"Perhaps, but I personally doubt it, due to the sheer volume of physical goods being produced, thus at cheaper prices than ever before."
It all depends on the type of product and the production costs vs. marketing and other COS (cost of sale) factors. CDs are a product where much of the selling price goes to cover the expense of transporting it, selling it, and marketing it. The actual cost of producing the CD is a pretty small slice of the pie.
You make some excellent points and you are absolutely correct that CD players and CDs are marketed in radically different fashions. Specifically, CD players are now commodities. The marketing spend for CDs is perhaps at its highest point ever.
Naturally the record companies say that piracy is 100% to blame for the decline in sales over the past few years. Slashdotters will quickly point out that it's everything but piracy; they also have some good points but I think many of us are "ignoring the elephant" a little too much. Both extreme viewpoints are self-serving; it allows the record companies to proceed with suing pirates with little remorse, and it allows Slashdotters to "share" all the music they can get their hands on without losing any sleep.
In the middle are the various research and analyst firms who specialize in analyzing markets. Several firms which I trust state that piracy is absolutely, definitely, part of the problem, but not the entire problem. The economy and competition from other sources of entertainment (such as the rise of the DVD market) are often cited by analysts as other principle factors.
"They have? That's news to me. When I got my first CD player in 1985, the average price of a new CD in a record store was $12. In 2004, the average price of a new CD in a record store is $18. Now, granted there are bargain-basement $5.99 CDs these days, as well as sale-priced new releases at the $12 or $13 price point, but as a whole, CDs aren't cheaper today than they were nearly 20 years ago."
Per NPD MusicWatch, the average price of a new release has dropped to $13.42. That's the mathematical average, which means that some retail for more, and some for less, and geographical differences will apply. If the average price of a CD in your area really is $18, consider shopping on Amazon, or using an online service like iTunes, where an entire album can be had for $12 or so.
I also got my first CD player in 1985, and I remember CDs being $18 or so, but I probably lived in a more expensive part of town than you, figuratively speaking. Let's use your $12 number to save time. $12 in 1985 dollars is about $20 in 2004 dollars; if prices hadn't gone down, we'd be paying $20 per CD today.
As you know, when you spend money on a CD, some of it goes to the artist, some of it goes into a record company's bank account (if they're profitable), but most of it goes to somebody's salary, whether they work at the CD pressing plant, or they're behind the counter at the record store, or they're one of the many people in between. As the cost of living has risen in the past 19 years, so have salaries, and the cost of physical goods have risen accordingly. If what you really meant is that CD prices haven't dropped enough, remember that it could be worse -- look at what's happened to the price of automobiles during the same time.
Thank you for the helpful post. After I asked my question I Googled on music fair use and found many pages on fair use exceptions. They seem to be related exclusively to educational scenarios or making copies for personal use (format shifting, mix tapes and the like), which seems to agree with what you're saying. However, a few Slashdotters have pointed out that they believe that "personal use" also includes giving copies to your friends. I certainly wouldn't have interpreted it this way and I can't find anything on the web that confirms this.
Thanks. Agreed, I think copyright law is clear that you can't be busted for making a cassette tape.
The original poster states that copyright law (specifically, the fair use guidelines) allow you to give copies to your friends. Unfortunately the articles I've found on the web don't back this up.
"Giving to a friend, meaning one, is personal. Giving to 2 friends could fall under distribution and/or manufacture."
I assume you've read the EFF link and the other links in my post... do you believe that "personal use" in the context they use also includes giving copies to others?
"The only question is the meaning of the word, noncommercial."
Correct. That clause covers using a device to make a copy. Many slashdotters will assume that this also covers distributing copies.
Fair use allows format-shifting, mix tapes, and other copies for personal use -- no debate there. The law is clear that you can't be nailed for the simple act of using a tape recorder... and rightfully so.
If you come upon any stuff in the law books that covers distributing copies (analog, digital or otherwise -- many Slashdotters have pointed out that there is apparently a difference according to US code) I would love to see it!
"Making an MP3 of a small portion of a song to use as an example of that song is also fair use (in the more traditional sense). In fact, making a cassette tape of a CD and giving it to someone you know (without money exchaning hands) is also fair use."
Do you have a citation for this? Are these covered in copyright law, or are they more in the realm of not needing backup because everybody knows they're true?
Googling on "fair use music" gives me the following:
http://www.pdinfo.com/fairuse.htm states: "We have attempted to do find specific details and examples of Fair Use of music. The rumors that it is OK to use so many notes or so many bars are just not true. There is little doubt that, other than private in-home listening and playing, Fair Use of music is extremely limited."
http://www.eff.org/cafe/gross1.html states that one can make a "mix tape" for one's own personal enjoyment (their words). There's nothing on the EFF page which gives one blanket authorization to make a copy of a CD and give it to a friend, whether cash is exchanged or not. Nor in this article, which was written by a lawyer.
