"Copyright was supposed to be for a LIMITED time and to create a LIMITED monopoly for the ORIGINAL copyright holder."
You're correct about the "limited" part (it's in the constitution) but do you have a citation regarding your "original" claim? In reading various histories of copyright law I can't find a reference to when the ability to transfer a copyright was added to the law. Chapter 2 of US copyright law is called "copyright owner and transfer" so I'm guessing that transferring has been part of the law since the early days; at least for the past 100 years or so. If you know differently, please englighten me.
"The problem with copyright is because of people like you who think that the purpose of copyright is to give you an UNLIMITED stream of revenue."
I don't understand what you mean. People like me? The phrase "limited time" is in the constitution. That concept is one of those 1L "intro to copyright law" things.
" Copyright is not designed to be a legacy to be passed down from generation."
The purported rationale of the new extension to lifetime of author + 70 years is just that -- so a copyright holder's children can benefit if the copyright holder has an untimely death. In short, the current law is designed to allow for a legacy. It's no coincidence that 70 years is also about the average lifespan of a human being. Rosen made the "passing along to children" analogy but I think a lot of us are incorrectly reading that as "and to their children, and to their children, ad infinitum."
BTW, I wrote "purported" because I believe that the primary reason for this latest extension was the heavy lobbying by Disney. Disney is surely benefitting from the change, but so are the hard-working individuals who hold the majority of copyrights.
Thanks for your reply. My paragraph was a summary of how many Slashdotters feel; you've helpfully elaborated why they feel that way. I know you're just a single individual, but each of your defenses are ones that have been repeated many times before around here.
"They can't seem to understand that it's possible to protect the artist's rights without draconion measures or royalties that would put a robber baron to shame."
Do you think the royalties earned by artists on musical works are too high? Are the artists being too -- there's that word again -- greedy?
FWIW, royalties typically top out at not much more than a buck for most CDs (for some it's more, and for some it's less). If Slashdotters could convince all those artists currently making a dollar per CD to reduce their royalties to zero (ie. by making money instead by voluntary donations, live performances, t-shirt sales, etc.) the total retail price of the CD would go down by about two bucks at most.
In general, if you don't like DRM and you don't like artists who insist they get paid first, check out Magnatune. It's an "open source" record label where payment is optional and there's no DRM. Apple has sold 1.5 million tracks since their launch and has a catalog of about a million songs; Magnatune, far less so. Given this, it may be a tough sell to convince Apple and the rest that they're just going about it the wrong way.
That's not the context in which she meant it. It was in the context over her and Lessig's disagreement of the copyright term extensions act which pushed the maximum term to life of author + 70 years.
Rosen argues that this way, a copyright can be a legacy. This aligns those people who make money via their creative output (as opposed to, say, tilling a field or screwing plastic things together on an assembly line) to be in a better position to support their family once they've shrugged this mortal coil. She was not arguing that copyright terms should be forever (such a change would, of course, be unconstitutional). Her analogy stopped at leaving a legacy for one's children.
Such a philosophy doesn't sit well with a portion of the Slashdot crowd who think that society would be better off if artists and writers knew their place -- give away your stuff for free, and hope that you make money by playing live concerts or live book readings. If somebody violates your copyright, don't fight back too hard -- you should be lucky to get what you get. And a big hearty fuck-you if you're uppity enough to put copy protection or DRM on your work -- what's done with your work should be the choice of the Slashdotter, not you. If you have the same aspirations of being a millionaire that, say, a (insert typical Slashdotter profession here) has, check yourself -- you're an artist, and if wandering the countryside in search of scraps was good enough for artists of the 13th century, it's good enough for you. In short -- know your place. A farmer gets to leave a legacy for his children. You don't.
"If your argument had any validity why would sound track CDs routinely cost more than the corresponding DVD of the entire movie? It takes a strong dose of reality distortion to swallow such facts but a surprising number of people seem to be able to do just that. At least people at the RIAA are paid to believe their fairy tales."
It's good that you want to learn, but you should not try to insult the other person when asking them a question. The answer to your question lies in another concept called the supply and demand curve. It's wholly unrelated to the CPI or of manufacturing logistics.
The quick answer to your question is that both DVDs and CDs are priced at what the market will bear. So are computer mice and microwave ovens, for that matter. The industry has determined that it will make more money overall if X DVDs are sold at a cost of $A, than if Y DVDs are sold at $B. Generally speaking (and there are many famous counter-examples), as the price increases, the sales volume goes down, and it's that sweet spot on the supply and demand curve that dictates the proper price -- where the revenue to the seller is maximized.
The followup question is "why does the market bear a price of about $13 for a CD and $20 for a CD?". People who ask this will point to the fact that a film takes more money to produce, and has more content (a video stream as well as an audio stream). But when you consider the value that the consumer gets -- the enjoyment -- it becomes more clear. In my case, I'll listen to a CD over and over and over again. A DVD I might watch once or twice, and that's it. That's why the value of a DVD to me is not $20 -- I haven't bought one in years. I do use Netflix, though.
As it relates to the economics of manufacture and sale, it's also important to understand that DVD sales are often just the icing on the cake. The film company has already made its money on the theatrical release. By comparison, a record label gets one and only chance to make money on a CD.
There are lots more examples that may be boggling to the lay person until they start thinking about things in term of the supply and demand curve. It's the market force that allows two restaurants to take $10 worth of ingredients and one to sell a meal for $20 and the other for $50, and the same force that causes a person to spend $150 on a pair of jeans at one store, vs. $20 on a pair of jeans at another store, or using that $150 and buying six DVDs or 12 CDs or a motherboard.
