Re:Costs should be lower and/or falling
on
Must a CD Cost $15.99?
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· Score: 3, Informative
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
Slashdot Mirror
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