A common point found in many articles I've read is the impact on the market. If the copying is done to avoid buying another copy, then it's not fair use. While making a copy of a CD for a friend -- cassette, MD, DAT, CD or otherwise -- might be solely so he can "sample" it or "try before he buys" or "evaluate it for consideration of purchasing it," in most cases it's not -- you are making a copy for a friend because he'd rather get a copy from you for free than to buy his own. Not a huge crime -- but not fair use.
They happen relatively often. They are simply not reported on Slashdot. Most fees for piracy are paid out of court but the feds do occasionally put on the blue jackets and bust in with guns drawn. A few years back Microsoft worked with the feds to bust several Microsoft software counterfeiting rings.
That much I understand. If I have a CD, I can loan it to a friend. If he makes a copy of it, he's in violation of the law, but that's largely irrelevant to the act of me loaning him my CD.
"You can share an analog copy of a CD you own, but only with "friends", and you can't do it for commercial gain. You can't make a digital copy of a CD and share it without seriously risking infringment."
This is where I get lost. Can somebody please point me to the section of US copyright law which spells this out? I understand the part of the law about libraries and similar institutions being allowed to make copies for archival purposes, but I can't find anything that relates one way or another to making copies and giving them to friends.
"The GPL is a LICENSE and is not copyright, copyright != license"
A license is a way for a copyright holder to dictate how their work may be used by other parties.
Similarly, there's a license which states how one may use songs downloaded from the iTunes Music Store. I think their terms of use are reasonable enough, yet there are many Slashdotters who think that Apple is pure evil for daring to impose terms of use. I wonder how many members this group of Slashdotters shares with the group that feels it acceptable for the GPL to impose its own set of terms.
I'm referring to manufacturer margins, not retail margins. Kraft Foods (which owns a number of brands) posted a pre-tax profit margin of 17% last year. General Mills hit 9%. By comparison, Vivendi Universal was negative, having lost $46 million dollars last year.
In the computer business, manufacturer net margins are typically 30% - 50%. Retailer markup is 25% - 40% at stores like Best Buy for computer goods.
The average selling price of a new release has dropped to $13.42 in the US per NPD Musicwatch. That is the average price, weighted by number of sales. You're correct that some retailers will sell some CDs for $18, but that's not the bulk of the business.
As a point reference, in my locale (San Francisco Bay Area) a good price for a vinyl album in '84 was $8.99. I'd pay $11.99 if I really wanted it but I could usually find them for $9.99 or $8.99. $7.50 - $8.50 wasn't usually an option.
"Face it, the record industry made a killing, when they switched the population over to CD."
The record industry is hurting. Indie labels are disappearing and the big ones are consolidating, with massive layoffs. With the exception of big conglomerates that happen to have a recording division, you rarely see a record company in the Fortune 500 (this has been the case for decades, not just recently), nor do you see analyist "buy" recommendations for record companies (another perennial fact). The record industry is a hugely speculative one, with a few hit releases covering the cost of the majority which do not make a profit. And, net margins on CDs are typically less than 30%, which is pretty low compared to many other products.
Do record companies make money? Sure. Are many of them profitable? You bet. But they're not the wildly profitable enterprises that many Slashdotters believe.
And the Enter The Matrix PC game costs even more than the soundtrack! I guess the game companies are the greediest of all.
"Maybe it's because the expected value of the CD is $15+, and without competition, the monopoly that owns redistribution rights can set the price."
That is correct. By the way, copyright law allows anybody to have a monopoly on the distribution rights to their work. If you write a software program that you distribute online, only you get to decide how much you sell it for and how you distribute it. By law, nobody may "compete" with you by selling or distributing your software without your permission. They can compete with you by writing their own software that does the same thing better, just as the Matrix Revolutions soundtrack competes with every other CD in the store.
The record labels were nailed for price fixing a few years back. Universal and a few others were giving co-op money to TWE and Tower Records as part of a MAP (minimum advertised pricing) program. In short, if the stores ran print ads with CDs at a certain minimum price, the record companies would help pay for those ads. MAPs and co-op advertising funding are a common practice in lots of industries, including the computer industry.
By the way, this came about because the big box retailers like Wal-Mart and Best Buy were selling CDs at low or no margin as a customer draw, then making their money on the higher-margin items in the store. Specialty retailers like Tower, which didn't have a store full of high-margin products, couldn't compete with Wal-Mart and Best Buy on price, so they complained to the record companies. The record companies implemented the MAP/co-op program with these retailers, so Best Buy and Wal-Mart complained to the government.