"This means that they pay 2 cents or whatever for each song played. The RIAA *is* getting their money."
Your post was spot on, but just one correction: these licenses are with BMI, ASCAP and SESAC. These are performing rights societies run by and for songwriters and composers. BMI and ASCAP are non-profit (not sure about SESAC). They are completely unrelated to the RIAA, and the RIAA does not see this money.
Of course, BMI and ASCAP are hated just as much by the Slashdot crowd, even though they're run by the artists that many Slashdotters claim to be helping when they pirate music (through word of mouth and by increasing the odds that they might go to a concert). Case in point the stories where BMI or ASCAP comes down on a restaurant that's playing music for their customers without obtaining a license.
" Goodness man! Without IP law we could be as uncreative as they were just after the dark ages. That would be like putting us back to the Renaissance! Who would want that."
I think you're referring to the popular misconception that there were no IP laws during the Renaissance. The common example is "Shakespeare didn't need copyrights." While the terms "copyright" and "intellectual property" were unknown to him, unauthorized performances of his work were a big issue for he and his troupe (and the first published version of his sonnets was a pirated version) and they called in the help of the law when they could -- and indeed they had some leverage. His troupe wasn't called "The King's Men" for nothing.
Interestingly, it's due to these unauthorized printed versions that we even have complete texts of some of his plays and poems. I'll let the Slashdot crowd slippery-slope that into an argument for file-sharing.
"CDs were more expensive but the idea that they were $25 is complete crap. I don't have any receipts but I recall street prices close to $10. Were you even buying music 25 years ago? What I've watched over that time period is the price of CDs going steadily up so that a classical music album is often close to $20."
I was buying CDs in 1985 for around $16 in 1985 dollars (they went up after that; I remember $19.99 being common), but very well -- we'll use your numbers. $10 in 1985 dollars is $17 today. The average price of a new CD is sub-$13 and falling. That's a 25% drop even using your numbers. Some CDs, such as classical music, will cost more, and that's because the cost more to make and fewer are sold.
"The attempt to wave the magic wand of inflation is also nonsense. First, there hasn't been inflation to speak of since the Carter administration."
Incorrect. If you like, you can use a link on that page to generate a nice pop-up inflation calculator.
"Second, technology products don't get more expensive. Their price tends toward zero, often quite quickly."
There is a process in making a CD just as there's a process in making a plastic container for holding liquid soap. This does not make a CD a technology product. As has been explained before, the actual cost of creating the media is a tiny portion of the total cost of sale. If the cost of making the CD, jewel case and booklet were to magically go to zero, the effect on the total price of the CD would be only a few bucks. As an aside... unfortunately, we can expect plastics costs to go up due to petroleum price issues lately.
Your argument is based on misunderstandings of inflation and of manufacturing costs. Sorry. Strong opinions are great, but do your homework first. CDs are sold at a much lower profit margin than many other consumer goods, so if your general issue is of abnormally high margins, you'll want to tilt at another windmill.
CD prices are dropping; more importantly, the speed at which they're dropping is accelerating. The average price of a new CD is down to $13.29.
Back in the 80's when audio CDs were first launched, $18 - $20 was a common price. Part of it was building the infrastructure, part of it was testing the market. Had prices stayed constant, that $18 CD in 1990 would have cost you about $25.50 in 2004 dollars, and the $16 CDs I was buying in 1984 would be about $28.50 today. In reality, prices have dropped by more than half. This is in the US, so YMMV. You mentioned a $20 price for CDs -- I'm guessing you're in Australia?
For what it's worth, the recording industry operates on profit margins that are below many other industries. It's hugely speculative and most CD releases don't make money. To your point about the cost of the media dropping, you're absolutely correct, but the cost of the media (typically around a buck for a finished CD given the quantities produced) is a small factor. If the cost of the media went to zero, that would likely lower retail prices by two bucks at most.
"Every time I see someone complaining about this statistic, I ask the same question, and no one can give me a straight answer. Why on Earth should the artist get more than 5%?"
It's because Slashdotters by and large don't know how much time and effort by skilled people, and how much money it costs to record, engineer and produce a CD. There's a great deal of difference between that piece of paper with lyrics written on it that the singer takes into the studio, and a finished CD, but I think a lot of Slashdotters equate them.
If a good singing voice and a piece of paper with lyrics on it were the same as a finished CD, then there wouldn't be a lot more artists who want recording contracts than those that have contracts.
Either way, the poster who used "1-5%" has his math off. Royalties (to performers, composers, lyricists, etc.) are typically north of a buck and represent about 15% - 20% of the total cost of sale to the record company. If the record company is lucky, they might clear a net profit of $2 on a CD. The record company gets two bucks, the artists get a buck. Not bad considering that the record company takes all the risk and has to front all the money; if a CD fails, it's the record company that loses, while the artist loses nothing but time.
Your post was very informative, but there were a few points to debate:
"The copyright code was intended to nail people that intentionally rip off copyrighted works and sell them for profit."
I'm not aware of that distinction in either the constitution or US code. Do you have a citation?
"Originally that was to stop books from being copied and sold."
Books, maps and charts were the first articles protected, but they were protected against unauthorized duplication. In common practice, there was little reason to make unauthorized copies unless you were going to sell them, but nonetheless, I'm not aware of any such distinction. This was in 1790. Printed musical works were added in 1831. That was before plays or (obviously) photos were added. Interestingly, unauthorized performance of copyrighted music wasn't added until 1897.
