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RIAA Says CDs Should Cost More
EatingSteak writes "The folks over at Techdirt just put up a great story today, with the RIAA claiming the cost of a CD has gone down significantly relative to the consumer price index. The RIAA 'Key Facts' page claims that based on the 1983 price of CDs, the 1996 price should have been $33.86. So naturally, you should feel like you're getting a bargain. Sounds an awful lot like the cable companies saying cable prices are really going down even though they're going up."
The RIAA 'Key Facts' page claims that based on the 1983 price of CDs, the 1996 price should have been $33.86.
No, because CDs are by far cheaper to mass produce than cassettes or, in all fairness, vinyl. For a small production run of vinyl, i'd expect to spend $1.00 per disc including a paper dust cover. CDs I would expect to spend 1/2 that with a basic sleve for a small production run. Cassette I would expect to spend double that of CD.
Yet for some reason, they sell commercial cassettes for less than a CD.
Not to speak of mastering seems to be done by some yahoo with protools.
There is no sanctuary. There is no sanctuary. SHUT UP! There is no shut up. There is no shut up.
CDs are STILL $13-18 (unless they are at Costco or "on sale", usually), but back in 1983, a decent computer cost $2000 (you can't even buy a computer that bad now, for as little as $299).
Even a nice calculator was about $50 or so (better ones now for under $20). A Color TV (A heavy CRT, 13 channels, click-click tuner) was 2 - 3 times what they cost now (for 121 channels, multi inputs, remote, etc. etc.)
The list goes on and on and gets "worse" (for the RIAA argument) when adjusting for inflation. LOTS of stuff is far cheaper than it has ever been.
Bah.
This issue is a bit more complicated than you think.
This is also interesting because they conspired to raise the prices of cd's already. Wonder if they will get away with it this time?
And right on, They compare the price of a new product to the price index instead of the price it should have been retailing for. If someone did the math in the same way with a normal valued price, I would bet that they would be a little more expensive now. I guess RIAA might be doing the "see, you getting a deal already so don't pirate" thing here.
Nothing like making you feel good about paying too much for something then by illistrating that they could be at a higher price.
Good point. I hardly ever buy CDs new nowadays - usually pick them up off of ebay for 1/2 or less the list price - and that seems to be a much more reasonable price than the $15 or so that the new ones cost. If they raised it much further I don't think I'd buy ANY CDs new.
What's the cost of a physical CD? let me tell you, since I have managed some commercial releases:
Indie artists who get stuff replicated in 1000 CD batches from OasisCd or Diskmakers pay about $1.70 per CD. These are PRESSED, retail-ready, in standard jewel cases, in color, with barcodes, spine labels and all the trimmings, shipped to your doorstep.
So, a physical cost of a CD is $1.70 or so for non-RIAA indie music. If you go to Sony DADC or another large manufacturing house and order 100K or gold (500,000) press jobs, your cost for a retail-ready jewel case+CD is between $.60 and $.90, depending on printing options. This info is from an actual quote. 10 cents a fully packaged disc is unrealistic. Materials alone are more then that. 10 cents gets you a pressed CD with 1 silk-screened color and a mylar sleeve.
Remember that about 50% of any retail price consists of retailer/wholesaler cuts. Indie artists who sell through Amazon watch as Amazon takes 55% of the retail price, distributing 45% to the artist. Assuming a $12.00 CD, lets break this down:
Out of that 45% ($5.40), the artist has to fund:
shipping to Amazon ($.25)
Duplication ($1.70)
17 U.S.C. 115 compulsory royalties ($.91) low end cost.
Producer's standard 20% cut ($1.08)
This leaves $1.46, with which the artist has to eat, promote, fund the next record, and tour on.
Anyway, the point is, CD pricing is complex. The RIAA is wrong though. CDs should cost less, but at the expense of our convoluted, monopolistic distribution system (cartel?), not at the expense of the artists.
Sig (appended to the end of comments you post, 120 chars)
i remember a sales person at a record store telling me that you could throw CDs against the wall and they wouldn't scratch.
(...goes to books to make sure it's the right number...)
And that's with my shoddy economies of scale. I can't even imagine where the RIAA gets this kind of thinking, but I guess they gotta do what they gotta do to keep up with the price of cocaine, right? Can't imagine the weak dollar has helped them with their fine imported Columbian stuff.