For what it's worth, DVDs and CDs have similar price controls -- that is, not many -- and the big box retailers heavily discount both.
As an aside, one person's opinion on why a CD is worth $13 to them while a DVD is worth $20 to them can't be "wrong" as it's their personal observation. A CD is worth about $13 to me, but a DVD is worth about $8, for the same reason he mentioned -- I'll listen to a CD squillions of times but I might watch a DVD just once or twice. I can't buy DVDs at retail for $8, so I use Netflix instead. There are lots of other industries (food, clothing, cars) where the retail price is often more about the perceived value by the consumer rather than the manufacturing cost.
You're correct -- the artist is usually the last to get paid. If a CD release has a net loss of $100K at the end of the year, the artist may have earned exactly zero in royalty payments, but the record company is out the $100K.
The alternative (foregoing the recording contract and paying for CD production costs yourself) can be equally tough. Many struggling artists just don't have the money to properly record, produce and promote their music, and the expenses aren't recouped in sales, the artist is SOL.
CD prices have gone down. When they first appeared in the mid-80's, prices of $17.99 and $18.99 for new releases were common. Lately, due to piracy and other forms of competition, they've dropped to the point that the average price of a new release is $13.42, according to NPD Musicwatch.
This is before adjustment for inflation. That $17.99 I paid in 1985 is about $30 in 2004 dollars. Prices now are half of what they were initially.
"Where is all this money going then? To the executives of course! Where does money always go in big business? To the fat cats at the top, and then it trickles down from there. So the reason why cds are so expensive is because the executives were merely giving themselves pay raises according to the work they've accomplished over the ages. These businesses have been around longer than many of us by several years. Thus the prices rise and rise."
That's interesting. I've met a few record label owners. They put lots of sweat and blood into their jobs, often working ridiculously long hours, and they don't make huge amounts of money. They often do give themselves pay cuts to keep their business afloat. In short, they don't match the description you give at all. Maybe you're thinking of one of the "big five" labels? Sure, they've got hugely paid executives, but there are thousands of indie labels out there whose working environment isn't anything at all what you describe.
You're correct that most of the net profit from a CD ends up going to somebody's salary -- that's the case with most things that are sold on the market, and so this fact probably would not appear on a "why record companies are evil" list. Most CDs do not make money, and even the indie labels have to sell about 100,000 examples of a CD to cover the production costs.
"That's exactly the problem with CD distribution in the first place! They still want me to believe I need to spend over $ 16 bucks on a disc that I know damn well cost them only $ 0.40 to manufacture and distro. Even with a couple bucks to the artist and the studio, it's overpriced."
To clarify, CDs are sold to distributors for about $8. Anything beyond that goes to the distributor and the retailer. I know, I know -- thus they are surely evil greedy fucktards, etc. -- but many if not most products we buy go through similar two-tier sales channels.
Of the eight bucks or so that the record company collects, the manufacturing fees are among the least significant of the costs. Among others:
Artist royalties
Salaries for the people involved in producing the CD. A CD is not the work solely of singer or a band, but session musicians, backing vocalists, producers, and engineers. Additionally, CDs, like virtually all other consumer goods, must be sold and marketed, and sales and marketing staffs are salaried, not volunteer, positions.
Allowances for returns from vendors -- if one in ten CDs ultimately gets returned by the store, that's about $0.80 of the cost of sale.
Channel promotions, co-op ads, promotional copies, and all the other sorts of things that are associated with manufacturing, selling and marketing a consumer good in today's society.
The bottom line is that CDs have a net margin of 30% or less, which is far lower than many other things we buy regularly, such as clothing, groceries, computer peripherals, and software. A CD released by a major label typically requires sales of a million units before it breaks even; the indies (which have much smaller promotion budgets but also typically sell fewer CDs) must sell about 100K.
"I like to be able to take even my legitimately purchased music and reduce it to the set of what *I* want to listen to. Isn't that my right as a consumer?"
If you're curious as to your rights when downloading music from iTMS, check out the fine print on the iTunes store.
Many people discuss "fair use rights" with the understanding that there is a list of activities that rightsholders are not allowed to prevent. This is not the case. Fair use doctrine is a loose list of instances in which you can make a copy of somebody else's work without running afoul of the law. Many of these relate to educational purposes. For example, you could occasionally Xerox a page from a magazine and distribute it to your class without fear of being hauled off to court, but this does not supercede a magazine publisher's right to, say, print a magazine using special ink and paper that cannot be Xeroxed.
