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Music Media The Almighty Buck

Must a CD Cost $15.99? 586

Posted by kdawson
from the selling-partner-who-does-not-care dept.
scionite0 sends us to Rolling Stone for an in-depth article on Wal-Mart and the music business. Wal-Mart is the largest music retailer selling "an estimated one out of every five major-label albums" in the US. Wal-Mart willingly loses money selling CDs for less than $10 in order to draw customers into the store, but they are tired of taking a loss on CDs. The mega-retailer is telling the major record labels to lower the price of CDs or risk losing retail space to DVDs and video games. (Scroll to the bottom of the article for a breakdown of where exactly the money goes on a $15.99 album sale.) "[A Wal-Mart spokesman said:] '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.' [While music executives are quoted:] 'While Wal-Mart represents nearly twenty percent of major-label music sales, music represents only about two percent of Wal-Mart's total sales. If they got out of selling music, it would mean nothing to them. This keeps me awake at night.' [And another:] 'Wal-Mart has no long-term care for an individual artist or marketing plan, unlike the specialty stores, which were a real business partner. At Wal-Mart, we're a commodity and have to fight for shelf space like Colgate fights for shelf space.'"
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Must a CD Cost $15.99?

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  • Wait (Score:5, Funny)

    by Anonymous Coward on Tuesday March 25, 2008 @03:41PM (#22861690)
    I thought all you guys stole all your music.
    • Re:Wait (Score:5, Insightful)

      by sm62704 (957197) on Tuesday March 25, 2008 @04:22PM (#22862260) Journal
      I thought all you guys stole all your music.

      Well, stealing music [wikipedia.org] is only a misdemeanor with a few hundred dollar fine if you get caught. copyright infringement [uncyclopedia.org] is a civil matter that can cost thousands upon thousands if you get caught.

      So is it any wonder that those guys steal it rather than infringe copyright?

      Myself, I'd rather buy indie music on CD from the bands themselves. $15.99? Hell, $10 is too much, most of the time they'll sell me two or three CDs for ten bucks. And it cost them a hell of a lot more to get them recorded, stamped, and packaged than it costs the major labels.

      No matter what you think about WalMart, they're in the right on this one. As evil as WalMart may be, the major record labels are far more evil.

      -mcgrew
      • Re:Wait (Score:5, Interesting)

        by Urza9814 (883915) on Tuesday March 25, 2008 @05:27PM (#22863112)
        Yea. I was part of an indie band myself. We got 100 discs printed off, full liner notes and everything and shipped to us for under $250. If anyone in their basement can pump out CDs for $2.50 a piece, no reason big name artists couldn't do it cheaper. Hell, had we managed to sell them for $10 each, it woulda only taken 700 copies to completely pay for all our equipment. We put out two albums, so that's 350 of each. Probably coulda done that easy had we cared.

        So let's see: assuming that same $7.50 profit on each album, and we'll say you wanna make at least $50,000 a year (which seems more than reasonable to me) and we'll say you put out one album every 3 years. That's 20,000 copies of each. Now, if you can't sell 20,000 copies of an album, you can't really expect to make it big. Or you could, ya know, have another job. Everyone in my band had other jobs, we still played shows here and there, and we managed two albums in about three years. For a better example, all the members of the doom metal band My Dying Bride have other jobs, and they've put out 13 albums in 14 years and tour other countries and continents. It's possible. As I said, if a bunch of kids in their basement can do it, why can't the professionals?
        • Re: (Score:3, Insightful)

          by mattack2 (1165421)
          But commercial CDs are pressed. The CDs "pumped out in the basement" are burned CDs.
          • Re:Wait (Score:5, Informative)

            by Urza9814 (883915) on Tuesday March 25, 2008 @06:29PM (#22863750)
            Hm. I thought we did get pressed CDs, but yea, you're right, they were burned. But, from the same place we got ours (DiskFaktory.com), you can get 1000 pressed CDs for $1.17 each...so I think my estimate of $2.50 each is still pretty good.
            • Re: (Score:3, Interesting)

              by prestomation (583502)
              I'm in a small indie band as well. A few years ago we did a cd ourselves. Simple thin jewel cases, black printed labels on burned cds with a 2sided color insert. We figured they cost about $2.50 each including cds, labels, cases, and ink. Last year, we did another project(with diskmakers.com), 4-panel full color insert, reverse color inside, inside back color insert, 3-color cd, glass mastered, at a quantity of 1000, they came out to about $1.80 a disc. We can reorder for cheaper now because we can forg
        • Re:Wait (Score:5, Funny)

          by Anonymous Coward on Tuesday March 25, 2008 @07:41PM (#22864402)
          As I said, if a bunch of kids in their basement can do it, why can't the professionals?