(an aside here: motion pictures were added in 1912. Just one more example of the law being retroactively updated to catch up with technology. Congress didn't bother with any of this "the genie's been let out of the bottle, and the incredible technology of movies is way beyeond our puny copyright laws" nonsense; they simply added them to the list. Many Slashdotters are of the mistaken impression that the scramble to update copyright laws to deal with the precedent of P2P is some sort of new concept; of course, they're being retarded. The law books get bigger as technology moves on. State vehicle codes didn't even exist much more than 100 years ago, and today the California Vehicle Code is about three inches thick.)
"I believe that predates the music industry. That is still the big distinction: if you commit infringement but don't profit by it, that's one thing (fair-use at best, a civil matter at worst), but sell it and make money and you can end up in criminal court, if the amount you make exceeds certain specific limits set up by the law."
Partially correct. It's quite easy to run afoul of criminal copyright law -- just distribute more than $1K or so of copyrighted work. You don't need to be collecting money for it, although that's a Common Slashdot Meme(tm). This is covered here This is another example of copyright law (as do many, many other areas of law) being updated for the times: in the 1850's, for example, it would be quite pointless and costly to give away the equivalent of $1,000 worth of copyrighted material, but today it's as easy as putting a few gigs of music or movies in your P2P share folder. Incidentally, this provision was added before the Internet became the cultural phenomenon it was today, and was put into place to nail the kiddies who ran the warez BBSes and web sites. I believe it was called the "No Electronic Theft" (NET) act.
"As an aside, one of things the RIAA would like to do is remove that distinction, and thoroughly criminalize any copyright infringement of any kind."
Interesting... I've never heard that. Do you have a citation?
The "It's only piracy if you sell it" notion is incorrect and self-serving. Probably thought up by somebody who didn't want to be bothered by feelings of guilt when they pirate software. Why bother with euphemisms? Fly the jolly roger proudly.
typing "dict piracy" into Firefox's address bar takes you to dictionary.com, where the relevant definition is:
The unauthorized use or reproduction of copyrighted or patented material: software piracy.
For all the clever bunnies who'd like to point out that the word "piracy" has other definitions, as well: so do lots of words. The word "piracy" is a homonym. This is a fundamental concept of the English language that we all learned in grade school.
"Accountants make allowances for uncollectable accounts (people who promise to pay for goods and services but never do and who would cost too much to track down and make pay), and I am sure that retail outlets make an allowance for physical theft."
Correct. But -- this is the important part -- retail businesses still prosecute shoplifters. The analogy here would be retail stores just realizing that shoplifting is a part of doing business and doing nothing about it.
The parent poster chided Microsoft for even making an effort to go after the pirates. Sales lost due to piracy are undoubtedly part of their profit equation, but it's still in their best interest to limit it as much as possible, rather than simply giving up.
This is how you, I, and most people reading this operate, too. To do almost anything in the real world is to invoke the chance of somebody else doing something mean or unpleasant to you. When this happens, you and I do not simply roll over and take it; if somebody messes with me; I'll kick their ass right proper. So why the chiding when Microsoft does the same to protect their own interests?
"When will companies realize that piracy is just an unfortunate part of doing business. Did they honestly think it wasn't going to be posted up on the internet? I've talked to a variety of friends and strangers. Those that are familar with Halo and Halo 2 all said that they knew of the leak, but they were still going to buy it when it comes out in a few weeks. Those that steal it now...probably wouldn't have bought it anyways."
Is your point that you don't think companies should go after software pirates; that is, not try to fight back at all, and just give up?
I sell products in the high-tech industry to Wal-Mart. I also know what margins my competitors offer to Wal-Mart, and I know the margin structure at many major retailers in the US. I know retail.
"I think the above statement is a misconception."
The context is the hypothetical example of the indie record store owner marking up CDs 33%. It is certainly not a misconception. It's a complex equation, but given typical costs for rent, employee salaries, utilities, shrinkage, and so on, 33% is right in the ballmark for a storefront retail establishment. As I mentioned earlier, at Best Buy, margins for most products start at about 30% and go up from there.
"Who is to decide what numbers are "gouging" and what numbers aren't?"
I do, in this context, because I have extensive background on the realities of what it takes to run a storefront business. Not all Slashdotters have a resume that ends with coding or system administration.
"Why are we even talking about "price gouging" regarding such a luxury item?"
Because some guy incorrectly claimed that an indie record shop owner with a 33% margin was "gouging." Several people were quick to point out that he was off the beam.
"33% is wildly high for some businesses, and very low for others."
Correct. Some cats have long hair, some don't. Some stars radiate light on the red side of the spectrum, some don't. Some girls sleep with you on the first date, some don't. Some languages let you overload operators, some don't. Differences are what make life great. However, in this context we're discussing whether it's "gouging" for an indie record shop owner to add a 33% markup. It is not.
By comparison, Wal-Mart's markup on stuff other than CDs ranges from 30% - 50%. Best Buy's margins on computers and computer peripherals ranges from 25% - 60%.
To answer your (rhetorical) question, 33% is most certainly not gouging.
"This is the first time a big player has attempted this sort of hardball move on the labels."
Not true in the least. Slashdotters have Wal-Mart to thank for the record labels being punished for price fixing (as in the popular Slashdotter refrain, "the record companies are evil! They've been busted for price fixing!"). Here's what happened, in a nutshell:
Wal-Mart started selling CDs at sub-par margins or as a loss leader to get people into the stores to buy other high-margin items.
Record chains like Tower Records freaked out, as their primary business was selling CDs and they couldn't compete with a Wal-Mart which had a huge store of fishing rods and cheap clothing to make up the bulk of their business.