"As we all know, the recording industry recently got busted for price-fixing or something similar, with the result that they aren't able to charge as much, per CD, now as they did before."
I love these "as we all know..." statements. "As many Slashdotters think to be true..." is a more accurate phrase in most cases. In the case of the price fixing settlement, it was just a few stores, a few years ago, and there is nothing preventing those stores from continuing to sell at the same price. The record companies made the same amount of money regardless of the stores' markup. The record companies got in trouble for giving co-op advertising money to a few chains in exchange for MAPs (minimum advertised pricing) -- a practice which is common in many industries. The record companies did this because the Wal-Marts and Best Buys of the world were selling music at little or no margin as an incentive to draw people into the store, and the smaller CD-only chains (like Tower Records) were hurting.
Otherwise, your comment is spot-on. Average CD prices are falling, thanks to piracy and other factors affecting the supply-and-demand curve. A good part of the reason why total revenues are down is because the record companies are selling the CDs into distribution for less.
"In the US, a new CD is now $17.99, sometimes even $18.99 or $21.99."
You may be shopping at the wrong stores. According to NPD Musicwatch (and they know what they're doing; I've used them to track other industries) the average price of a new release is down to $13.42. That's the average price, the higher prices are offset by the new releases which are often $11.99 or $10.99.
" I was at Borders the other day wanting to buy a new album (that I couldn't download!) and was blown away that they wanted $19.99 for ONE CD. Screw that, I'll search harder and find it online somewhere..."
Borders does not offer competitive prices. They tend to favor selection and convenience over price. Try Amazon (selection/price but not convenience) or Best Buy (price/convenience but not selection).
Given prices where I live, I don't use iTMS to buy entire albums; it's roughly the same price to get it into the store and I get the album art and all that. iTMS is ideal for single tracks, however.
"That would all be true if Canadians didn't pay a tax on writable digital media that gets handed to the CRIA."
As a point of clarification, only about 15% of the levy goes toward the record labels. The rest goes to songwriters and performers.
I do not believe that paying the levy gives one the moral right to pirate music. Here in the USA, citizens pay for the operation of police departments, yet we are still subject to law enforcement. Law-abiding citizens being forced to pay for the wrongdoings of others is, sadly, not a Canadian invention.
"However, at the same time, it must be noted that more c90% of proceedings from CD sales go to the record labels."
For what it's worth, it's a little different down here in the US. A CD that you see in the store for US$12.50 was sold into distribution for about $8.00 -- so about a third of the price you pay goes to the channel.
You're correct that the record label collects that roughly $8.00 at which the CD is sold into the sales channel, but in most cases, 100% of that $8.00 ends up going to somebody's salary, whether they work at the CD pressing plant or they're the engineer behind the board or they're the graphic artist that did the artwork. When you phrase it in the form "sales go to the record labels" it may give the impression of going into some vault somewhere. The distribution, sales and marketing of hard goods may be inefficient, but inefficiency != evil.
"The vast majority of artistes vehemently support electronic means of music distribution over the CD method."
Interesting, I didn't know somebody'd taken a poll. Do you have a citation for that statistic? Does that count signed as well as unsigned artists? The A&R guys see so many demo CDs -- from more artists than they could possibly sign -- that I just don't see the math working here.
DVD burners are great and I know lots of folks who use them for general purpose data storage like you mention.
However, everybody I know who owns DVD X-Copy uses it to pirate (not "back up") DVDs. Likewise, everybody I know who uses Kazaa regularly, does it to download copyrighted music as an alternative to paying for it. Perhaps I'm hanging with the wrong crowd!
I think a common view is that once copyrights are extended beyond a lifetime, they become a benefit exclusively to organizations and no longer become a benefit to individuals. But, individuals benefit from longer copyright terms, as well. For example, songwriters, just like IT managers or programmers, have the same desire to raise families and provide bounties for same (and let's skip the usual silly "if they're after a profit, they're not an artist" argument; the fact remains that many artists make their living doing so). For example, if you're a songwriter or a painter, if you know that the copyright system will provide for your offpsring if you should meet an early death, then this is additional incentive for you to remain a songwriter or a painter rather than, say, becoming an investment banker. Lifetime plus seventy years looks out for you if you hit that jackpot and write that hit song at age 28, and then you are run over at a bus at age 29 with a wife and infant daughter.
Do corporations benefit from longer copyright terms as well? You betchya. But there are tons of laws which benefit corporations as well as individuals. That in itself is not enough reason to change those laws. It would strike back at those "greedy corporations," but we must consider the collateral damage to those ordinary folks who rely on their arts to survive.