Another reasonable and well thought out claim from the RIAA. Someone inform Intel that a single transistor should still cost about a dollar, they're losing money by the fistful.
m
m icroprocessor_timeline.pdf
They figured out how to make them faster better cheaper. Have you seen Intel's R & D budget? Intel has figured you can make a profit in volume sales. Making lots of units at low prices can cover very high production costs. They spend lots on their product to improve the quality and value. I wish I could say the same for the RIAA who in the same time frame have not improved the number of minutes or tracks on a CD and reduced quality by over compression, loss of dynamic range, and technical problems with CD's that don't work and break things.
Q1 outlook 2007 for R & D for Intel;
Expenses (R&D plus MG&A): Between $2.6 billion and $2.7 billion. In addition, the company expects a first-quarter restructuring charge of approximately $50 million.
http://www.intel.com/intel/finance/bus_outlook.ht
If the RIAA kept up with Intel in the same time frame, they would have CD's out with the $33 price point, but would have to kept up with the times. The 8088 processor ran 4.77 Megahertz. Most current Prescott P4's run at 3,400 Megahertz (3.4 GHZ)
The 8088 had 49,000 transistors in 1978. The 286 had 134,000 transistors in 1982. The 386 had 275,000 in 1985. The 486 had 1.2 million in 1989. The pentium in 1993 had 3.1 million transistors.
Since we are looking at a time frame of "The RIAA 'Key Facts' page claims that based on the 1983 price of CDs, the 1996 price should have been $33.86." we can take the numbers from Intel's 1983 processor the 286 at 134,000 transistors and the 1996 Pentium processor at 3.1 million transistors. (Pentium II in developement at 7.5 million transistors released a year later in 1976)
In the same time frame the CD went from 8-12 tracks average to 8-12 tracks average. To keep up with technology like the computer, it would have had to go from about 10 tracks to about 300 tracks at about the same selling price. Napster almost reached that value.
Intel data gleaned from; PDF aleart.. http://www.intel.com/pressroom/kits/core2duo/pdf/
If Intel tried to continue selling 4.77 MHZ CPU chips today at adjusted for inflation prices, they too would have volume sales problems. Somebody wake up the RIAA and have them smell the coffee.
The truth shall set you free!
More complex then that. What's the physical cost of a CD? Blank media from staples works out to a few cents. Before staples, it's even cheaper. Now burning data on a CD does cost money. A red laser in 1983 that can burn media would cost in the tens of thousands, if not hundreds of thousands of dollars. Now it costs less than 100 USD, again retail.
Commercial CDs are typicaly not burnt, they are pressed. In some ways they are like vinyl in the way they are mass produced, from a master, stamp stamp. The process i'm familar with uses a glass master which then a laser is used to etch the photo sensative layer, then several metal molds are made. Then the metal molds stamp the plastic layer, and reflective layer is added.
This is not like your home brew system.
Tape was always more tedius, you rather needed a loop master which would play and replay as banks of decks recorded them. The process could be automated to a large degree, but still the speed at which you copy was limited, vs pressing while requiring more prep time produced copies faster per unit.
There is no sanctuary. There is no sanctuary. SHUT UP! There is no shut up. There is no shut up.
Yeah, the grandparent is right that CDs go down over time, but the point is that the raw cost of manufacturing is only a small percentage of the cost of a CD. Sure, that cost has fallen, but it has never been the principle cost driver for the medium. Manufacturing costs aren't what we should be debating. Sorry if I was unclear...I'm not the best writer.
Sig (appended to the end of comments you post, 120 chars)
Remember, we are talking about royalties from CD sales. The artists aren't paying themselves. They are making money from CD sales. Two possible scenarios for part 115 royalties:
SCENARIO 1) The indie artist does a cover. They have to pay compulsory royalties. When Rusted Root did "You Can't Always Get What You Want", they had to pay royalties. Conversly, when I cover a Rusted Root song, Rusted Root is getting 9.1 cents per song per album sold in royalties from my CD sales.
