UMG To Price New CDs Under $10

marmoset writes "Perhaps a decade late, Universal Music Group has decided to try out sub-$10 CD pricing in the US. 'Beginning in the second quarter and continuing through most of the year, the company's Velocity program will test lower CD prices. Single CDs will have the suggested list prices of $10, $9, $8, $7 and $6.'" CD retailers are not convinced the price cuts will work out. For one thing it depends on whether other major labels follow suit, but the article notes that "executives at the other majors were nervous about the UMG move" and "privately, some appeared annoyed."

Comments

I Am Shocked!

[eldavojohn]

the article notes that "executives at the other majors were nervous about the UMG move" and "privately, some appeared annoyed."

You don't say. You mean to tell me that they might have to price their music competitively? That they might have to take a pay cut in order to compete in the market? That their 'silent agreement' of what all music should cost among the biggest labels is no more?

Music record contracts really annoy me in this respect. They are nothing but middlemen when it comes to publishing music. I understand their role in promoting and paying upfront cash for studio time but their role as publishers is leech at best.

If bands had the ability to pit manufacturers against each other in publishing their CDs and albums (and also if the band could decide what percentage they needed from sales) then we would see prices dramatically plummet. Look at CDBaby and think how inexpensive it could get if that kind of market was where we bought all our CDs. And in a capitalistic world, that's how it is supposed to work. But no, acts have contracts and the most popular acts love how the labels shove only those acts down our throats. The music industry is a sorry state right now and rarely do we hear news like this. At least UMG appears to be slowly realizing that it's adapt-or-die time.

Re:I Am Shocked!

[Bobb Sledd]

I produce MP3's for mass distribution, and also support them when they don't function correctly (encoding/corruption issues).

In my opinion, VBR is not supported well-enough for mass consumption. Too many players out there still dork up when VBR is used. Granted, it's typically older players, but they are still out there.

The majority of people cannot tell the difference between (get this) 32kbps and 128kbps. I'm talking about the general population, not music enthusiasts. Most engineers cannot tell the difference between 162kbps and 192kbs, and certainly less of them can distinguish 192kbps and 256kbps -- and even I have doubts that most of those can in a true blind test.

But consider this: I put forth that the reason the you don't need full 44khz 16-bit audio is that you'll never hear the music as originally intended, and that is because of the following factors:

1) You usually listen in your car, and road-noise alone will destroy your ability to discern slight volume changes and perception of frequencies anywhere near 12khz and above

2) If you don't listen in a car, you often use your cheap speakers on your laptop

3) Most headphones people use are either cheap (under $50), or they are biased on the lower-end, and most are not equalized correctly, or not equalized to your ear physiology (different sizes ear canals can cause resonance/standing waves that cause a different perception in frequency for different people -- each set must be tuned individually if you are a true audiophile).

4) If you're older than 21, you probably can't hear above 16Khz at all

5) Your ears are not perfect (many people's frequency response is different from one ear to the other)

6) Your player is not perfect

7) Your speakers are not perfect, and you most likely haven't calibrated them with an RTA for the room they sit in or for where people are actually positioned.

8) The humidity, temperature, air pressure, and even the air pressure on the other side of your ear-drum changes frequently causing a difference in frequency response.

And if I'm completely wrong on points 1-8, then you are now in the .01% of all listeners, and you are not the target audience for mass-produced and distributed MP3s anyway.

Re:I Am Shocked!

[Rich0]

Well bands do have the ability to do that - it's just that an unknown band has to decide - do it myself or go with a label that may turn me into a hit? Most decide the later.

I don't think it is just whether the label turns the band into a hit. There is also what I'd call risk equalization.

If you strike out on your own the business model is simple. Either you lose a fair amount of money (whatever you spent on promotion/production/etc), or you strike it enormously rich (probably slowly since you won't have much capital). 99.99999% of the time you lose the fair amount of money.

If you sign with a record label the business model is also simple. You will not lose any money under any circumstances. You will definitely get to keep your advance, which for a 20-year-old artist is a fair chunk of cash. Most likely that will be the end of it, but there is a modest chance that you could make a little more money, and a very very small change that you'll be a mega hit and outlast your contract and be able to be super-rich.

Essentially record labels take money from the people who are hits and spread it out among those who don't become hits (while keeping 90% of the money for themselves). They also take all the risk - they're the only ones putting out hard cash.

