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."

Comments

My eyebrows are raised....

[BWJones]

Funny (not as in ha ha) because as I recall back in 1983 the record companies acknowledging that CDs *were* expensive but that the price would come down as the number of CD sales went up. Back then a record album ran around $7 US and CDs were anywhere from $13-18 US and I could as a 13 year not afford many CDs, but did I ever load up on all those punk 45s, likely outspending what I would have on CDs over time. What the record companies can not apparently figure out is that if priced affordably, some sales are money in the pocket versus no sales and no money in the pocket. Judging from the precipitous fall in music sales and revenues over the past few years from lousy music, over priced music, DRM and bad will from the RIAA, they obviously just don't get it. Now, if they were smart.... record companies would *give away* music from bands just starting out and from the biggest bands out there and make money from tours. Bands in the middle of the spectrum could be the "middle-class" of the record companies that could provide the most profit after small bands graduate into the middle class and start selling their music, touring as they want.

Re:My eyebrows are raised....

[sk999]

Well stated - matches my recollections as well. The price of CD's has NEVER come down since they were first introduced, and it is only because of inflation that their relative price is now on a par with that of record albums from yon times of yore. Taking 1983 as a reference point for what CD's OUGHT to cost, when CDs were a new technology, is just insanity.

Re:My eyebrows are raised....

[dtfinch]

You can bounce a CD off a wall without scratching it. It's not until they land on the floor afterwards, spinning as they slide across the rough surface, that you have to worry about scratches.

Re:My eyebrows are raised....

[omeomi]

Just like everything else, CDs are subject to supply and demand market forces. If they really want to try to get record companies to sell their CDs for $34, let them. They'll quickly realize that the loss in revenue caused by the huge drop in sales is not worth it in the least, and the price will come right back down. The RIAA is just making noise because they know they'll be totally irrelevant within the next 10 years...

Re:My eyebrows are raised....

[NormalVisual]

They'll quickly realize that the loss in revenue caused by the huge drop in sales is not worth it in the least, and the price will come right back down.

Or more likely, they'd blame the drop in sales on piracy and direct their wholly-owned subsidiary members of Congress to push yet more ridiculous legislation through in support of their dying business model at the expense of the citizenry.

Re:My eyebrows are raised....

[Znork]

"Make it cheap and I will buy much more of it."

The RIAA corps arent interested in you buying more music. They're interested in you paying lots for _their_ music.

If you buy _more_ music, the revenue stream gets diluted. The cost to produce per unit sold becomes a larger part of the total revenue of each unit sold, and they get less profit. More music means more varied music taste and music exposure, in turn leading to less per-unit income off radio stations, etc. Less revenue per unit means less marketing capital, means less power to push independents off the air and off the shelves. Less control. Less money to those who control the market channels, and a larger piece of the pie to more of the actual artists and composers.

Not at all in the RIAA corps interest.

"Basic economics."

Basic free market economics. But the intellectual monopoly industries are nothing like a free market.

The fact is that the digital revolution has cut production costs for professionally produced music down the level that basically anyone who can afford a halfway decent used car can afford to make their own professionally produced album. The internet revolution has cut distribution costs down to zero. On a free and competetive market, the pricing of music would reflect that, and the prices would fall down to maybe a dollar per CD, and far less for the most widely produced CD's.

As long as we allow the monopoly rights to remain, this gain of wealth will remain unrealized, and we'll see far less music than we should, far more marketing (and its even less savoury accompanying corruption a payola and lobbying) than we should, and a much poorer culture than we should.

Re:My eyebrows are raised....

[dubl-u]

Just like everything else, CDs are subject to supply and demand market forces.

Well, no, they aren't, not entirely.

If one sugar producer decides the "true" price of sugar is $15 a pound, then you can buy sugar from somebody else. But if you want to buy the latest Weird Al or Madonna album, there's only source. It's a monopoly, an in theory limited but in practice eternal one called "copyright". If they double the price of the hot Madonna release, there are a lot of people who won't think that Weird Al is just as good, and vice versa.

It's also important to note that RIAA is a trade association of major music producers, not a single producer. If the major labels (heaven forbid!) were to get together and, say, fix prices then market forces would also not apply. Not that they would do such a thing; RIAA is here to help us. I'm just talking hypotherically, you see.