The record companies helped fund the advertising for Tower as well as two other chains (TWE and MusicLand, I believe) in exchange for Tower et. al. agreening not to display prices in those ads that went below a certain point. FWIW, this is called a "MAP program," for "minimum advertised price," and is prevalent in tons of other industries.
Wal-Mart got all pissy and threw their weight around with the government.
The government told the record companies to stop, and to send checks to consumers.
Lots of other industries, including the computer peripheral industries, still happily continue MAP programs... until that point that Wal-Mart tattles on them, too.
Tower Records subsequently declared bankrupcty. Enjoy buying your music at Wal-Mart, folks.
"This is already a markup in the first place right there. 50 cents to the author, 50 cents to press the CD. The rest is advertising and marketing."
FYI, cost of goods for a CD (including the case and the booklet) is typically north of a buck. Royalties are typically north of a buck as well (particularly when there are multiple composers and songwriters, and something known as "compulsory royalties" are paid). At least in the computer industry (my profession of choice), royalties are included in what's known as the bill of materials cost and are an "above the line" charge to the gross margin. The salaries of the people involved in making the recording are included in the cost of sale, as are shipping costs, return reserves, and, as you mentioned, sales and marketing. The cost of sale is the cost of sale... there's no profit there. "Markup" starts after the cost of sale.
This is all Accounting 101 stuff, and it applies to goods in the computer industry as well as the record industry (and every other industry). As I mentioned earlier, lots of Slashdotters just don't have a background in this type of stuff. Likewise, most accountants don't know Thing One about serializing call-back functions.
I'm not sure I follow. The average price of a new CD is now $13.29 in the US. A 10x markup would require that the cost of sale is in the neighborhood of $1.33. It's nowhere near that.
"Markup" is an imprecise term but it generally refers to the delta between the cost of sale and the retail cost. If we look at the cumilative markup between the manufacturer and the end user, with a cost of sale of about six bucks, that's about a 100% markup, not a 1,000% (10x) markup. Is that what you meant?
"Ok...so let me ask you, why bother with someone like that in the first place? If they weren't going to buy it anyway, you've lost $0 from them copying it."
Because it comes a tautology. With each new CD that you pirate rather than purchase, "I wouldn't have bought it anyway" becomes easier and easier to say. It transforms from "I wouldn't have bought it anyway because I {couldn't afford it | don't particularly like the music | etc.}" to "I wouldn't have bought it anyway because it's readily available for free." Humans have a tremendous capacity for self-deception, and rationalizations like this make piracy go down smooth, easy, and guilt-free.
"The problem is that the RIAA refuses to understand economic laws. Things are valuable only because they are scarce. We've eliminated scarcity for music and other data, so the value drops to 0."
Then it would seem that the software industries (including all those guys who make money on shareware) don't understand economic laws as well as you do, either. Here's self-deception at work again: Slashdotters can all slap each other on the back and tell each other that these large companies (who have people with degrees in economics on the payroll, and whose very existence relies on understanding the economy) don't understand economics; while on the other hand, Apple has sold nearly two million songs.
"If it's not scarce, the value becomes zero" is a simple statement easily understandable by your typical Slashdotter, but nonetheless wrong. Economics are more complex than that, and the realities of the market can't be expressed in simple bromides.
If I can summarize your post, you feel that $18 is too high a price to pay, and $9 is an acceptable price point for you.
If so, you're in luck: the average price of a new CD in the US is $13.29, and it's dropping fast.
I agree with you that it would suck to pay an average of $18 for a new CD. Seeing as new CDs haven't been priced at an average of $18 for years, I don't think this is a huge issue.
"and the total cost paid by the users of the information is far in excess of the costs of production, plus reasonable profit."
A popular myth on Slashdot is that record companies operate on profit margins that are out of step with other businesses. The reality is that record industry margins are pretty dismal compared to the margins earned on computer parts and accessories, packaged foods, clothing, and products of many, many other industries which Slashdotters don't consider to be "evil." This is why, multimedia conglomorates aside, you rarely see record companies on the Fortune 500, you rarely see stock analysts issue "buy" ratings for record companies, and why -- this is the important part -- if you ever have the opportunity to talk to somebody who's run an indie label, it's a pretty shitty business to be in if you're trying to make money.
"Governments should therefore be stepping in to ensure most of the money goes to the creators, and that copyright monopoly only lasts until the creator receives the cost of production plus reasonable profit."
Most of the money earned on the sale of a CD does go to the creators. Some goes to the creator of the CD media itself. Some goes to the performer who sings the notes or strums the guitar to create the notes. Some goes to the composer and songwriter who created the words and music. Some goes to the session musicians who help create a sonically appealing piece. Some goes to the engineer and producer who do their magic in creating appealing music with the raw source. Some goes to the creator of the cover art. A CD is not the same as a piece of sheet music, or a musician playing guitar on a street corner. It's the result of the work of dozens (or more) of creative, productive people.
There are some bad things about our society, but one of the nice things is the opportunity to combine talent and hard work to earn money. It is not our place to arbitrarily decide what is a "reasonable" profit for somebody who happens to choose a different career than us. You certainly would not want a bunch of musicians deciding how much income is "reasonable" for a programmer (particularly because the average programmer makes a lot more than the average musician), so why would you even entertain the idea of the opposite?
Slashdot Mirror
"Copyright was supposed to be for a LIMITED time and to create a LIMITED monopoly for the ORIGINAL copyright holder."
