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Must a CD Cost $15.99?
scionite0 sends us to Rolling Stone for an in-depth article on Wal-Mart and the music business. Wal-Mart is the largest music retailer selling "an estimated one out of every five major-label albums" in the US. Wal-Mart willingly loses money selling CDs for less than $10 in order to draw customers into the store, but they are tired of taking a loss on CDs. The mega-retailer is telling the major record labels to lower the price of CDs or risk losing retail space to DVDs and video games. (Scroll to the bottom of the article for a breakdown of where exactly the money goes on a $15.99 album sale.) "[A Wal-Mart spokesman said:] 'The record industry needs to refine their business models, because the consumer is the ultimate arbitrator. And the consumer feels music isn't properly priced.' [While music executives are quoted:] 'While Wal-Mart represents nearly twenty percent of major-label music sales, music represents only about two percent of Wal-Mart's total sales. If they got out of selling music, it would mean nothing to them. This keeps me awake at night.' [And another:] 'Wal-Mart has no long-term care for an individual artist or marketing plan, unlike the specialty stores, which were a real business partner. At Wal-Mart, we're a commodity and have to fight for shelf space like Colgate fights for shelf space.'"
[A Wal-Mart spokesman said:] should read [A Best Buy VP said:]
This is how they can sell CDs for $9.72 and make $90B in profit - by saving $400K in medical insurance costs http://www.cnn.com/2008/US/03/25/walmart.insurance.battle/index.html
I'd be curious to compare this against the breakdown when the CD was introduced. I vaguely remember something like, "Sure, it's $16 now, but if everyone gets on board the economy of scale will reduce the price closer to the record prices you are used to paying! (~$8)". I think these misc. overhead costs are probably just fudge factors to avoid listing them under profit, like how movie production companies make up data to keep their net profits artificially low.
In 2003, Universal had already announced it would be cutting prices to $12.98 per CD.
But prices for CDs are still cheaper than other countries.
Japan: 3100yen ($31) http://www.amazon.co.jp/CANT-BUY-MY-LOVE-%E9%80%9A%E5%B8%B8%E7%9B%A4/dp/B000MZHT7U/ref=sr_1_2?ie=UTF8&s=music&qid=1206475131&sr=1-2
Germany: 13.95 EUR
http://www.amazon.de/Spirit-Leona-Lewis/dp/B000ZNW6VS/ref=sr_1_1?ie=UTF8&s=music&qid=1206475335&sr=8-1
UK: 8.99 BRP
It's just the way it is. Get a better job if you can't afford it.
I printed 1,000 CDs for a personal indie project that I did (*cough*shameless self plug*cough*) and $0.80 / CD is around what I paid INCLUDING what I paid the artist to do the art work.
There's no freakin' way that that major labels are paying $0.80 / CD when they print runs in the tens of thousands. They should be getting WAY better bulk deals.
Musicians unions often give significant emergency aid to musicians fallen on hard times. Were it not for help from the composers union, for example, Bela Bartok would have been dead two years earlier than he was. I see no reason to protest.
Having dealt with both sides, it's a hell of a lot cheaper to put together a good album than it is a good game. The tools you need to put together a good album are cheaper, they don't suffer from the pace of obsolescence that afflicts high tech gear. You need the musicians, you need a sound guy (if you're not doing it yourself) and you need a decent recording space.
In the old days, you had to do that in some big recording studio, but these days there isn't any reason you couldn't do it in a sufficiently padded basement with a laptop running some basic music software.
Now some games, obviously, are cheaper than that...Your 60 dollar figure is pretty much aimed at the console market, where the margins are also quite thin since they have all the expenses above, plus a hefty licensing fee. But the vast majority of developers have huge NRE in terms of equipment, artists, programmers, etc, even on failed games that sell poorly.
In short, it's not an apples to apples comparison. It'd be like complaining when a movie DVD is cheaper than a music CD, without acknowledging the tiny difference the box office returns make in the movie profits.
ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
If only there were another way for musicians to make money.... hmmm.... I've got it! They could try to get a bunch of people to pay to see them perform. That's just crazy enough to work!