Re:My eyebrows are raised....

[indifferent children]

It also strikes me as absurd, that I can buy a DVD of a movie in a store for $10-$20, and look over to the left and see a CD of the soundtrack for that movie for $18. Did all those people who took the pretty moving pictures cost nothing? Were the actors free? How can the soundtrack be considered to have equal value to the entire movie?

Re:My eyebrows are raised....

[AxemRed]

I don't think that it's their business model that is failing... Rather, they are failing at their business model. Granted, the current system needs some tweaks. But the main problem is that the record companies are just not doing their job. Their whole purpose is to go out and find music that people will like and then market it to people. They are doing the opposite though... They are trying to TELL people what music to like instead of finding music that people WILL really like.

Re:My eyebrows are raised....

[zotz]

"Well, no, they aren't, not entirely."

and

"But if you want to buy the latest Weird Al or Madonna album, there's only source. It's a monopoly, an in theory limited but in practice eternal one called "copyright"."

Bingo! Mod parent up.

There are no free markets in goods protected by copyrights and patents. These goods are covered by government granted monopolies. It should also be obvious that these monopolies distort the markets or people would likely not bother with them. I mean why go to the trouble to get a patent if it is not going to give you an advantage in the market? Why push to hve copyright terms extended if it is not going to help you in the market?

One quirk though, even without copyright, there is still only one source in the first instance for the work of a particular artist.

all the best,

drew

Re:My eyebrows are raised....

[MojoRilla]

I don't think that it's their business model that is failing...

Their business model is definitely failing. Their business model includes the following features:

1. Find up and coming artists.
2. Sign those artists to highly unfair contracts because there is no other way to get music distributed.
3. Front artists seed money to record albums, and spend lots of money on studio magic making things sound better, all of which is recouped before artists actually make any money off royalties.
4. Promote those artists through radio, which they control through payola.
5. Control the distribution channels. Distributors won't work with non RIAA music.
6. Sell full CDs even when people only want one song. Include three good songs and seven filler cuts.
7. Rotate media every 10 to 20 years and re-sell their back catalog over and over. They successfully did this with records, tapes, and CDs. They have been unsuccessful with products like eight track and minidisc. The jury is still out on SACD and DVD-audio, but it isn't looking good.
8. ...
9. Profit!

This is failing in the following ways:

1. As you point out, they are not doing a good job of finding artists. They are trying to manufacture artists.
2. Unfortunately, the RIAA's monopoly on distribution is ending. The internet is now a better way to distribute music.
3. The cost of recording has been drastically reduced due to affordable computer recording software. The RIAA no longer has a monopoly on well recorded music.
4. Radio is no longer the only way to hear music. The internet is making inroads here as well.
5. Brick and mortar stores are no longer the easiest and cheapest way to distribute music. The internet is more convient. The RIAA resisted selling music on the internet, perhaps because their monopoly distribution system was threatened. So because convenient music wasn't available, people started sharing files.
6. People are fed up with having to buy an entire CD when they only want a song. The internet makes it possible to only buy the tracks people want.
7. People are fed up with rotating media. They are largely satisfied with the quality of CDs. They don't want to rebuy media.

Re:My eyebrows are raised....

[shark72]

"1) there are plenty of us who were around and remember the initially massively over-priced CD and promises of huge price drops once the technology took hold,

Which they have; they've dropped about 60% in constant dollars since launch.

"2) pretty much everyone of any age already knows that CDs are a lot more expensive than they should be, not a lot less."

Yet nobody is able to exploit this. Even Magnatunes, which pushes the cost of the music production onto the artist, still sells CDs for $8 each, direct. CDBaby, another cool company, sells CDs for $14. And there are hundreds of really cool indie labels -- run by people who are musicians, or who really and genuinely care about the music -- that also sell their CDs for typical pricing.

"This is yet more panic-induced, ill-conceived **AA FUD, when will these people learn how to die with dignity?"

