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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."
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.
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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?!
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...
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.
My pirated music collection just tripled in value! I guess it's worth the trouble to back it all up to DVDs now.
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..
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.
FTFA:
For every album released in a given year, a marketing strategy was developed to make that album stand out among the other releases that hit the market that year. Art must be designed for the CD box, and promotional materials (posters, store displays and music videos) developed and produced. For many artists, a costly concert tour is essential to promote their recordings.How about you all agree to stop marketing the CDs and just let the people choose what they think is good, rather than trying to tell them? We'd all save millions.
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.
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
Editor, A1-AAA AmeriCaptions
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.
Please don't send a Word document when a text file will do the job.
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.
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.
Hopefully I didn't put any [] around my words.
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.
(...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!
"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?"
It's real simple:
+$16.00
-$12.01 (75% cut for recording label)
-$01.33 (8.33% cut for artist)
-$01.33 (8.33% cut for retailer)
-$01.33 (8.33% cut for manufacturing & distribution)
-------
$0
What are they smoking?
Almost every newsagent and bookshop has a photocopier. Yet people don't commonly "pirate" books and newspapers. Why? Well, because it's cheaper to buy than to pirate. It's my reckoning that if CDs cost about £3.00 (€4.55 / $5.88) each, then it would not be worth most people's while to go to the effort of copying them. Nor would anyone think twice about buying a CD at that price. The record companies could easily afford to sell CDs at for £3.00 if they didn't spend so much pursuing failed copy-prevention schemes and paying fatcats to do nothing useful. And they'd probably sell enough units to be earning more than they were before. People would be more willing to take a gamble; if it turns out to be shite, it's not such a great loss.
Now I'm going to tell you a story. It's a sad story. About music, and greed, and the Perversity of Human Nature.
There was a bar I used to drink in once. They had a juke box in there. An NSM Prestige, played 45s, 160 selections. 10 pence a song, six for 50p., and it was always playing. Everyone who came into the place used to walk up to the machine, look at the records, drop in a coin and put on a tune.
Actually, the juke box wasn't always playing. For one hour a fortnight, it would be silent, while the man from the amusement machine hire company emptied the coin box, changed the records and cleaned and serviced the machine. And the bar was closed sometimes. But you get the general idea. It was a popular machine. It also played the records in the order they were arranged in the magazine, not the order in which they were selected (that way, it used only 20 bytes of RAM to store all its selections; which is important when your brain is a single-chip micro with just 64 bytes of RAM), and it was quite possible that you'd have to stay awhile to hear your track if there were a lot of selections from the other end of the machine to be played. That meant the bar sold more beer and food, since the Perversity of Human Nature is such that someone who has paid to hear a song will gladly spend a few pounds on refreshments rather than waste ten pence by leaving before the song comes around on the record machine.
All that changed one sunny afternoon. The man from the amusement hire company came round as usual; only this time, as well as merely emptying the coin box, changing the records, cleaning and servicing the machine, he also tweaked the price up to 20 pence a song.
After that, people just used to walk up to the machine, look at the records, and walk away again.
And the moral of the story, if you're really choking for this story to have a moral, is that if you charge too much then people won't pay it.
Je fume. Tu fumes. Nous fûmes!