You're correct about the "limited" part (it's in the constitution) but do you have a citation regarding your "original" claim? In reading various histories of copyright law I can't find a reference to when the ability to transfer a copyright was added to the law. Chapter 2 of US copyright law is called "copyright owner and transfer" so I'm guessing that transferring has been part of the law since the early days; at least for the past 100 years or so. If you know differently, please englighten me.
"The problem with copyright is because of people like you who think that the purpose of copyright is to give you an UNLIMITED stream of revenue."
I don't understand what you mean. People like me? The phrase "limited time" is in the constitution. That concept is one of those 1L "intro to copyright law" things.
" Copyright is not designed to be a legacy to be passed down from generation."
The purported rationale of the new extension to lifetime of author + 70 years is just that -- so a copyright holder's children can benefit if the copyright holder has an untimely death. In short, the current law is designed to allow for a legacy. It's no coincidence that 70 years is also about the average lifespan of a human being. Rosen made the "passing along to children" analogy but I think a lot of us are incorrectly reading that as "and to their children, and to their children, ad infinitum."
BTW, I wrote "purported" because I believe that the primary reason for this latest extension was the heavy lobbying by Disney. Disney is surely benefitting from the change, but so are the hard-working individuals who hold the majority of copyrights.
Thanks for your reply. My paragraph was a summary of how many Slashdotters feel; you've helpfully elaborated why they feel that way. I know you're just a single individual, but each of your defenses are ones that have been repeated many times before around here.
"They can't seem to understand that it's possible to protect the artist's rights without draconion measures or royalties that would put a robber baron to shame."
Do you think the royalties earned by artists on musical works are too high? Are the artists being too -- there's that word again -- greedy?
FWIW, royalties typically top out at not much more than a buck for most CDs (for some it's more, and for some it's less). If Slashdotters could convince all those artists currently making a dollar per CD to reduce their royalties to zero (ie. by making money instead by voluntary donations, live performances, t-shirt sales, etc.) the total retail price of the CD would go down by about two bucks at most.
In general, if you don't like DRM and you don't like artists who insist they get paid first, check out Magnatune. It's an "open source" record label where payment is optional and there's no DRM. Apple has sold 1.5 million tracks since their launch and has a catalog of about a million songs; Magnatune, far less so. Given this, it may be a tough sell to convince Apple and the rest that they're just going about it the wrong way.
That's not the context in which she meant it. It was in the context over her and Lessig's disagreement of the copyright term extensions act which pushed the maximum term to life of author + 70 years.
Rosen argues that this way, a copyright can be a legacy. This aligns those people who make money via their creative output (as opposed to, say, tilling a field or screwing plastic things together on an assembly line) to be in a better position to support their family once they've shrugged this mortal coil. She was not arguing that copyright terms should be forever (such a change would, of course, be unconstitutional). Her analogy stopped at leaving a legacy for one's children.
Such a philosophy doesn't sit well with a portion of the Slashdot crowd who think that society would be better off if artists and writers knew their place -- give away your stuff for free, and hope that you make money by playing live concerts or live book readings. If somebody violates your copyright, don't fight back too hard -- you should be lucky to get what you get. And a big hearty fuck-you if you're uppity enough to put copy protection or DRM on your work -- what's done with your work should be the choice of the Slashdotter, not you. If you have the same aspirations of being a millionaire that, say, a (insert typical Slashdotter profession here) has, check yourself -- you're an artist, and if wandering the countryside in search of scraps was good enough for artists of the 13th century, it's good enough for you. In short -- know your place. A farmer gets to leave a legacy for his children. You don't.
"If your argument had any validity why would sound track CDs routinely cost more than the corresponding DVD of the entire movie? It takes a strong dose of reality distortion to swallow such facts but a surprising number of people seem to be able to do just that. At least people at the RIAA are paid to believe their fairy tales."
It's good that you want to learn, but you should not try to insult the other person when asking them a question. The answer to your question lies in another concept called the supply and demand curve. It's wholly unrelated to the CPI or of manufacturing logistics.
The quick answer to your question is that both DVDs and CDs are priced at what the market will bear. So are computer mice and microwave ovens, for that matter. The industry has determined that it will make more money overall if X DVDs are sold at a cost of $A, than if Y DVDs are sold at $B. Generally speaking (and there are many famous counter-examples), as the price increases, the sales volume goes down, and it's that sweet spot on the supply and demand curve that dictates the proper price -- where the revenue to the seller is maximized.
The followup question is "why does the market bear a price of about $13 for a CD and $20 for a CD?". People who ask this will point to the fact that a film takes more money to produce, and has more content (a video stream as well as an audio stream). But when you consider the value that the consumer gets -- the enjoyment -- it becomes more clear. In my case, I'll listen to a CD over and over and over again. A DVD I might watch once or twice, and that's it. That's why the value of a DVD to me is not $20 -- I haven't bought one in years. I do use Netflix, though.
As it relates to the economics of manufacture and sale, it's also important to understand that DVD sales are often just the icing on the cake. The film company has already made its money on the theatrical release. By comparison, a record label gets one and only chance to make money on a CD.
There are lots more examples that may be boggling to the lay person until they start thinking about things in term of the supply and demand curve. It's the market force that allows two restaurants to take $10 worth of ingredients and one to sell a meal for $20 and the other for $50, and the same force that causes a person to spend $150 on a pair of jeans at one store, vs. $20 on a pair of jeans at another store, or using that $150 and buying six DVDs or 12 CDs or a motherboard.
I hope this helps.
"This means that they pay 2 cents or whatever for each song played. The RIAA *is* getting their money."