...then why don't you become the one that kills them? I'm 100% serious. If everybody knows that there's this amazingly huge profit margin built into CDs, then there must be somebody out there who can figure out how to find artists, produce their work, pay them fairly, give their stuff proper promotion, and sell a reasonable number of copies at $3 or $5 or even $7. The record companies clearly don't -- they still only manage to net around ten points at the end of the year. From what I read on Slashdot, it's a market that's ours for the taking.

What a joke

[n1000]

If they should cost more, they would! It's simple supply vs demand! I mean, the RIAA are cartel for all intents and purposes. Who are they to be complaining?!

Re:What a joke

[feyhunde]

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.

So yah, if it cost the same amount to actually make the CD in 1983 as it did in 1996, or 2007, there might be some validity. But the physical cost of the CD fully packaged is 10 cents or so.

So we're expected to believe the majority of costs in that same article are related to booths. When a 6$ record is replaced by a 14$ CD, the price works out the same. Nothing got cheaper, they just want us to believe a CD is magically as hard to make now as a LP in 1983.

Re:What a joke

[EatingSteak]

"It's simple supply vs demand!"

I don't think I'm the first to say, but it really isn't supply vs. demand at all.
"Supply & Demand" implies a free market, ie, one with (theoretically) infinite suppliers and infinite consumers. In practice, we just say "many" suppliers and consumers, both of whom are price takers. Emphasis on takers.
Even with the concept of monopoly pricing "creating a shortage", that is more like OPEC (a large group acting as a monopoly). OPEC, believe it or not, is a price taker. They do not say "ok I will sell you this many barrels of oil at, say $60/barrel. They can only set a goal price of $60 by restricting supply.

Retails sales are a completely different ball game. Of course, by the definition of copyright, and the fact that the record label holds it (as opposed to the artist), that label has a monopoly on selling that artist's music. To prevent competition from similar artists, they have a cartel going for them.
So, one could say that the labels have at least a partial monopoly. But here's the kicker: they are price makers. In a market (such as the market for futures, where you get quote "oil prices"), a monopoly would set supply. In retail/wholesale, the label sets prices (well, wholesale prices). There is no market to buy whatever's there at whatever price will make it move.
Rather, the labels set a price (at least a wholesale price), and the public buys however many units they feel like. The supply is theoretically infinite... it'd be a tough case to argue that they would stop printing additional CDs as long as they keep selling. Basically, they set the price (retail is $12.75 IIRC), and the public buys or does not buy.

Because it's not like production ever gets easier

[Anonycat]

I suppose we should have to pay $1300 for a Commodore 64 nowadays, too?

You don't even want to hear how much the RIAA thinks you should have to pay for a machine capable of a billion calculations per second...

Please, do raise the prices

[orthancstone]

Seriously, jack them up. That way, when less CDs fly off the shelves, they'll start making some good decisions on how to run the industry and actually attract customers. Throwing us tons of garbage every week for a "good price" doesn't mean they are doing us any favors.

Re:Please, do raise the prices

[TheUni]

If less CDs fly off the shelves, they'll blame it on rampant piracy. Always something with these guys.

Pricing and inflation?!?

[wall0159]

Also, the cost of international phone calls has declined markedly since 1925. Based on inflation, we should now be paying $500/min for international calls. Don't tell the telcos!

Similarly, the cost of motor cars has come down since the Model-T Ford - they should cost $1.5 million each (based on inflation - discounting better performance these days)

Or... perhaps technology and economics has some influence on the price of things too..

#include <derisive_laughter.h>

[ewhac]

Fact: The unit cost of a single CD, silkscreened, in a jewel case, with six-page four-color liner notes, quantity 5,000: USD$0.91.

Quantity 10,000: USD$0.79.

Explain to me again why these fsckers cost $16.00?

Now then, what was the per-unit pressing cost, quantity 10,000, of a CD in 1980? If we calculate MSRP as a percentage multiplier of the raw pressing cost, what should music CDs cost today?

Schwab

Cost Of Production Is A Very Small Amount

[domukun367]

Ben Woods' argument is correct, if we are talking about a piece of electronics, where, say, 90% of the cost of that piece of electronics is in the production. However, only a very small amount of the cost of the cd (less than 1% if 1c for the CD and 3c for the case/cover) is in the PRODUCTION of the CD.