Slashdot Mirror
"Perhaps, but I personally doubt it, due to the sheer volume of physical goods being produced, thus at cheaper prices than ever before."
It all depends on the type of product and the production costs vs. marketing and other COS (cost of sale) factors. CDs are a product where much of the selling price goes to cover the expense of transporting it, selling it, and marketing it. The actual cost of producing the CD is a pretty small slice of the pie.
You make some excellent points and you are absolutely correct that CD players and CDs are marketed in radically different fashions. Specifically, CD players are now commodities. The marketing spend for CDs is perhaps at its highest point ever.
Naturally the record companies say that piracy is 100% to blame for the decline in sales over the past few years. Slashdotters will quickly point out that it's everything but piracy; they also have some good points but I think many of us are "ignoring the elephant" a little too much. Both extreme viewpoints are self-serving; it allows the record companies to proceed with suing pirates with little remorse, and it allows Slashdotters to "share" all the music they can get their hands on without losing any sleep.
In the middle are the various research and analyst firms who specialize in analyzing markets. Several firms which I trust state that piracy is absolutely, definitely, part of the problem, but not the entire problem. The economy and competition from other sources of entertainment (such as the rise of the DVD market) are often cited by analysts as other principle factors.
"They have? That's news to me. When I got my first CD player in 1985, the average price of a new CD in a record store was $12. In 2004, the average price of a new CD in a record store is $18. Now, granted there are bargain-basement $5.99 CDs these days, as well as sale-priced new releases at the $12 or $13 price point, but as a whole, CDs aren't cheaper today than they were nearly 20 years ago."
Per NPD MusicWatch, the average price of a new release has dropped to $13.42. That's the mathematical average, which means that some retail for more, and some for less, and geographical differences will apply. If the average price of a CD in your area really is $18, consider shopping on Amazon, or using an online service like iTunes, where an entire album can be had for $12 or so.
I also got my first CD player in 1985, and I remember CDs being $18 or so, but I probably lived in a more expensive part of town than you, figuratively speaking. Let's use your $12 number to save time. $12 in 1985 dollars is about $20 in 2004 dollars; if prices hadn't gone down, we'd be paying $20 per CD today.
As you know, when you spend money on a CD, some of it goes to the artist, some of it goes into a record company's bank account (if they're profitable), but most of it goes to somebody's salary, whether they work at the CD pressing plant, or they're behind the counter at the record store, or they're one of the many people in between. As the cost of living has risen in the past 19 years, so have salaries, and the cost of physical goods have risen accordingly. If what you really meant is that CD prices haven't dropped enough, remember that it could be worse -- look at what's happened to the price of automobiles during the same time.
Thank you for the helpful post. After I asked my question I Googled on music fair use and found many pages on fair use exceptions. They seem to be related exclusively to educational scenarios or making copies for personal use (format shifting, mix tapes and the like), which seems to agree with what you're saying. However, a few Slashdotters have pointed out that they believe that "personal use" also includes giving copies to your friends. I certainly wouldn't have interpreted it this way and I can't find anything on the web that confirms this.
Thanks. Agreed, I think copyright law is clear that you can't be busted for making a cassette tape.
The original poster states that copyright law (specifically, the fair use guidelines) allow you to give copies to your friends. Unfortunately the articles I've found on the web don't back this up.
"Giving to a friend, meaning one, is personal. Giving to 2 friends could fall under distribution and/or manufacture."
I assume you've read the EFF link and the other links in my post... do you believe that "personal use" in the context they use also includes giving copies to others?
"The only question is the meaning of the word, noncommercial."
Correct. That clause covers using a device to make a copy. Many slashdotters will assume that this also covers distributing copies.
Fair use allows format-shifting, mix tapes, and other copies for personal use -- no debate there. The law is clear that you can't be nailed for the simple act of using a tape recorder... and rightfully so.
If you come upon any stuff in the law books that covers distributing copies (analog, digital or otherwise -- many Slashdotters have pointed out that there is apparently a difference according to US code) I would love to see it!
"Making an MP3 of a small portion of a song to use as an example of that song is also fair use (in the more traditional sense). In fact, making a cassette tape of a CD and giving it to someone you know (without money exchaning hands) is also fair use."
Do you have a citation for this? Are these covered in copyright law, or are they more in the realm of not needing backup because everybody knows they're true?