          Dont you know how much it costs to have a private jet, custom 3 bus caravan (with one bus just for the prima-donna lead guitarists' guitar collection) let alone the amount of money needed to keep the drummers coke addiction fueled? The Bassist's alcohol problem it's self costs $7500.00 a show and that does not count bribing him out of jail after every gig.

          Being a REAL band is expensive. It costs at least $45,000 a month just to keep the drugs and booze flowing. The skanky hooker expense is close to that unless you are a screamo band, then you get away with $60.00 a night. (those guys like dirty ho's!

          It costs at least $100,000 a month to take care of the artists and keep them artistic. Many bands like Metallica need another $1.2mil monthly just to think about creating, or at least re-recording their old junk so they dont sound like complete tools on stage when they cant remember the words to "sandman"

          (Yes I am bitter that the lazy assholes dont even try anymore at the $250.00 a ticket raping prices)
          • Re:Wait (Score:4, Insightful)

            by daviddennis (10926) <david@amazing.com> on Tuesday March 25, 2008 @11:57PM (#22865984) Homepage
            All very reasonable costs, but if they're on the road, they are selling concert tickets, and if they are selling concert tickets they are making more than enough money to cover these expenses and far more.

            If you have one concert a month and it sells out a 15,000 seat venue at $50 a ticket you're grossing $750,000 a month. I don't know what the venue deal is like but I'm sure you get to keep at least half the money and clearly $100,000 a month is going to be money well spent, and I'll bet most bands could do a concert a week, not a concert a month.

            They don't need a dime from CD sales to cover any of that.

            What strikes me is that if you go with Wal*Mart, a lot of those expenses vanish - Wal*Mart is going to buy these CDs for $9.72 to sell them at $9.72. So you should not have to pay distribution fees ($0.90), retailer profit ($0.80) or retailer overhead ($3.89). The total of that is $5.59. $15.99 - $5.59 = $10.40.

            Marketing/Promotion costs $ 2.40 per CD? That seems like an awful lot. I would think that if Wal*Mart automatically gave the $9.72 CDs good positioning in the store, you would not have to pay any of that. These are going to be acts with name recognition so no promotion should be necessary. So your total costs go down to $ 8 a CD and you are actually making a respectable profit on $9.72, especially since $1.70 of that $ 8 is "Label profit" already.

            So if you can sell a CD for $ 9.72 and it costs you (8-1.70) to make, then you're actually making a profit of $3.42, which is actually more than what you make on that $ 15.99 retail price.

            I think Wal*Mart's position is very reasonable.

            But in the mean time, the labels might consider that by not dropping prices they charge independents they have killed the independents. If they want to not have to deal with ruthless, relentless Wal*Mart, selling to independents at the same price they sell to Wal*Mart would help them exist. Then promotion consists of giving independents a few extra copies of albums to keep for themselves and recommend to customers. No way something like that costs $2.40 per CD.

            If people see the same CD they could buy for $15.99 for $9.99 at Wal*Mart, they are going to buy at Wal*Mart. But I'll bet that for a lot of people if they could buy for $11.99 at an independent or $9.99 at Wal*Mart they would go for the independent because they like going there. The independent doesn't have to beat Wal*Mart, it just has to be somewhat competitive and offer a more pleasant buying experience. If you could see labels selling the music for $9, giving Wal*Mart $1 in profit and the independents $3, then that would be fine, and people would start buying at independent stores again.

            D
        • Re:Wait (Score:5, Insightful)

          by Anonymous Coward on Tuesday March 25, 2008 @07:45PM (#22864438)

          As I said, if a bunch of kids in their basement can do it, why can't the professionals?


          Because you guys probably had talent. The pros have to spend megabucks on marketing to sell crap.
        • by Anonymous Coward on Tuesday March 25, 2008 @08:56PM (#22864970)

          You're not really making $7.50/unit, because you're not accounting for production, distribution and marketing. If you leave those out, then of course it'll look cheap.

          And don't tell me that you can do your own production, distirbution and marketing, because that just misses the point: of course you can do those things, cheaper than the labels would, and maybe even decently well (and I certainly think more musicians ought to do it); but the numbers you're giving don't account for the cost of the time you spent, unless your time is free. You didn't make $7.50 of profit per unit; you made $7.50 minus the value of the time (and equipment, materials, etc.) that you spent on making and selling your CDs.

