Where your CD money goes

Post by **miftah** » Wed Oct 13, 2004 3:35 pm

Price War: Does a CD have to cost $15.99?

Major labels insist that the low prices mass retailers such as Wal-Mart and Best Buy demand are impossible for them to achieve. But Best Buy senior vice president Gary Arnold counters, "The record industry needs to refine their business models, because the consumer is the ultimate arbitrator. And the consumer feels music isn't properly priced." Labels point to roster cuts and layoffs as evidence that they can't sell CDs cheaper.

This breakdown of the cost of a typical major-label release by the independent market-research firm Almighty Institute of Music Retail shows where the money goes for a new album with a list price of $15.99.

$0.17 Musicians' unions
$0.80 Packaging/manufacturing
$0.82 Publishing royalties
$0.80 Retail profit
$0.90 Distribution
$1.60 Artists' royalties
$1.70 Label profit
$2.40 Marketing/promotion
$2.91 Label overhead
$3.89 Retail overhead

Back in the days when I was a music journo, I used to get a stack of anywhere to 10-20 free CDs A DAY. And if you think I listened to all of them, you're crazy. The truth is, label overhead and marketing/promotion are increasingly over-budgeted especially on the bigger sellers.

The evidence for this lays in the whole ramp-up of mp3s and the internet. You find most people are aware of release dates and its little to do with any advertising or music press. Most releases can be purchased bootleg in major cities before their release date. So no, you don't need a major marketing push on things like Destiny's Child or Jay-Z because most people know already. But paradoxically enough, the marketing budgets for those releases are always massive compared to the new artists.

It seems so improbable that the music industry can't recognize that complimentary copies of CDs needn't go out in the standard format. If only there was some way of distributing text materials and music without incurring some sort of overhead on them. Something that required no actual material product. Hmmm...

The other aspect is that they refuse to acknowledge that the consumer demand is less than the price point. If they can't afford to do it at these prices, then perhaps they should reevaluate their business model. Every other industry in the world has to. Why are they an exception?

Alliat · Post by **Alliat** » Thu Oct 14, 2004 3:35 am

heh, $15.99 is a pretty good price for a CD here... Specialy when we're talking about my kind of music, then the CDs are often priced as high as $50. But a part of that high price can be traced to the fact that double CD albums are more frequent in Drum 'n Bass.

Apple has been a pioneer in getting rid of the material products offering variety of good quality MP3s legaly for 0.99$ a piece. Check out the program iTunes if you're interested.

Post by **miftah** » Thu Oct 14, 2004 9:47 am

I've been all over iTunes for a few things. They often have some exclusive tracks you can't even buy on a regular CD and its nice for that. But oddly enough, sometimes a double disc set which is sold conventionally for a single disc price will be priced for a double disc on iTunes (usually $5-10 more than the CD).

Post by **bio** » Thu Oct 14, 2004 2:59 pm

There's a facinating article at MSNBC about online music.

My favorite part is this:

So far, 99 cents for singles is holding firm, but at the labels' insistence, some albums now cost more than the standard $9.99. The idea, one insider explained to me, is to uphold the "perceived value" of music.

Spare me... you greedy bastards!

Post by **miftah** » Thu Oct 14, 2004 5:37 pm

So far, 99 cents for singles is holding firm, but at the labels' insistence, some albums now cost more than the standard $9.99. The idea, one insider explained to me, is to uphold the "perceived value" of music.

Yeah, and guess who those are. Established acts who have more than recouped. Like Dylan, the Stones and Floyd. The ones who have sold their cost and expected profit margins about a thousand times over. Next, you can guess who I'm still downloading for free.

Buy that new Interpol album? Sure. Mogwai has a new album out? I'm going to the local independent shop. Yeah Yeah Yeahs have exclusive tracks on iTunes? I'm there. Another fucking remaster of Floyd's exhausted catalogue? Why bother?

Moxie · Post by **Moxie** » Thu Oct 21, 2004 3:19 pm

Things are being done to try and correct that situation.

Rocketdork · Post by **Rocketdork** » Thu Oct 21, 2004 7:02 pm

I have to commend Wal-Mart on their negotiation tactics, even if they are a bit heavy handed, however, I'll never by a CD from them.

Their position makes it easy for them to do this, but do you really think this will make it down to your favorite record shop? I think Wally World will just corner the market on Music sales. If the record companies don't pass this "deal" on to everyone, you can fully expect that CD's will become the sanitary items that Sam Walton wants them to be. No more cutting edge lyrics that have swear words or progressive ideas in them. Do you ever think that you'll see a Mr. Moth CD on a Wal-Mart shelf?

Good old down home boys that believe swearing and sex are evil will rule the day...its not a good thing.

Post by **bio** » Thu Oct 21, 2004 7:45 pm

Wall*Mart also refuses to sell albums with objectional lyrics and/or content.

You won't find a single album with a parental advisory sticker in stock.

I guess we're not bright enough to decide what we want to hear... they do it for us.

Moxie · Post by **Moxie** » Fri Oct 22, 2004 3:24 pm

True, they don't carry a lot of music. But I'm not going to condemn that choice, it's theirs to make.

I do think it's going to help change the face of the music industry. It's changing whether the big-wigs want it to or not, and this is just one more rock added to the pile.