Googling on "fair use music" gives me the following:
http://www.musiclibraryassoc.org/Copyright/guidemu s.htm
http://www.serve.com/marbeth/music_fair_use.html
http://www.pdinfo.com/fairuse.htm states: "We have attempted to do find specific details and examples of Fair Use of music. The rumors that it is OK to use so many notes or so many bars are just not true. There is little doubt that, other than private in-home listening and playing, Fair Use of music is extremely limited."
http://www.eff.org/cafe/gross1.html states that one can make a "mix tape" for one's own personal enjoyment (their words). There's nothing on the EFF page which gives one blanket authorization to make a copy of a CD and give it to a friend, whether cash is exchanged or not. Nor in this article, which was written by a lawyer.
A common point found in many articles I've read is the impact on the market. If the copying is done to avoid buying another copy, then it's not fair use. While making a copy of a CD for a friend -- cassette, MD, DAT, CD or otherwise -- might be solely so he can "sample" it or "try before he buys" or "evaluate it for consideration of purchasing it," in most cases it's not -- you are making a copy for a friend because he'd rather get a copy from you for free than to buy his own. Not a huge crime -- but not fair use.
"Why aren't there software-piracy raids?"
They happen relatively often. They are simply not reported on Slashdot. Most fees for piracy are paid out of court but the feds do occasionally put on the blue jackets and bust in with guns drawn. A few years back Microsoft worked with the feds to bust several Microsoft software counterfeiting rings.
"You can share a CD you own."
That much I understand. If I have a CD, I can loan it to a friend. If he makes a copy of it, he's in violation of the law, but that's largely irrelevant to the act of me loaning him my CD.
"You can share an analog copy of a CD you own, but only with "friends", and you can't do it for commercial gain. You can't make a digital copy of a CD and share it without seriously risking infringment."
This is where I get lost. Can somebody please point me to the section of US copyright law which spells this out? I understand the part of the law about libraries and similar institutions being allowed to make copies for archival purposes, but I can't find anything that relates one way or another to making copies and giving them to friends.
"The GPL is a LICENSE and is not copyright, copyright != license"
A license is a way for a copyright holder to dictate how their work may be used by other parties.
Similarly, there's a license which states how one may use songs downloaded from the iTunes Music Store. I think their terms of use are reasonable enough, yet there are many Slashdotters who think that Apple is pure evil for daring to impose terms of use. I wonder how many members this group of Slashdotters shares with the group that feels it acceptable for the GPL to impose its own set of terms.
I'm referring to manufacturer margins, not retail margins. Kraft Foods (which owns a number of brands) posted a pre-tax profit margin of 17% last year. General Mills hit 9%. By comparison, Vivendi Universal was negative, having lost $46 million dollars last year.
In the computer business, manufacturer net margins are typically 30% - 50%. Retailer markup is 25% - 40% at stores like Best Buy for computer goods.
The average selling price of a new release has dropped to $13.42 in the US per NPD Musicwatch. That is the average price, weighted by number of sales. You're correct that some retailers will sell some CDs for $18, but that's not the bulk of the business.
As a point reference, in my locale (San Francisco Bay Area) a good price for a vinyl album in '84 was $8.99. I'd pay $11.99 if I really wanted it but I could usually find them for $9.99 or $8.99. $7.50 - $8.50 wasn't usually an option.
"Face it, the record industry made a killing, when they switched the population over to CD."
The record industry is hurting. Indie labels are disappearing and the big ones are consolidating, with massive layoffs. With the exception of big conglomerates that happen to have a recording division, you rarely see a record company in the Fortune 500 (this has been the case for decades, not just recently), nor do you see analyist "buy" recommendations for record companies (another perennial fact). The record industry is a hugely speculative one, with a few hit releases covering the cost of the majority which do not make a profit. And, net margins on CDs are typically less than 30%, which is pretty low compared to many other products.
Do record companies make money? Sure. Are many of them profitable? You bet. But they're not the wildly profitable enterprises that many Slashdotters believe.
And the Enter The Matrix PC game costs even more than the soundtrack! I guess the game companies are the greediest of all.
"Maybe it's because the expected value of the CD is $15+, and without competition, the monopoly that owns redistribution rights can set the price."
That is correct. By the way, copyright law allows anybody to have a monopoly on the distribution rights to their work. If you write a software program that you distribute online, only you get to decide how much you sell it for and how you distribute it. By law, nobody may "compete" with you by selling or distributing your software without your permission. They can compete with you by writing their own software that does the same thing better, just as the Matrix Revolutions soundtrack competes with every other CD in the store.
The record labels were nailed for price fixing a few years back. Universal and a few others were giving co-op money to TWE and Tower Records as part of a MAP (minimum advertised pricing) program. In short, if the stores ran print ads with CDs at a certain minimum price, the record companies would help pay for those ads. MAPs and co-op advertising funding are a common practice in lots of industries, including the computer industry.
