CDs Want To Be Free 439
Dotnaught writes: "An article that I wrote about a new music promotion service called fightcloud.com and CD pricing in general has just gone up on Salon. And heeding the advice of Dave Winer, I also posted the full transcript of the interview on my Web log, Lot 49, for those curious about what got left on the cutting room floor." Rather than complaining that Big Recording's CDs are overpriced, it sounds like this company is simply demonstrating that music (even on physical media) just don't have to cost that much.
This probably won't make a difference (Score:2, Informative)
Since all the artists on the site are unknown, they'll never be able to reach much of an audience because the radio stations are the pretty much beholden to the recording industry will never play their music.
I really haven't followed up with Prince's attempts in directly selling to the consumer, but I don't recall hearing much from him lately. He might still be selling records, but who thinks he'd be as well-known as he is without generating lots of dollars for the recording industry first.
It's a cynical view, but it's hard to not to have it. I do applaud attempts to go it alone, but I can't help but think these guys will be gone this time next year.
wheres my $20 going? (Score:3, Informative)
CD+ Packaging + artist cut == $1.36
$20 - $1.36 == 18.64 RIAA
Re:"Free"? (Score:4, Informative)
Capital costs on the CD burner and the Hard Drive to store the master on. Paying someone to "upload" the tracks onto the server.
I'm impressed. The artists get more per disk than with a major label. Customers get more music per dollar. If they can keep their costs down and remain an ongoing, growing concern, we're all better off.
Re:NOT FREE..... (Score:2, Informative)
No, it doesn't. The recording labels out there aren't saying that it costs $18 to duplicate a CD (en masse), print jewel-case inserts and stuff everything into a package and shrink-wrap it so that you can't get into it.
Now, repeat after me: That's not what costs $18 per CD! What costs $18 per CD is the audio engineer that was paid to mix the tracks in the studio where the music was recorded; the rental time for that studio space and hi quality recording, mixing and sampling equipment; the designer that was paid to create the artwork you see on the jewel-case inserts and on the CD face; the copywriter that came up with what should be written on the inside sleeves of the jewel-case inserts; the production monkey that laid out the text + images in Quark for the jewel-case inserts. OK, so that all costs some money, right? Well, that's NOTHING compared with the cost of food, travel, housing that many recording labels provide their artists while they are recording. Some artists have VERY high demands for this ... caviar, first class plane tickets, 5 star hotels, the works. That costs money. The promotion work that is done when the artist goes on tour - that costs money: TV spots, banner ads, Ticketmaster kick-backs, deposits for venues, etc., etc. The promotion work that is done when a new CD launches: getting the artist on talk shows, on MTV - speaking of MTV, getting the new video shot for MTV, VH1, etc., etc.
Guess what, folks?!? That ALL costs money, and lots of it. So much, in fact, that if a particular artist doesn't make it BIG most record labels lose their pants. Ever heard of a record label that doesn't have a big name artist signed? No? I'm not surprised ... until a big artist is "discovered" a record label is nothing because it has NO MONEY.
There's a significant cost involved in promoting new music ... now, should you have to pay for lots of bad artists to be able to release their music?!? Maybe not, but that's the breaks. You can't really weed out the good from the mediocre before you incur all those costs ...
I'm quite tired of all these misinformed people thinking that they're paying an outrageous amount of money for a plastic disc with binary information encoded on it. WAKE UP! There's a lot more that goes on behind the scenes with the money that you're paying.
Re:wheres my $20 going? (Score:3, Informative)
Don't forget that CDs never get from the production company to the retail store directly through magic.
Count in distributor, wholesaler, and chain, then the shipping/trucking costs between, and you'll see that the RIAA does not get what's left after packaging, CD cost and cut to artist.
Re:someday they'll get a clue... (Score:3, Informative)
If I can sell a x CDs for 20 bucks, or sell 2x CDs for 10 bucks, and given that I have *some* amount of fixed cost per CD, well, I end up with more money at the end of the day at the 20 buck price point. So if I want to make money, exactly why would I lower the price?
It's extremely hard to paint the record companies as money-grubbing capitalists and foolishly missing out on money due to lost sales at the same time. Rather than totally blowing capitalism 101, stick to arguments that try to tie proposed sale prices to production costs rather than using supply/demand; it's the only way you could possibly have a point to make, and it only requires a fundamental change in philosophy on the part of most of your readers.
Re:NOT FREE..... (Score:5, Informative)
You know jack shit about the music industry, my friend. All those things are what are called RECOUPABLE EXPENSES.