Your post was spot on, but just one correction: these licenses are with BMI, ASCAP and SESAC. These are performing rights societies run by and for songwriters and composers. BMI and ASCAP are non-profit (not sure about SESAC). They are completely unrelated to the RIAA, and the RIAA does not see this money.
Of course, BMI and ASCAP are hated just as much by the Slashdot crowd, even though they're run by the artists that many Slashdotters claim to be helping when they pirate music (through word of mouth and by increasing the odds that they might go to a concert). Case in point the stories where BMI or ASCAP comes down on a restaurant that's playing music for their customers without obtaining a license.
" Goodness man! Without IP law we could be as uncreative as they were just after the dark ages. That would be like putting us back to the Renaissance! Who would want that."
I think you're referring to the popular misconception that there were no IP laws during the Renaissance. The common example is "Shakespeare didn't need copyrights." While the terms "copyright" and "intellectual property" were unknown to him, unauthorized performances of his work were a big issue for he and his troupe (and the first published version of his sonnets was a pirated version) and they called in the help of the law when they could -- and indeed they had some leverage. His troupe wasn't called "The King's Men" for nothing.
Interestingly, it's due to these unauthorized printed versions that we even have complete texts of some of his plays and poems. I'll let the Slashdot crowd slippery-slope that into an argument for file-sharing.
"wielding copyright law to the point of the absurd (e.g. having said it's illegal to rip CDs for your personal use)"
Interesting... I've never seen them say that. Do you have a citation or a link?
"CDs were more expensive but the idea that they were $25 is complete crap. I don't have any receipts but I recall street prices close to $10. Were you even buying music 25 years ago? What I've watched over that time period is the price of CDs going steadily up so that a classical music album is often close to $20."
I was buying CDs in 1985 for around $16 in 1985 dollars (they went up after that; I remember $19.99 being common), but very well -- we'll use your numbers. $10 in 1985 dollars is $17 today. The average price of a new CD is sub-$13 and falling. That's a 25% drop even using your numbers. Some CDs, such as classical music, will cost more, and that's because the cost more to make and fewer are sold.
"The attempt to wave the magic wand of inflation is also nonsense. First, there hasn't been inflation to speak of since the Carter administration."
Incorrect. If you like, you can use a link on that page to generate a nice pop-up inflation calculator.
"Second, technology products don't get more expensive. Their price tends toward zero, often quite quickly."
There is a process in making a CD just as there's a process in making a plastic container for holding liquid soap. This does not make a CD a technology product. As has been explained before, the actual cost of creating the media is a tiny portion of the total cost of sale. If the cost of making the CD, jewel case and booklet were to magically go to zero, the effect on the total price of the CD would be only a few bucks. As an aside... unfortunately, we can expect plastics costs to go up due to petroleum price issues lately.
Your argument is based on misunderstandings of inflation and of manufacturing costs. Sorry. Strong opinions are great, but do your homework first. CDs are sold at a much lower profit margin than many other consumer goods, so if your general issue is of abnormally high margins, you'll want to tilt at another windmill.
CD prices are dropping; more importantly, the speed at which they're dropping is accelerating. The average price of a new CD is down to $13.29.
Back in the 80's when audio CDs were first launched, $18 - $20 was a common price. Part of it was building the infrastructure, part of it was testing the market. Had prices stayed constant, that $18 CD in 1990 would have cost you about $25.50 in 2004 dollars, and the $16 CDs I was buying in 1984 would be about $28.50 today. In reality, prices have dropped by more than half. This is in the US, so YMMV. You mentioned a $20 price for CDs -- I'm guessing you're in Australia?
For what it's worth, the recording industry operates on profit margins that are below many other industries. It's hugely speculative and most CD releases don't make money. To your point about the cost of the media dropping, you're absolutely correct, but the cost of the media (typically around a buck for a finished CD given the quantities produced) is a small factor. If the cost of the media went to zero, that would likely lower retail prices by two bucks at most.
"Every time I see someone complaining about this statistic, I ask the same question, and no one can give me a straight answer. Why on Earth should the artist get more than 5%?"
It's because Slashdotters by and large don't know how much time and effort by skilled people, and how much money it costs to record, engineer and produce a CD. There's a great deal of difference between that piece of paper with lyrics written on it that the singer takes into the studio, and a finished CD, but I think a lot of Slashdotters equate them.
If a good singing voice and a piece of paper with lyrics on it were the same as a finished CD, then there wouldn't be a lot more artists who want recording contracts than those that have contracts.
Either way, the poster who used "1-5%" has his math off. Royalties (to performers, composers, lyricists, etc.) are typically north of a buck and represent about 15% - 20% of the total cost of sale to the record company. If the record company is lucky, they might clear a net profit of $2 on a CD. The record company gets two bucks, the artists get a buck. Not bad considering that the record company takes all the risk and has to front all the money; if a CD fails, it's the record company that loses, while the artist loses nothing but time.
Your post was very informative, but there were a few points to debate:
"The copyright code was intended to nail people that intentionally rip off copyrighted works and sell them for profit."
I'm not aware of that distinction in either the constitution or US code. Do you have a citation?
"Originally that was to stop books from being copied and sold."
Books, maps and charts were the first articles protected, but they were protected against unauthorized duplication. In common practice, there was little reason to make unauthorized copies unless you were going to sell them, but nonetheless, I'm not aware of any such distinction. This was in 1790. Printed musical works were added in 1831. That was before plays or (obviously) photos were added. Interestingly, unauthorized performance of copyrighted music wasn't added until 1897.
