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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."
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.
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)
(...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!
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:
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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";
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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.
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