When a record label advances money to an artist, or spends money in certain areas, to make, market or promote a record, the artist must pay back that money before the label begins to split the profits with the artist. Paying back that money out of record sales is called "recouping." If the record stiffs, even at the fault of the label, the artist of course owes nothing. But if the record sells some units, and the label decides to put out another record, the debt is NOT wiped clean if the artist is unrecouped. This nasty little fact is called "cross collateralization" and what that means is that if the artist makes Record Number Two for the label, but hasn't recouped from Record Number One yet, the back owed funds come out of the sales from the new record before the artist ever sees a dime from the new record. So you can see how difficult it is to get ahead...which is how a label (meaning Def Jam) would explain why Slick Rick is unrecouped after all these years and 5 albums later.
As an example, let's say the artist has an unrecouped balance of $200,000 on the day his record drops (his advance and recording budget were $150,000 and $100,000 was spent on the video for the first single, half of which is recoupable--that's $200,000). Let's say the label did its job properly and had a good four month set up on the album (set up is the amount of work that goes into a project to build awareness prior to its release), and the artist has a strong buzz in the marketplace. So pre-orders are looking good (the amount of records the retail stores ask for, based on the anticipation of sales for the release) and the label decides to ship 300,000 units initially. If the label is in the Universal family, for example, and offers a sales discount because it's a new artist, a $16.98 anticipated retail price will position this CD at $10.78 wholesale. So the label can anticipate an income initially of $3,234,000 (300,000 x $10.78). And by the way, the label feels as though it has already lost $189,000, because the full retail selling price of $17.98 would have brought the label $3,423,000 (300,000 x $11.41) and since they discounted the record one dollar, they're already losing money. Here's the ugly side of label accounting and recouping: the artist's contract stipulates that the artist's share of the back end is 12 points, which really means 12% of the retail price (less a whole bunch of stupid provisions for breakage, free goods, return reserves, and container charges, producer royalties, etc) which leaves the artist about $1 a record. That means that the artist's share of the income from one record sold at $16.98 is roughly $1. Recouping means that the artist has to pay back the money spent out of his share (which is $1 a record sold). So in order to pay back that $200,000 spent prior to the record even coming out, 200,000 units must sell.
After the initial order is shipped, the artist incurs promotional costs which the label advances to him. The independent radio promoters, video promoters, tour support, remixes, etc, are all shared expenses that come out of the artist's money. So you can see how easy it is for an artist to remain unrecouped. If he finishes his project two or three singles deep, it's easy to come into the next project already at a high negative balance. The artist is artificially unrecouped, however, because the label has made back the money it spent off the top. Let's look at our above example. Let's say the label gets paid (meaning every retail store sells every copy with no returns) for every copy of the initial 300,000 units it shipped at $10.78 a copy. And let's also assume they did not spend any additional money to sell those records (also highly unlikely). The label has made $3,234,000. The label has also recouped $200,000 from the artist for the expenses, so that $3,234,000 is almost pure profit (except for the unrecouped costs of running their business and the overhead of running their business). Meanwhile, the artist has made only $100,000 (less the artist's overhead costs). According to my calculator, that's only 3% of the share.
And the massive screwjob doesn't stop there, not by far. Labels pay royalties on 90% of sales which assumes 10% breakage, a holdover from the vinyl days. From that amount is deducted the advances and recoupable expenses such as studio time, engineers, producer, etc. However, a distributer is often given 15-30% of his albums free on which there is no royalty. Overseas sales and sales to military stores are at a greatly reduced royalty. Some Talent may be more popular overseas than in America which means they see very little royalties. If albums are returned and then sold at discount, Talent receives virtually no royalty on those sales.
Apples and oranges (Score:3, Informative)
Re:Apples and oranges (Score:3, Informative)
The linear notes for Nirvana's "Bleach" say that it was recorded for $400. Personally, it sounds pretty good to me; you can do a lot with a little equipment and a lot of knowledge and time. Many recording majors I know (at UMBC) use their studio project time to record their band. That means it cost them _nothing_, and they got to use some damn nice equipment. Plus, if they ever go back and decide the sound could use improvement, they've got the masters, and can go for it.
The Mountain Goat's "All Hail West Texas" is one singer/guitarist recorded on a _defective_ Marantz, which produces an interesting effect. The album is amazing, and it probably cost nothing to record; the value is in the songs.
Re:NOT FREE..... (Score:4, Informative)
So you either have:
1) way to damn many middlemen--in which case you need to improve your efficiency so that you can compete on price, or
2)a few people who are excessively greedy (and potentially fixing prices with the other labels, since everyone seems to have the same range of hyperinflated pricing).