          Yes, I'm absolutely sure many people can make more money as indies than with a major label. But come on, be honest with the accounting.

          • " You're not really making $7.50/unit, because you're not accounting for production, distribution and marketing. If you leave those out, then of course it'll look cheap. "

            Doesn't matter. With a valid business model, those things are inexpensive and mostly pay for themselves.

            There's a reason business, you know, invests into capital expenditures. When you invest in distribution or marketing, your paying someone to help you sell more units; because there is still room between the vast per-unit profit you are making and the point where additional capital returns generate negative total income.

            If it wasn't driving sales, RIAA labels wouldn't employ top-notch production teams in building albums. They'd record them on an MP3 camera phone and press that directly to disk. And if audiences didn't buy albums based on super-expensive cover artwork, a label would release it with low-cost artwork; or none at all, if it could get away.

            And distribution? Perhaps distributors would consider buying CDs if they thought they represented a good value; i.e. they could sell these "CD" things for more than they purchased them. Without, that is, a marketing subsidy.

            Not to mention that each level in the distribution chain tends not to settle for less than 43% net income, particularly retailers.

            Basically, if the per-unit cost(meaning the cost to press that CD, print the label, an put it in a case with a full-color cardboard sleeve on it) is still _at most_ 30-40% of MSRP ($6.40); if they spend a _ton_ of money on it. At most, the unit cost of manufacturing is in the $2.50 range (that how much it takes to make 100!). At 50,000 level, and particularly the 500,000 level, these things become incredibly cheap. The total cost curve starts to flatten out. You'd be shocked at how low it is below the retail MSRP, because at those volumes (500,000-millions) the revenue streams become bankable. The percentage of unit costs that is fixed cost approaches nearly nil, and it becomes dead easy to borrow money (find an institution to invest in you) to finance production. Particularly if you have most of the equipment.

            Lets be generous, and say that comes to $1.25. That's HALF what it takes to make 100. That's more than what it takes to make & package a foam shoe. It's probably around the price of cheap perfume products. And is certainly a great deal more than some generic pharmaceutical products, and those two categories of product have FDA requirements and excessive, tamperproof packaging. Lets be more generous, claim that retails are really gouging them, and paying "only" $4.80. Walmart claims to make a loss at $10.00; but who knows, maybe that includes some funky numbers. That means they make "only"$3.55 a CD, which is then blown on production costs, advertising.

            What that means if they break even, or god forbid, loose money, is fully 3/4s of the money "made" on that album, by the label, is spent on marketing and and bribing distributors to take it. If you had product that was actually good enough to sell by itself; or, god forbid, a product for which a concert tour represented adequate marketing, that 3/4 would be all profit.

            There's really only 2 scenarios. Either the RIAA labels are making obscene profits (50-90% of MSRP, depending upon volume), or the shit they put out is so bad that it is effectively unsellable without an expensive campaign to dress it up as "not shit".

            Given the RIAA label's worsening financial state, I'd guess its the latter. It's too bloody expensive, and society as a whole thinks that those resources should be better spent on something else. Effectively, at $15.99 an album, music is too expensive for the market to want to buy it. Particularly when the market becomes more and more aware that there are distribution media for which the unit-cost is 0 (electronic).
      • Re:Wait (Score:5, Insightful)

        by dontmakemethink (1186169) on Tuesday March 25, 2008 @05:35PM (#22863222)

        As an indie musician and producer, I can assure you that successful indie bands do not sell CD's for $10, much less several. Stage-side CD sales should be for $20 or more, partly because of the opportunity to get them signed by the band, also because it's an inelastic demand - anyone willing to spend $10 on a CD at a show will typically spend $20, so selling for less does not sell more copies. It's only when there is a selection of 100's of bands that purse strings tighten.

        I feel compelled to reply because I don't want folks to think they can talk any musician down to $10 on a CD. Some you can, but they probably recorded it in their garage.

        And while it does cost indies more per CD to manufacture them, major labels typically have much higher production budgets. I produce for between $3k-$8k, majors are typically $50k and up. There are many hits on the radio which cost over $1M for just the one song. And if it flops, the artist(s) gets the bill!

        Ironically, the least expensive component of a CD is pressing the content, the most expensive is printing the artwork. That's big motivation to go the iTunes route.