SCENARIO 2) If the indie artist wrote their own music and signed a contract with a record company, hopefully they weren't stupid. If they weren't stupid, the contract included a clause that says something like:
-------
15. COMPULSORY ROYALTIES
a. All musical compositions or material recorded pursuant to this Agreement which are written or composed, in whole or in part by Artist or any individual member of Artist or any producer of the masters subject hereto, or which are owned or controlled, directly or indirectly, in whole or in part, by Artist or any individual member of Artist or any producer of the masters subject hereto (herein called "Controlled Compositions") shall be and are hereby licensed to Company:
i. A royalty per selection equal to 100 percent (100 %) of the minimum statutory per selection rate (without regard to playing time) effective on the earlier of (A) the date such masters are delivered to Company hereunder or (B) the date such masters are required to be delivered to Company hereunder. The aforesaid rate shall hereinafter sometimes be referred to as the "Per Selection Rate";
-------
The above was pulled from an actual contract. It allows the artist to earn compulsory royalties on their own work, in addition to sales royalties. This is usually a good thing. As you can see, that is section 15, which is from a 32 section contract that runs 24 pages. This industry is exceedingly, needlessly complex. I wish it weren't so.
Anyway, I hope this is a decent explaination. Remember, royalties are paid separately for both the RECORDING and the COMPOSITION.
Sig (appended to the end of comments you post, 120 chars)
Once you have the production line up and running, and a steady stream of sales to amortize the start up costs, stamping out another unit costs only a couple bucks. It's like CPUs. In the beginning demand is high, production relatively low, and a large investment has been made in setting up a new product line, so costs are high. Once everything is in place, it costs only a few cents to actually stamp another CPU, and for a product with high production and market penetration, even the costs of labor are spread over many individual units. When the demand drops, the supply goes right with it. As long as the product continues to sell, the company can continue making money off a production line that's basically "paid for", which means profit in the bank, even if the prices drop.
Then there's the fact that companies may in fact be selling units at a loss, especially with technology that's not so cutting edge anymore. Some revenue is better than no revenue and a stack of product sitting in a warehouse taking up inventory space.
The Slashdot Limerick
They will never raise the CD price to 34$. That is not their intention with this statement. The record companies know damn well how the market works and they know damn well what we have been saying for months and years.
But the problem is going the new routes and trying a new business model is somewhat risky. So the put up such statements in the hopes that people believe the bullshit and they can get away with it a bit longer. They don't want to raise prices... they just want to feed us bullshit in order for us to be quiet and be happy that it isn't even worse than it already is. It's a question of relativity.
I just bought a rucksack for 50DKK (~ US$ 9). Seems OK. My new vacuum cleaner did cost 250 DKK (~ US$ 45). A new garden table set (table, bench and chairs) was 500 DKK (~ US$ 90).
I doubt I could have purchased any of these items for the same amount 20 years ago.
The rucksack and vacuum cleaner were made in China, the garden table set was made in Vietnam.
Everyone spewing about the cost of technology going down over the past 14 years is correct, the RIAA states that in the beginning of their article!
What they postulate is that all the non-technical/manufacturing costs have gone down, but the cost of advertising, recording, wages, etc. etc. has actually increased (these type of things will increase along with the CPI).
So in effect, the cost of making the CD has gone down. But the cost of making the CD successful by finding new artists, recording the music, advertising, etc. has gone UP!!!
I hate the RIAA, they are despicable. But you're not even reading the articles!
No - I'm not new here
The difference is that movies try to make thier money back on the theatrical release prior to being sold for home viewing on DVD.
The musical analog of theater release for a movie is a concert tour by the performer. While the money from a movies' release goes to the studio, money from a concert tour goes mainly to the performers.
I know that it's really more complex than that, but I'm nutshelling here.
I want to shoot the messenger!
Then explain why the last time I seriously considered buying CDs (just last year), I found 10- to 15-year-old Iron Maiden CDs, not in any means a mainstream popular act for the most part, were still priced around $17 each? I'm not even talking about the recent albums either, but their back catalog that I still had only on cassette (which I got for about $9 back in the 80's, by the way). I had planned to finally update my collection from when I was a teenager, figuring "Ah hell, they can't cost more than $10-12 each, I should be able to buy the whole discography for about $150 or so". I left without buying anything, reminded why I hadn't bought music in about 10 years.
It's a good time to be an indie artist, definitely.
I [may] disapprove of what you say, but I will defend to the death your right to say it.
Just a quibble: CDBaby, another cool company, sells CDs for $14.
;-)
CDBaby actually sells CDs for whatever price you, the artist, want. For example, we like selling our CD for $10, online or offline. So we set our price at $10. And CDBaby sells them for that. http://www.cdbaby.com/meetgoodwin. Not often I get to stick a link to the band in to a response and actually have it be relevent