(an aside here: motion pictures were added in 1912. Just one more example of the law being retroactively updated to catch up with technology. Congress didn't bother with any of this "the genie's been let out of the bottle, and the incredible technology of movies is way beyeond our puny copyright laws" nonsense; they simply added them to the list. Many Slashdotters are of the mistaken impression that the scramble to update copyright laws to deal with the precedent of P2P is some sort of new concept; of course, they're being retarded. The law books get bigger as technology moves on. State vehicle codes didn't even exist much more than 100 years ago, and today the California Vehicle Code is about three inches thick.)
"I believe that predates the music industry. That is still the big distinction: if you commit infringement but don't profit by it, that's one thing (fair-use at best, a civil matter at worst), but sell it and make money and you can end up in criminal court, if the amount you make exceeds certain specific limits set up by the law."
Partially correct. It's quite easy to run afoul of criminal copyright law -- just distribute more than $1K or so of copyrighted work. You don't need to be collecting money for it, although that's a Common Slashdot Meme(tm). This is covered here This is another example of copyright law (as do many, many other areas of law) being updated for the times: in the 1850's, for example, it would be quite pointless and costly to give away the equivalent of $1,000 worth of copyrighted material, but today it's as easy as putting a few gigs of music or movies in your P2P share folder. Incidentally, this provision was added before the Internet became the cultural phenomenon it was today, and was put into place to nail the kiddies who ran the warez BBSes and web sites. I believe it was called the "No Electronic Theft" (NET) act.
"As an aside, one of things the RIAA would like to do is remove that distinction, and thoroughly criminalize any copyright infringement of any kind."
Interesting... I've never heard that. Do you have a citation?
The "It's only piracy if you sell it" notion is incorrect and self-serving. Probably thought up by somebody who didn't want to be bothered by feelings of guilt when they pirate software. Why bother with euphemisms? Fly the jolly roger proudly.
typing "dict piracy" into Firefox's address bar takes you to dictionary.com, where the relevant definition is:
The unauthorized use or reproduction of copyrighted or patented material: software piracy.
For all the clever bunnies who'd like to point out that the word "piracy" has other definitions, as well: so do lots of words. The word "piracy" is a homonym. This is a fundamental concept of the English language that we all learned in grade school.
"Accountants make allowances for uncollectable accounts (people who promise to pay for goods and services but never do and who would cost too much to track down and make pay), and I am sure that retail outlets make an allowance for physical theft."
Correct. But -- this is the important part -- retail businesses still prosecute shoplifters. The analogy here would be retail stores just realizing that shoplifting is a part of doing business and doing nothing about it.
The parent poster chided Microsoft for even making an effort to go after the pirates. Sales lost due to piracy are undoubtedly part of their profit equation, but it's still in their best interest to limit it as much as possible, rather than simply giving up.
This is how you, I, and most people reading this operate, too. To do almost anything in the real world is to invoke the chance of somebody else doing something mean or unpleasant to you. When this happens, you and I do not simply roll over and take it; if somebody messes with me; I'll kick their ass right proper. So why the chiding when Microsoft does the same to protect their own interests?
"When will companies realize that piracy is just an unfortunate part of doing business. Did they honestly think it wasn't going to be posted up on the internet? I've talked to a variety of friends and strangers. Those that are familar with Halo and Halo 2 all said that they knew of the leak, but they were still going to buy it when it comes out in a few weeks. Those that steal it now...probably wouldn't have bought it anyways."
Is your point that you don't think companies should go after software pirates; that is, not try to fight back at all, and just give up?
"Where are you getting your numbers?"
I sell products in the high-tech industry to Wal-Mart. I also know what margins my competitors offer to Wal-Mart, and I know the margin structure at many major retailers in the US. I know retail.
"I think the above statement is a misconception."
The context is the hypothetical example of the indie record store owner marking up CDs 33%. It is certainly not a misconception. It's a complex equation, but given typical costs for rent, employee salaries, utilities, shrinkage, and so on, 33% is right in the ballmark for a storefront retail establishment. As I mentioned earlier, at Best Buy, margins for most products start at about 30% and go up from there.
"Who is to decide what numbers are "gouging" and what numbers aren't?"
I do, in this context, because I have extensive background on the realities of what it takes to run a storefront business. Not all Slashdotters have a resume that ends with coding or system administration.
"Why are we even talking about "price gouging" regarding such a luxury item?"
Because some guy incorrectly claimed that an indie record shop owner with a 33% margin was "gouging." Several people were quick to point out that he was off the beam.
"33% is wildly high for some businesses, and very low for others."
Correct. Some cats have long hair, some don't. Some stars radiate light on the red side of the spectrum, some don't. Some girls sleep with you on the first date, some don't. Some languages let you overload operators, some don't. Differences are what make life great. However, in this context we're discussing whether it's "gouging" for an indie record shop owner to add a 33% markup. It is not.
The average price of a new CD is down to $13.29.
"Making a profit on a 33% mark-up is gouging?"
By comparison, Wal-Mart's markup on stuff other than CDs ranges from 30% - 50%. Best Buy's margins on computers and computer peripherals ranges from 25% - 60%.
To answer your (rhetorical) question, 33% is most certainly not gouging.
"This is the first time a big player has attempted this sort of hardball move on the labels."
Not true in the least. Slashdotters have Wal-Mart to thank for the record labels being punished for price fixing (as in the popular Slashdotter refrain, "the record companies are evil! They've been busted for price fixing!"). Here's what happened, in a nutshell:
- Wal-Mart started selling CDs at sub-par margins or as a loss leader to get people into the stores to buy other high-margin items.