        • Re: (Score:3, Insightful)

          by atrizzah (532135)
          I don't know if I buy your logic on $20 pricing. That might work IF the band is the only act, and they're only selling one CD that contains most of the material they just played. But most of the time when I'm checking out a band I've never heard of, I've got at most 30 bucks in my pocket, and often times, the band has 4 CD's on the shelf for $20. Even if I had the cash, there's no way I'm gonna blow $80 on some unknown band's back catalog. So I pick a random one, which may or may not be representative o
      • Re:Wait (Score:5, Insightful)

        by h3llfish (663057) on Tuesday March 25, 2008 @06:07PM (#22863548)
        I agree that Walmart is the "hero" of this particular story, but to me, the real villain is the record buying public. We can't ask firms to not try to make a profit... that's communism! We needed to stand up to the major labels a long time ago by simply not buying their over-priced crap. But sadly, most of us are just too dumb to know better.

        That includes me, back in my teenage years, when I would spend darn near every cent that I had on "content", either as movies or CDs. Music meant so much to me back then, I would have paid 40 bucks a CD to get the latest Nirvana album if I had to. Thank the Lords of Cobol that today's teens have much better access to the true alternatives.

        Marketing (aka propaganda) is very powerful, especially on those who have weak or poorly developed egos (like teens). We need to do a better job as a culture of teaching young people how to spot it (not hard, it's ubiquitous), and how to spot the fallacious logic and appeals to insecurities. The vast majority of the time, marketing is trying to get you to do something that is not in your best interest... like pay 20 bucks for the new Nickleback CD! Ugh!
        • by sentientbrendan (316150) on Tuesday March 25, 2008 @06:53PM (#22863978)
          >I agree that Walmart is the "hero" of this particular story, but to me, the real villain is the record buying public.

          How is Walmart the hero? This is another story in Walmart's long history of pushing competitors out of the marketplace and then squeezing suppliers. Walmart is the ultimate middleman in that they have more leverage than either producers, consumers, or even their own workers. That said, I don't even really think that Walmart is a villain exactly (most of the time), they are just an extremely well run business optimizing their profits.

          What I think is very wrong is the interpretation that anyone that screws the record industry, the movie industry, or the software industry is somehow a hero. Somehow the slashdot crowd has gotten the impression that these industries are composed completely of useless middlemen who don't deserve to make any profit from their work.

          However, this is less and less true since now artists can sell their work fairly independently. This was probably never true with the software industry, where even smaller publishers like Stardock can make it onto Walmart shelves, and the movie industry where actors, writers and directors all get paid pretty handsomely.

          The truth is that you can't take money out of the "record industries" pockets without taking money out of artists pockets, especially now that artists have access to smaller or self created labels and the ability to sell their stuff over the internet.

          Personally, I buy products at the lowest price I can get them, but I don't go around cheering when the producers get shortchanged.
          • by h3llfish (663057) on Tuesday March 25, 2008 @07:23PM (#22864224)
            Walmart is the hero in this story because they are trying to drive down prices. Now, when they used the same strong-arm tactics on the Rubbermaid corporation, it resulted in American jobs going to China. That makes them not the hero in that one, to me. The US economy was made weaker by the job loss, and the increase in the already staggering national trade deficit.

            The music industry is different. Our pop music is not going to be made more cheaply in China any time soon (I hope). And while market forces would normally drive the price of a good down, with music, all CDs are not interchangeable. If someone makes a cheaper light bulb that's just as good as other bulbs, I switch to the cheaper ones. CDs don't work that way, mostly due to the amazing triumph of propaganda.

            Because of this tremendous brand loyalty (people get tattoos of their favorite rockbands... anyone ever get a tattoo of their favorite soap?), the price is pretty high. Competitive market forces have not driven the price down, despite the fact that the cost to produce the product has gone down. Milton Freidman is spinning in his grave!

            Further, I just don't agree with your statement that it's impossible to force record companies to take a smaller chunk of the pie without also shafting artists. The artists have been getting shafted all along, unless they're at the very top. The price breakdown in TFA shows the artist getting $1.60 in royalties (80 cents more if they wrote the song too). That's misleading. All artists do not get the same share of the royalties. Plus, the money that artists do get, they often have to give right back to pay for the cost of recording the album. Here's an article from 2000 where Courtney Love talks about how artists get shafted by record companies. In know, she's a train wreck, but she does have experience dealing with record companies.

            http://archive.salon.com/tech/feature/2000/06/14/love/print.html [salon.com]

            And besides, TFA says that the record company gets $1.70 Label profit, and $2.91 Label overhead - over and above the cost of marketing, producing and distributing. What is label overhead? And why is it way more than the artist gets, even in a best case scenario?
          • Re: (Score:3, Insightful)

            by big_paul76 (1123489)
            "What I think is very wrong is the interpretation that anyone that screws the record industry, the movie industry, or the software industry is somehow a hero. Somehow the slashdot crowd has gotten the impression that these industries are composed completely of useless middlemen who don't deserve to make any profit from their work."