For a new band they have the choice of making taking a $100k advance RIGHT NOW, or seeing how many CDs they can sell on their own - without serious promotion. Making even $100k selling CDs on your own is EXTREMELY difficult - especially without any capital investments. Sure, signing the deal means that you could end up getting $120k instead of $25M, but most likely it means you'll get $100k instead of ending up with a crate full of CDs and T-Shirts that you can't sell while you work at the pizza place down the street.

Don't get me wrong - the whole industry needs a major overhaul. However, most people critical of the RIAA miss the fact that it does provide one valuable service to the new artist, and that is the key to their success.

Shocking

[kseise]

You mean it doesn't cost $20.00 to make a CD? Really?

Re:Shocking

[Aphoxema]

It actually costs 40 dollars but the labels are so generous they were paying 50% of the cost out of pocket. Their hearts grew even bigger thanks to everyone being so happy with them, so they decided to pay 75%. Soon they'll just start handing them out for free!

I love our music industry, they're so nice to us little, unimportant people!

CDs! How *quaint*

[gestalt_n_pepper]

I remember CDs. They made such pretty coffee coasters after I burned all their music to my MP3 player.

Re:CDs! How *quaint*

[eldavojohn]

I remember CDs. They made such pretty coffee coasters after I burned all their music to my MP3 player.

I believe the correct verb you're looking for is 'ripped.' But before you go on about how 'quaint' CDs are, keep in mind how nice it is to own something physical. You have, as a physical object, evidence of your licensing of personal enjoyment of that media. I do buy $5 albums on Amazon MP3 but I feel almost like I somehow receive less rights or a watered down licensing of that album as opposed to if I had purchased the album. If you find this concept quaint then why are vinyl sales slowly rising?

My favorite form of purchasing these albums is vinyl + lossless digital download. A lot of the indie record labels are adopting this method and you pay a $1 or $2 premium on the CD or vinyl album in order to have the music now with the physical artifact shipped to you later. I purchased my Cloud Cult albums in this manner and also She and Him. Instant gratification and I don't even have to take the album out of its wrapper. Don't expect the major labels or even Amazon to warm up to this idea though ... it's far too empowering for the consumer.

Re:CDs! How *quaint*

[WrongSizeGlass]

Especially the AOL ones...they seemed to soak up more liquid than any of the others.

That's because they were specifically designed to withstand the tears of users installing AOL.

Re:CDs! How *quaint*

[Anonymous Coward]

Audio CDs aren't quaint. They're reliable read-only long term storage media for losslessly encoded music. The data is unencumbered by DRM, you can lend CDs to your friends, you can sell CDs and you can listen to your CDs on as many devices as you like. I don't pay for downloads. I pay for CDs or get my music for free.

Re:CDs! How *quaint*

[somersault]

I don't even have to take the album out of its wrapper.

Yeah, that sounds really worth the extra money. I have barely any space to store my DVDs and blu-rays in my flat right now. I'm glad I could shove all my CDs into my mum's attic. I used to have some kind of sentimental attachment to them, but that starting going after Amazon began offering cheap MP3 albums, and completely evaporated last time I had to move flat. Storing and moving CDs and DVDs is a real pain - and records would be even worse in terms of space - not to mention more fragile. I don't see anything empowering about needing to keep highly inefficient backups of what is essentially just something you want to hear - not something you need to look at or touch.

Re:CDs! How *quaint*

[maxume]

Vinyl sales are rising because people are fools.

(There is some chance that the audio never experiences any filtering and the frequency response of the entire chain of analog equipment is such that there is no cutoff of high frequencies, and that the ears listening can hear the high frequencies, and that there isn't any dust on the record and that the record hasn't been worn by previous playback, but it isn't really all that likely)

Re:CDs! How *quaint*

[geekmux]

If you find this concept quaint then why are vinyl sales slowly rising?

Because the dynamic range of vinyl albums can't be compressed as much as they are on a CD resulting in better sounding music?

Uh, that may be true, but it would also require that the overprocessed, overmodulated, autotuned, beatbox crap they're calling "music" these days be worth a shit to press onto vinyl. In most cases, vinyl is nothing more than turd polish.

Re:CDs! How *quaint*

[jayme0227]

If you find this concept quaint then why are vinyl sales slowly rising?