- Record chains like Tower Records freaked out, as their primary business was selling CDs and they couldn't compete with a Wal-Mart which had a huge store of fishing rods and cheap clothing to make up the bulk of their business.
- The record companies helped fund the advertising for Tower as well as two other chains (TWE and MusicLand, I believe) in exchange for Tower et. al. agreening not to display prices in those ads that went below a certain point. FWIW, this is called a "MAP program," for "minimum advertised price," and is prevalent in tons of other industries.
- Wal-Mart got all pissy and threw their weight around with the government.
- The government told the record companies to stop, and to send checks to consumers.
- Lots of other industries, including the computer peripheral industries, still happily continue MAP programs... until that point that Wal-Mart tattles on them, too.
- Tower Records subsequently declared bankrupcty. Enjoy buying your music at Wal-Mart, folks.
That's about as hardball as you can get."This is already a markup in the first place right there. 50 cents to the author, 50 cents to press the CD. The rest is advertising and marketing."
FYI, cost of goods for a CD (including the case and the booklet) is typically north of a buck. Royalties are typically north of a buck as well (particularly when there are multiple composers and songwriters, and something known as "compulsory royalties" are paid). At least in the computer industry (my profession of choice), royalties are included in what's known as the bill of materials cost and are an "above the line" charge to the gross margin. The salaries of the people involved in making the recording are included in the cost of sale, as are shipping costs, return reserves, and, as you mentioned, sales and marketing. The cost of sale is the cost of sale... there's no profit there. "Markup" starts after the cost of sale.
This is all Accounting 101 stuff, and it applies to goods in the computer industry as well as the record industry (and every other industry). As I mentioned earlier, lots of Slashdotters just don't have a background in this type of stuff. Likewise, most accountants don't know Thing One about serializing call-back functions.
I'm not sure I follow. The average price of a new CD is now $13.29 in the US. A 10x markup would require that the cost of sale is in the neighborhood of $1.33. It's nowhere near that.
"Markup" is an imprecise term but it generally refers to the delta between the cost of sale and the retail cost. If we look at the cumilative markup between the manufacturer and the end user, with a cost of sale of about six bucks, that's about a 100% markup, not a 1,000% (10x) markup. Is that what you meant?
"Ok...so let me ask you, why bother with someone like that in the first place? If they weren't going to buy it anyway, you've lost $0 from them copying it."
Because it comes a tautology. With each new CD that you pirate rather than purchase, "I wouldn't have bought it anyway" becomes easier and easier to say. It transforms from "I wouldn't have bought it anyway because I {couldn't afford it | don't particularly like the music | etc.}" to "I wouldn't have bought it anyway because it's readily available for free." Humans have a tremendous capacity for self-deception, and rationalizations like this make piracy go down smooth, easy, and guilt-free.
"The problem is that the RIAA refuses to understand economic laws. Things are valuable only because they are scarce. We've eliminated scarcity for music and other data, so the value drops to 0."
Then it would seem that the software industries (including all those guys who make money on shareware) don't understand economic laws as well as you do, either. Here's self-deception at work again: Slashdotters can all slap each other on the back and tell each other that these large companies (who have people with degrees in economics on the payroll, and whose very existence relies on understanding the economy) don't understand economics; while on the other hand, Apple has sold nearly two million songs.
"If it's not scarce, the value becomes zero" is a simple statement easily understandable by your typical Slashdotter, but nonetheless wrong. Economics are more complex than that, and the realities of the market can't be expressed in simple bromides.
If I can summarize your post, you feel that $18 is too high a price to pay, and $9 is an acceptable price point for you.
If so, you're in luck: the average price of a new CD in the US is $13.29, and it's dropping fast.
I agree with you that it would suck to pay an average of $18 for a new CD. Seeing as new CDs haven't been priced at an average of $18 for years, I don't think this is a huge issue.
"and the total cost paid by the users of the information is far in excess of the costs of production, plus reasonable profit."
A popular myth on Slashdot is that record companies operate on profit margins that are out of step with other businesses. The reality is that record industry margins are pretty dismal compared to the margins earned on computer parts and accessories, packaged foods, clothing, and products of many, many other industries which Slashdotters don't consider to be "evil." This is why, multimedia conglomorates aside, you rarely see record companies on the Fortune 500, you rarely see stock analysts issue "buy" ratings for record companies, and why -- this is the important part -- if you ever have the opportunity to talk to somebody who's run an indie label, it's a pretty shitty business to be in if you're trying to make money.
"Governments should therefore be stepping in to ensure most of the money goes to the creators, and that copyright monopoly only lasts until the creator receives the cost of production plus reasonable profit."
Most of the money earned on the sale of a CD does go to the creators. Some goes to the creator of the CD media itself. Some goes to the performer who sings the notes or strums the guitar to create the notes. Some goes to the composer and songwriter who created the words and music. Some goes to the session musicians who help create a sonically appealing piece. Some goes to the engineer and producer who do their magic in creating appealing music with the raw source. Some goes to the creator of the cover art. A CD is not the same as a piece of sheet music, or a musician playing guitar on a street corner. It's the result of the work of dozens (or more) of creative, productive people.
There are some bad things about our society, but one of the nice things is the opportunity to combine talent and hard work to earn money. It is not our place to arbitrarily decide what is a "reasonable" profit for somebody who happens to choose a different career than us. You certainly would not want a bunch of musicians deciding how much income is "reasonable" for a programmer (particularly because the average programmer makes a lot more than the average musician), so why would you even entertain the idea of the opposite?