By the way, this came about because the big box retailers like Wal-Mart and Best Buy were selling CDs at low or no margin as a customer draw, then making their money on the higher-margin items in the store. Specialty retailers like Tower, which didn't have a store full of high-margin products, couldn't compete with Wal-Mart and Best Buy on price, so they complained to the record companies. The record companies implemented the MAP/co-op program with these retailers, so Best Buy and Wal-Mart complained to the government.
For what it's worth, DVDs and CDs have similar price controls -- that is, not many -- and the big box retailers heavily discount both.
As an aside, one person's opinion on why a CD is worth $13 to them while a DVD is worth $20 to them can't be "wrong" as it's their personal observation. A CD is worth about $13 to me, but a DVD is worth about $8, for the same reason he mentioned -- I'll listen to a CD squillions of times but I might watch a DVD just once or twice. I can't buy DVDs at retail for $8, so I use Netflix instead. There are lots of other industries (food, clothing, cars) where the retail price is often more about the perceived value by the consumer rather than the manufacturing cost.
You're correct -- the artist is usually the last to get paid. If a CD release has a net loss of $100K at the end of the year, the artist may have earned exactly zero in royalty payments, but the record company is out the $100K.
The alternative (foregoing the recording contract and paying for CD production costs yourself) can be equally tough. Many struggling artists just don't have the money to properly record, produce and promote their music, and the expenses aren't recouped in sales, the artist is SOL.
CD prices have gone down. When they first appeared in the mid-80's, prices of $17.99 and $18.99 for new releases were common. Lately, due to piracy and other forms of competition, they've dropped to the point that the average price of a new release is $13.42, according to NPD Musicwatch.
This is before adjustment for inflation. That $17.99 I paid in 1985 is about $30 in 2004 dollars. Prices now are half of what they were initially.
"Where is all this money going then? To the executives of course! Where does money always go in big business? To the fat cats at the top, and then it trickles down from there. So the reason why cds are so expensive is because the executives were merely giving themselves pay raises according to the work they've accomplished over the ages. These businesses have been around longer than many of us by several years. Thus the prices rise and rise."
That's interesting. I've met a few record label owners. They put lots of sweat and blood into their jobs, often working ridiculously long hours, and they don't make huge amounts of money. They often do give themselves pay cuts to keep their business afloat. In short, they don't match the description you give at all. Maybe you're thinking of one of the "big five" labels? Sure, they've got hugely paid executives, but there are thousands of indie labels out there whose working environment isn't anything at all what you describe.
You're correct that most of the net profit from a CD ends up going to somebody's salary -- that's the case with most things that are sold on the market, and so this fact probably would not appear on a "why record companies are evil" list. Most CDs do not make money, and even the indie labels have to sell about 100,000 examples of a CD to cover the production costs.
"That's exactly the problem with CD distribution in the first place! They still want me to believe I need to spend over $ 16 bucks on a disc that I know damn well cost them only $ 0.40 to manufacture and distro. Even with a couple bucks to the artist and the studio, it's overpriced."
To clarify, CDs are sold to distributors for about $8. Anything beyond that goes to the distributor and the retailer. I know, I know -- thus they are surely evil greedy fucktards, etc. -- but many if not most products we buy go through similar two-tier sales channels.
Of the eight bucks or so that the record company collects, the manufacturing fees are among the least significant of the costs. Among others:
The bottom line is that CDs have a net margin of 30% or less, which is far lower than many other things we buy regularly, such as clothing, groceries, computer peripherals, and software. A CD released by a major label typically requires sales of a million units before it breaks even; the indies (which have much smaller promotion budgets but also typically sell fewer CDs) must sell about 100K.
"I like to be able to take even my legitimately purchased music and reduce it to the set of what *I* want to listen to. Isn't that my right as a consumer?"
If you're curious as to your rights when downloading music from iTMS, check out the fine print on the iTunes store.
Many people discuss "fair use rights" with the understanding that there is a list of activities that rightsholders are not allowed to prevent. This is not the case. Fair use doctrine is a loose list of instances in which you can make a copy of somebody else's work without running afoul of the law. Many of these relate to educational purposes. For example, you could occasionally Xerox a page from a magazine and distribute it to your class without fear of being hauled off to court, but this does not supercede a magazine publisher's right to, say, print a magazine using special ink and paper that cannot be Xeroxed.
"As we all know, the recording industry recently got busted for price-fixing or something similar, with the result that they aren't able to charge as much, per CD, now as they did before."