By the way, radio stations pay significant fees to broadcast music to music publishers (ever hear of BMI or ASCAP?) There's plenty of money to be made in music with $5-$8 albums (hmm, that's about what Amazon charges to download an album in MP3 format).
I like my beverages with warning labels!
If you think $15 is too much, spare a thought for we Europeans. Over here an album costs twice that, for no obvious reason.
We do not live in the 21st century. We live in the 20 second century.
The CD is the main profit center for the Record Companies, but tours are where the artists make most of their money. Artists have to look at it the opposite way the movie industry does - the album is like an advertisement for their concerts.
Although the article is over three years old, Wal-Mart's position on CD pricing hasn't significantly changed since its publication. As for the breakdown in cost on a $15.99 CD, here is the real skinny:
$0.17 Musicians' unions
It's not a royalty, but rather an average cost per CD. Even if you play in a band, you should get paid union scale for the recording sessions on your album. For many bands, this and publishing (below) might be the only money they ever see on an album.
$0.80 Packaging/manufacturing
Not unreasonable...includes CD artwork, recording, mastering and physical production. Could probably be shaved a nickel or two with lower production budgets.
$0.82 Publishing royalties
Unrealistic...the mechanical royalty as set by Congress was 8.8 cents per song last time I checked, amounting to $0.88 for a ten-song album. Most label contracts cap this number as much as 25% - 30% lower, screwing artists/bands that write their own songs. Cover tunes MUST be paid at the legal rate. If your contract caps your mechanical rate at, say, 6.6 cents per song and you include a cover song on your ten-song album, the cover songwriter will get paid 8.8 cents and you'll receive $0.572 royalty for the rest of your songs (per disc). Still, should be higher as songwriters should get paid, and for many recording artists that write their own stuff, the publishing money is all the cash they may get from the label (if they haven't stupidly signed over their publishing...but that's another story).
$0.80 Retail profit
Sounds about right...five points on retail, maybe more if they average in free goods.
$0.90 Distribution
Disingenuous...the labels own their own distribution companies, so they take this out of one pocket and put it in their other. Has nothing to do with shipping costs, which are largely absorbed by the retailer. Wal-Mart is its own distributor on many goods, but not on CDs.
$1.60 Artists' royalties
Unbelievably inaccurate...a young artist/band will never see anywhere NEAR this number. First of all, 25% is deducted off the top for "packaging;" 10% of total sales will be deducted for "breakage" (yeah, digital, too, on many artist's contracts...a holdover from the '50s and shellac 78s that would break during shipping); deductions for recording, videos, tour support...the list is endless. By the time it's all over, the artist/band will owe the company money unless they manage to sell so many damn CDs that the label can't steal it all.
$1.70 Label profit
It would be nice if it was true...
$2.40 Marketing/promotion
Could easily be cut in half, maybe by 75% on many artists/bands. The single largest expense for a label, and an accounting category that hides a multitude of sins from shareholders and the IRS.
$2.91 Label overhead
Less now, perhaps, though executive salaries and perks are still obscenely bloated. Could also be cut in half by making suits buy their own lunches....
$3.89 Retail overhead
Sounds high to me, but I dunno...maybe for big boxes. Indie stores work with smaller expenses.
The bottom line: the retail price of a CD could easily be brought down to $10.00 without hurting the artist. Margins would be slimmer for the label, but they'd make it up on increased volume, which they've admitted more than once. The wholesale cost of a new CD is close to $13 before price rebates, free goods, ad co-op and other perks are factored in for the big boys.
Your corner indie store doesn't get too many of these reductions, and are forced to sell at a higher price to make a smaller margin. That's why there's a boom market in used CDs...40% - 50% margins and quicker turnover on inventory.
I don't agree that a CD should cost $5.00 because then there's nothing there for the artist and/or songwriter. A digital download of an album could be $5.00 if the labels would split it 50/50 with the artist. But a phy
I bought two CDs from an independent label last night, right after the gig finished. It came to £23! (=$45.50, 29.60). And this is buying direct from the record label, on tour, with no middlemen at all.