Think hard: do the artists at fightcloud have no costs to record and engineer their music? Is it really likely that the costs of a good amateur production studio are so infinitesimally smaller than a professional studio? Do they have no gigging costs? No artwork costs? Keep in mind, the "professional" releases can spread their costs over millions of CDs whereas the amateurs are lucky to spread them over thousands--you'd expect the amateur productions to have those costs make up a BIGGER percentage of the per CD cost, even if the total costs are less.
Finally, you need to go re-read Courtney Love's essay about who bears the production costs with the majors--it comes out of the artist's royalties, which are a small fraction of that $18. That's true for big artists and small on the major labels; it's not like the label is paying that artist extra specially to stick around in most cases.
Follow the Money (Score:2, Informative)
Re:NOT FREE..... (Score:4, Informative)
I'm indie: see URL above. I worked with Ampcast to help them set up their CD program and I have a pretty good idea of how much CDs really cost physically. Mine go for $12: that is with a color four-panel two-sided insert, a color but one-sided tray liner, Red Book uncompressed CD master from high-resolution originals: in other words, very very near to major-label technical quality, and in some ways (sound quality) substantially better than the average major label release. And that is why I set my price so a couple bucks go to the artist, rather than setting it so that I get nothing.
It'll cost you about 8$ to 10$ per CD to run a business that sustains itself producing CDs that are like major label releases. If you're good with having no artwork, or God forbid 'CDs' burned off mp3s and the like, you should be able to bring them in for much cheaper than that.
Note, however, that the RIAA releases tend to be mass production- even 1000 is in its way mass production- and it sure as hell costs them less than $8 to cover everything involved. There's a lot of people gobbling caviar and Chateau Lafite in that business. Many are label people. Some are artists. For the artists, it means they will never see a royalty check so long as they live- but so long as they're allowed, they'll live high as if they were going to get paid. It's relatively cheap to give an artist a limo ride rather than pay them what you REALLY owe them, and if you own the limo company, hey- even cheaper. The whole industry is a big con.
The Big Difference (Score:5, Informative)
You can charge whatever the market will bear. So, game producers charge $50 (at least for a few months) for a new game.
How is that different from CDs? Well, the game producers didn't have to settle with the FTC because they were conspiring to inflate the price of CDs [cnn.com]. Retailers wanted to sell them cheaper, but the middle-men wouldn't let them!
Even with the antitrust allegations settled, I wouldn't be surprised if this kind of crap still goes on. The RIAA members are effectively a monopoly on the music industry. As a result, the market isn't dictating what price a CD will go for, they are.
Recording costs (Score:1, Informative)
Thomas Pynchon's _Crying of Lot 49_ (Score:3, Informative)
For those interesting in a real headtrip, try to plow your way through Pynchon's Gravity's Rainbow [themodernword.com].
Pynchon is an interesting hermit [who2.com]. He didn't accept his award for Gravity's Rainbow [google.com].
Instead, he sent Irwin Corey [hyperarts.com].
(BTW, You'll enjoy GR a lot more if you read it with a companion [amazon.com].)
Re:Apples and oranges (Score:2, Informative)
From fightcloud, the artist gets $1 (or whatever) for selling the CD, and from that they pay for the studio and marketing and hopefully make a profit some day.
From the "normal" labels, the artist gets $.10 to $.50 per cd sold (from the article), and from that gets to pay the label back for cd production, studio costs, and marketing.
So, basically, here the artist gets twice as much, and has to pay for 2 of the 3 costs of production (studio/marketing), with the labels, they get less money and have to pay for everything. Read Courtney Love's article sometime. She claims that unless many, many cds are sold, the artist ends up owing the label a lot of money.
Re:someday they'll get a clue... (Score:3, Informative)
Not quite, the only way to guarantee the same profit is double their margins, doubling the price will more than double their profit. Economically, if demand is falling for something, the price should be falling to match the demand. It follows that if you're not selling enough of a product at a certain price point, you should drop your price to make it more attractive, thus increasing demand.
Economically the price should do whatever the firm wants it to do. The firm will only drop their price if the Price elasticity of demand indicates it's worth their while. The 'Law of Supply and Demand' you cite really only applies in the long run and in competitive industries where smaller players are priced out or starved out.
Economics is not quite as simple as the Supply and Demand curve.
Useful tool for calculating a musicians "payout" (Score:2, Informative)
The Royalty Calculator [mosesavalon.com]
An amazing look at the way the recording industry stiffs its artists.