Most of the cost of a CD is in the marketing and (of course) profits for the record company. Sure there are a few extras, like the pittance they give the artist, but the majority of the cost is MARKETING. This gets more and more expensive as they get more and more ridiculous in their marketing and the cost of marketing increases over time.

Another spin might be that CDs are now more expensive to produce due to all the non-redbook copy prevention measures that they keep trying to put on "CDs" now.

Pure BS

[soren100]

This is one of the most laughable things I have ever heard.

CD prices were always higher than the equivalent cassette tape, which was much more complicated to produce and had the same production and marketing costs.

FTA: For example, when you hear a song played on the radio -- that didn't just happen! Labels make investments in artists by paying for both the production and the promotion of the album, and promotion is very expensive.

The only thing that gets played on the radio is the latest Britney Spears bubblegum crap-ola. In fact, Mandy Moore recently apologized for making such bad music

So we have to pay for all the payola in getting the radio stations bribed to play the songs on the radio.

And then when a CD gets scratched, broken, or stolen, do we get a free replacement? Oh no, we have to pay the full retail cost all over again even though the RIAA wants us to think that we have somehow "licensed" the music from them.

I am glad that they are sweating, which they must be in order to be trying to play the "victim" game. The days of the Internet are here to stay, and bands can finally distribute their own music without getting shafted.

In the linked article it says that only 10% of all CD's make a profit. The other 90% of CD's put the bands into debt to the record companies, making it a really bad deal to sign a record contract. Courtney Love does the math.

The RIAA sounds desperate, and I hope they are -- it would serve them right.

Post-scarcity needs getting used to

[Glowing Fish]

If you look at most computer or home electronic prices, the trend has been downwards over the past twenty years. Not only downwards when adjusted for inflation, downwards when adjusted for performance, but downwards in absolute prices. I wish I had stronger memories and figures to back this up, but I do remember as a child, (I was born in 1979), people just had a wildly different attitude towards electronics. A VCR, cable television, a microwave oven, color TVs...all of these were important luxury items. This could be just a artifact of me growing up, but a color television set was on par with say, a grand piano as far as how expensive it seemed.
I do have better data for computers. I have a 1994 price guide to computers when bottom line computers, 386s cost around 1500 dollars, twice as much as a midrange new desktop would today.
All of this is stuff most readers here know. (Although I am expecting at least a few people will correct my specifics.)
What I have noticed, however, is that many people have not psychologically adjusted to this, even when they intellectually know it is the case. I have noticed this most at my work at Free Geek, where often people come in, with a Packard-Bell Pentium, and explain at some detail that the quad speed CD Drive works, if you just wiggle it around first. Or that their 14 inch monitor still works, but it might blink off every few minutes. Meanwhile, we get truckloads of P-4 systems every few days.
The point is, I think many people (often older people, but not always that much older), still have a mindset that computer and electronics are rare and valuable, instead of being the mass-produced, quickly obsolete, pieces of junk they are. And I think that many of these people are honestly confused about how valuable their product is. Of course, the RIAA people know that AOL mails out millions of CDs a month (do they still do that?), and that CDs cost "under 1 dollar to make" ( wikipedia on CD manufacturing). Of course they know these things intellectually, but I really do think they have a mindset that they are producing a rare and valuable resource, and that they aren't asking for much in that they haven't raised their prices with inflation.

Post-scarcity takes some getting used to. I consider the entertainment industries inability to come up with a more financing method that doesn't involve creating false scarcity to be one of the less harmful inabilities to adjust to a new paradigm. I consider the fact that the US political and industrial leaders really don't understand (even though they know) that the US has lost textiles 50 years ago, consumer items 40 years ago, vehicle manufacturing 30 years ago, electronic manufacturing 20 years ago and computer manufacturing 10 years ago (numbers somewhat generalized), and that all of those things are now produced overseas for a fraction of a US worker's hourly minimum wage, to be a much more dangerous symptom of the same disease.

Corporate math

[Bullfish]

You have to understand corporate math. That math says that if you made 15 million in profit in year one, and 10 million in year 2, then you have taken a 5 million loss in that second year. That thinking convolutes all kinds of statistics.