTMS price. They couldn't get away with charging significantly more than CDs on iTMS when they get less for it.
The prices of ringtones are high because you only need to buy a few, maybe even one, and unless you're a total pop culture slut once you find one you like you're unlikely to buy another for six months.
And they don't need P2P ringtones. If you're savvy enough to be using P2P and you have a cellphone, there's bunches of programs out there that will let you take any chunk of a song and turn it into a ringtone for all kinds of phones. People don't care, because the $3 for the ringtone is nothing compared to the $1000+ they're paying for the phone over a 2 year contract.
Speaking of which, is the music or the cellphone industry a bigger rip-off?
Huh? It's called a 'smokescreen'. Investigate a certain business for price fixing, find nothing wrong, everything goes on business as usual. Happens up here in Canada every time the government 'investigates' the gas companies for price fixing.
Don't just stand there, get that other dog!
I recently discovered for myself the used CD market on ebay.
I have currently purchased about ~50 cds. I got most for about $3 - $4 each on average including shipping. Each CD is a full album (no singles). Most have 10-15 songs on them. Many come from shops specializing in the sale of used cds...
Which means I'm paying about $0.30 per song. And to think that someone had to collect these CDs, figure out which ones were scratched, which not, advertise on ebay, put them into a box, and ship them to be via the postal mail...
Even if 25% of the CD is so scratched up that my computer can't read it, I still come out -- way ahead. And I like to think that maybe I'm helping someone [non-RIAA] out... (which may/may not be the case)
And to think that we currently have an *industry* selling electronic copies of songs for $0.99? Thery already had the digitized recording from the recording studios... Bandwidth these days is practically free. There is virtually no packaging or transportation cost. Very little human intervention is required....
So are the music companies colluding? Maybe. Or maybe they are just exploiting the dumbness of their customers... These companies are large enough to **define** the market. They don't have to answer to supply & demand. The real crime is that the public puts up with this and asks for more...
Does anyone remember how buying home VHS/DVD movies used to be expensive? $15-$20 US for a single movie? Lately, Wal-Mart has a huge crate in their electronics dept, filled with DVDs for ~$5-$7 each... (*renting* at blockbuster costs almost that much ~$4). When displayed like that, I realize how stilly this whole $$$ for IP thing really is... But when displayed neatly in nice packaging on a shelf, these videos somehow appear [to the public] to merit their price...
Some might say the $5-$7 movies are crap... Well, what are most of downloadable songs selling for $0.99 EACH??? And movies cost far far more to produce than music...
Come to think of it, the DOJ antitrust investigations really aren't what they used to be at all. When they smacked down IBM, they put the fear of God into the company! For decades after that IBM bent over backwards to obey the terms of their agreement with the department. Ever since then though, it seems like all the companies that get investigated and found guilty of anti-competitive behavior just shrug it off and keep doing what they were doing before.
I don't know when exactly the DOJ lost the ability to scare the living hell out of a company like they did with IBM, but I think they need to get that ability back. Otherwise they're just wasting my tax dollars. I think the best way to do that is to make a particularly brutal example of the next company they investigate. What? You say it's the music industry? Well... OK then! Get to it, guys!
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
You are confusing price setting with price fixing. Most forms of price setting are legal - ultimately a manufacturer decides how much they want to charge for their product. Manufacturers cannot, however, legally dictate the final retail price (well, this is true in Australia). Of course, they can always could scuttle $0.99 downloads by refusing to sell tracks to apple under $0.99.
Price fixing is when different companies in the same industry collude to artificially set the prices of goods at a price far higher than what normal market forces would dictate. It is usually difficult to prove as you need evidence of the collusion part. In production of goods, when a competitor raises prices, you can either maintain prices, hoping to steal market share or you can cash in by raising your prices too! In the music industry, the end products are not exact matches for each other - artists are generally not marketed under different labels so you would be incredibly stupid to try to steal market share!
In many respects, selling music is the perfect encapsulation of Capitalism - "screw the customer for whatever you can!" - and as long as we keep paying what they ask, the labels will continue to do so.