Probably for the same reason that young people prefer MP3s to higher quality music. People grow up listening to music in a certain way and the cracks and pops of vinyls, much in the same way as the sizzle sounds of MP3s, are what the listener expects to hear in the music. Because they expect to hear it, the music doesn't sound "right" when they hear high quality recordings without it. So now that baby boomers are reaching retirement age, they look back at what they loved when they are younger and buy old vinyls.

Re:CDs! How *quaint*

[twistedsymphony]

You have, as a physical object, evidence of your licensing of personal enjoyment of that media

Not necessarily: you could have shoplifted it. Actually, given the RIAA's attitude to its customers, they'd likely assume that until proven otherwise.

I'd rather they assumed I shop-lifted it than I downloaded it... the penalties are less severe for shop-lifters.

It only took a decade or so...

[TACD]

You'd think the music companies would have at least one economist on staff who could explain to them, slowly and gently, that under certain circumstances it is actually possible to make more money when each individual unit is priced lower. It really takes some stubborn failure of logic to prioritise your sale price above your actual monetary returns.

Of course, it's also possible that the music quality will just decline to compensate for the drop in price.

I love the juxaposition

[edremy]

""Why does Universal feel the need to get below $10?" a senior distribution executive at a competing major asked. "

Quickly followed by

"[Sales of CDs] which [are] down 15.4% so far this year. Album sales were down 18.2% last year, and 19.7% in 2008, "

I swear, Thick as a Brick should be a Jethro Tull song, not a description of record company executives....

Re:Just like cassettes

[floatednerd]

Maybe I'm going into the future kicking and screaming... but I don't feel like I "own" a song unless I have it on CD (or cassette, vinyl, etc). From my point of view, CDs are the "superior" product verses the MP3 from iTunes or Amazon.

Re:What's the first thing you would do with a CD?

[quantumplacet]

I dont know, most cd's that come out these days I'd rather burn than rip...

Normal price here. And still way overpriced.

[wvmarle]

In Hong Kong a typical release CD of some local artist costs around USD 10 already. That's been since I moved here 7, 8 years ago. Older releases cost less. Import from US is typically USD 8-12 for a CD.

Now there are a few differences: the entertainment world lives on a smaller budget and the top artists are at a level that wouldn't even make it into American Idol. That says more about the cantopop than about American Idol.

Movies on DVD cost about USD 20 (new releases), older movies are sold at far cheaper prices. On VCD one can buy a movie for a few dollars.

The above prices are for the official media, not for the pirated ones. Those are far cheaper.

Still I think US$10 for a CD is overpriced. Pirated CD's are selling for well under USD 1 each. So that is a $9.something mark-up for what? Recording and artist's share?

Both pirated CD's and official CD's have to be manufactured and distributed. That incurs costs that are independent of the content. The only difference is the actual recording and the marketing. Even the shops selling pirated disks are in the same expensive locations as the official outlets, so even there is no difference: they both have to make the same profit to survive. Both shop's suppliers have to run their trucks and pay their drivers and workers and run their CD/DVD machines.

Official releases have better quality CD (technical: play guaranteed, last longer than a few years) and come in jewel case instead of paper sleeve. That may add $0.20-0.30 to manufacturing. Even when selling at USD 2.50 each the label should be able to make a USD 1.00 gross profit on each. And at that price level it becomes vending machine material, and volume may skyrocket due to all those impulse buys. Sell a million disks, make a million in gross profit. If a million dollars is not enough to cover recording, marketing, and a fat profit, then you're doing something terribly wrong.

Re:Just like cassettes

[whisper_jeff]

Did you seriously just write "CDs aren't portable"? Really? I know nerds have the stigma of being out of shape, but really?

Premium vs Discount Format

[BlueBoxSW.com]

I see this as a really important shift.

Previously, the CD was the premium format, with all it's uncompressed audio glory. And it is fairly portable, playable in most consumer electronic devices found in the living room or car.

The MP3/AAC format was the discount format. Compressed with some audio loss, and playable in less devices. Also encumbered in some cases with DRM.

The premium format carried a 50% markup, with most MP3 albums costing around $10, and CD's costing around $15.

With CD's potentially costing LESS than MP3/AAC formats, this signifies the market is placing premium on the MP3/AAC format over the CD. This could be because the format is now supported in more devices, or consumers find it friendlier to deal with, perhaps because there's no need to fight the packaging then burn it on your own.