I was feeling slightly guilty, since I usually buy music from the USA (where it would have been about £15=$30 for the two CDs). Unfortunately, a small UK-based retailer of this type of music just went bust, blaming it on the $/£ exchange rate and claiming everyone was buying from the USA so they couldn't compete. So last night I decided to buy from the EU instead of mail ordering when I got home. It's a difficult decision though, and if I hadn't been in such a good mood from the bands I'd have probably decided to buy three CDs from the USA instead of just two from the EU.
(For what it's worth, I don't like much newer popular music. However, I don't stop listening to a band's older stuff just because they 'sold out' and released something 'popular'.)
Pesonally, I wouldnt mind paying 15.99 or more for an album. However I do not feel that I am provided any value over any other method of distribution.
It the most simple of terms; Many modern albums come with roughly only 10 songs. I, like most tech savy individuals and likley most of the general public in the near future, feel simply that I am provided a better value downloading songs at less than $.99 cents apice resulting in more music for the same amount of money. One additional added benefit is that I get to pick and choose what I want to hear and am not paying for what I don't. In otherwords, I dont think its not the cost of the media itself, its the value provided therein. Most people would be willing to pay that price, given an incentive to do so, other than lining the record labels pockets.
Not to mention the fact that CDs are simply an ageing media, that is not only more difficult to carry, but offers signifigantly less storage value than modern flash based media players.
I think Trent Rezor, with his online release of his new album, Ghosts, has a refreshingly modular approach to music distrobution. I for one would like to see others follow the same path, and would definately be willing to pay for the added value.
The Man Who Said No to Wal-Mart
I fully agree with Red Flayer that anyone doing business with Wal-Mart is choosing their own fate. I happen to think that Wal-Mart is worth most of the prices that it demands; it really has reduced costs for many living essentials, which is why so many people shop there. However, if you don't want to be squeezed by Wal-Mart on price, you shouldn't sell there to begin with. Music is currently mostly sold in only a few venues:
That's 39.4% of all sales from three companies. Between the three of them, I think music prices might be dropping soon...
Atanamis
Hm. I thought we did get pressed CDs, but yea, you're right, they were burned. But, from the same place we got ours (DiskFaktory.com), you can get 1000 pressed CDs for $1.17 each...so I think my estimate of $2.50 each is still pretty good.
If I'm not mistaken, I believe that touring is actually the primary source of revenue for most artists. The typical deal is 50% of the box office for a venue. Think 20K people paying $40 a head and that's $400K for one night versus moving 250K CDs (1/2 to a gold record). Coldplay sold 8.3 million copies of X&Y globally, for a presumed global take of $13.2M on album sales (and X&Y was H-U-G-E). The band played 34 US cities for the supporting tour, not counting other countries, at an average take of $400K per stop for a presumed US take of $13.6M, that can probably be doubled given it was a global tour. So $27M for touring, versus $13M for album sales, granted that without the album, the tour would likely have been smaller venues than arenas.
Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws-Plato
I have produced several DVD's. I can tell you some facts on it.
Equipment cost is 100% = to that of what is needed to master a CD. It's the same MAC quad core running the same priced software. (Pro Tools costs as much as Scenarist)
I have to buy more graphics and "art" but licensing music is gravy. when music is bought for a movie the studios screw the artist hard. Basically we have the right to what we damn well please with the music. Some older films this was not the case, which is why "Heavy Metal" took forever to come to VHS and then finally DVD. Those artists did not allow the studio to screw them 3 ways to sunday.
I can author a DVD from the movie in 2 weeks. add 2 weeks if you want some silly "game" on the thing. but 90% of the stuff needed are on the B roll they shot and some interns can do the still graphics and other "assets".
In fact, if you want to do it "ghetto" Get a copy of final cut studio and a old dual G5 and you can author a DVD as good as us "pros" using the real software. So a kid in his basement with a outdated $3500.00 Sony HD camera and a old outdated used mac and another $3500.00 in software can do EXACTLY what the $21,000,000 blockbuster studio can do.
and honestly, if he's good at shooting and get's a decent Senheiser MIC he can make some thing better than what Hollywood can.
Do not look at laser with remaining good eye.
Dude, try clicking the 'parent' link next time. Just because the post I'm replying to has a score 1 doesn't mean it's not there.
These days DVD revenue is actually 3-4 times higher than box office revenue for most movies.