I love these "as we all know..." statements. "As many Slashdotters think to be true..." is a more accurate phrase in most cases. In the case of the price fixing settlement, it was just a few stores, a few years ago, and there is nothing preventing those stores from continuing to sell at the same price. The record companies made the same amount of money regardless of the stores' markup. The record companies got in trouble for giving co-op advertising money to a few chains in exchange for MAPs (minimum advertised pricing) -- a practice which is common in many industries. The record companies did this because the Wal-Marts and Best Buys of the world were selling music at little or no margin as an incentive to draw people into the store, and the smaller CD-only chains (like Tower Records) were hurting.
Otherwise, your comment is spot-on. Average CD prices are falling, thanks to piracy and other factors affecting the supply-and-demand curve. A good part of the reason why total revenues are down is because the record companies are selling the CDs into distribution for less.
"In the US, a new CD is now $17.99, sometimes even $18.99 or $21.99."
You may be shopping at the wrong stores. According to NPD Musicwatch (and they know what they're doing; I've used them to track other industries) the average price of a new release is down to $13.42. That's the average price, the higher prices are offset by the new releases which are often $11.99 or $10.99.
" I was at Borders the other day wanting to buy a new album (that I couldn't download!) and was blown away that they wanted $19.99 for ONE CD. Screw that, I'll search harder and find it online somewhere..."
Borders does not offer competitive prices. They tend to favor selection and convenience over price. Try Amazon (selection/price but not convenience) or Best Buy (price/convenience but not selection).
Given prices where I live, I don't use iTMS to buy entire albums; it's roughly the same price to get it into the store and I get the album art and all that. iTMS is ideal for single tracks, however.
"The whole point of DRM is to keep you from doing things you are legally entitled to do as specifically written in copyright law."
What section of US copyright law are you referring to?
Is it also the case that copy protection on software also violates the customer's rights?
"That would all be true if Canadians didn't pay a tax on writable digital media that gets handed to the CRIA."
As a point of clarification, only about 15% of the levy goes toward the record labels. The rest goes to songwriters and performers.
I do not believe that paying the levy gives one the moral right to pirate music. Here in the USA, citizens pay for the operation of police departments, yet we are still subject to law enforcement. Law-abiding citizens being forced to pay for the wrongdoings of others is, sadly, not a Canadian invention.
"However, at the same time, it must be noted that more c90% of proceedings from CD sales go to the record labels."
For what it's worth, it's a little different down here in the US. A CD that you see in the store for US$12.50 was sold into distribution for about $8.00 -- so about a third of the price you pay goes to the channel.
You're correct that the record label collects that roughly $8.00 at which the CD is sold into the sales channel, but in most cases, 100% of that $8.00 ends up going to somebody's salary, whether they work at the CD pressing plant or they're the engineer behind the board or they're the graphic artist that did the artwork. When you phrase it in the form "sales go to the record labels" it may give the impression of going into some vault somewhere. The distribution, sales and marketing of hard goods may be inefficient, but inefficiency != evil.
"The vast majority of artistes vehemently support electronic means of music distribution over the CD method."
Interesting, I didn't know somebody'd taken a poll. Do you have a citation for that statistic? Does that count signed as well as unsigned artists? The A&R guys see so many demo CDs -- from more artists than they could possibly sign -- that I just don't see the math working here.
DVD burners are great and I know lots of folks who use them for general purpose data storage like you mention.
However, everybody I know who owns DVD X-Copy uses it to pirate (not "back up") DVDs. Likewise, everybody I know who uses Kazaa regularly, does it to download copyrighted music as an alternative to paying for it. Perhaps I'm hanging with the wrong crowd!
I think a common view is that once copyrights are extended beyond a lifetime, they become a benefit exclusively to organizations and no longer become a benefit to individuals. But, individuals benefit from longer copyright terms, as well. For example, songwriters, just like IT managers or programmers, have the same desire to raise families and provide bounties for same (and let's skip the usual silly "if they're after a profit, they're not an artist" argument; the fact remains that many artists make their living doing so). For example, if you're a songwriter or a painter, if you know that the copyright system will provide for your offpsring if you should meet an early death, then this is additional incentive for you to remain a songwriter or a painter rather than, say, becoming an investment banker. Lifetime plus seventy years looks out for you if you hit that jackpot and write that hit song at age 28, and then you are run over at a bus at age 29 with a wife and infant daughter.
Do corporations benefit from longer copyright terms as well? You betchya. But there are tons of laws which benefit corporations as well as individuals. That in itself is not enough reason to change those laws. It would strike back at those "greedy corporations," but we must consider the collateral damage to those ordinary folks who rely on their arts to survive.