            Well, I can't speak for the slashdot crowd, whoever that is, but, when an industry believes that a certain price per unit is guaranteed to them in the constitution or something, I
        • Re:Wait (Score:4, Insightful)

          by ScrewMaster (602015) on Tuesday March 25, 2008 @08:07PM (#22864614)
          The thing here is that the studios were, for decades, accustomed to dealing with record stores and other relatively small-time operators who could be pressured successfully. Now that the bulk of music sales are through two channels (Wal-Mart and iTunes) which are not controlled by or in any way beholden to the music companies, they're finding themselves in a difficult position. We consumers don't have a collective voice loud enough to be heard, smaller brick-and-mortar stores and chains have no power ... but the likes of Wal-Mart and Steve Jobs have put the fear of God into the music outfits.

          That's probably a good thing. Every king needs to be toppled from his throne now and then. It's good for the rest of us. Little rough on the kings, I suppose, but nobody cares much about them anyway.
          • Re: (Score:3, Insightful)

            by h3llfish (663057)
            All good points. It's interesting how the major labels have been losing their monopoly because of two separate music distribution revolutions: the p2p revolution, and the walmart/box big retailer revolution. The latter turned out to be not really a big deal. TFA is from 2004, and CD prices have not dropped, not like Walmart was perhaps hoping. But the p2p thing - that's been a real bitch for them. Couldn't happen to a nicer bunch.

            If anything, I wonder if the big box retailers haven't helped the 4 ma
    • Re:Wait (Score:5, Interesting)

      by Technician (215283) on Tuesday March 25, 2008 @07:40PM (#22864386)
      I thought all you guys stole all your music.

      In some locations, where Tower Records and other retailers are gone, it's Wal * Mart or Wal * Mart. Unless you look the other way while I borrow a loaded iPod, there are few options for kids without credit cards. Schoolyard trading is now the de-facto established method of filling an iPod. I know. I have 2 teens at home. The RIAA waiting till they are in college to educate them is a big mistake. By then they already know where the good music comes from. Something needs to be done to attract younger shoppers. Shutting them out by closing doors and forcing stupid pricing is not the way. Less than 10 CD's for a C note doesn't happen to someone with a paper route. That money is for new headphones, better iPod, the movies and other social activities.

      You may criticize me for not stopping it. Other than banning music players, there isn't much to be done when the kids visit friends houses. They may be heavily monitored online to prevent a RIAA lawsuit for making available, but it's hard for them to see what goes on in the friends home. Throttled P-P was able to be monitored. The Comcast throtteling is a blessing for parents. Media Sentry can't download anything to prove it is really a RIAA property. Thanks Comcast. The only downer is I have to use somebody's generosity for the latest Ubuntu ISO and am unable to provide it on Bittorrent. Thank goodness Portland State University has a fat pipe. Thanks guys!

      A 30 Gig iPod transfer is a little harder to catch than a torrent and only takes about 30 minutes. These kids aren't dumb. They know how to slide into the shadows out of view. The RIAA isn't making P-P go away. It's returning to sneakernet. In spite of the sneakernet, P-P seems to have little decline. Too bad they haven't figured out the product is too expensive for their intended market.
  • 2004? (Score:5, Insightful)

    by DigitalisAkujin (846133) on Tuesday March 25, 2008 @03:42PM (#22861696) Homepage
    Hardly news considering the article was posted on Oct 12th, 2004!

    Who the hell approved this?
    • Re:2004? (Score:5, Funny)

      by night_flyer (453866) on Tuesday March 25, 2008 @03:44PM (#22861732) Homepage
      Take it easy on him... he's a slow reader
    • Re:2004? (Score:5, Insightful)

      by The-Bus (138060) on Tuesday March 25, 2008 @04:00PM (#22861946)
      Well, it's been brought up again recently [yahoo.com].

      All Wal-Mart needs to succeed with this is to have one record company break off and decide to join them and have $5 to $10 CDs. Which brings me to this point:

      Maas referenced the DVD business as a model for tiered pricing. "(It) has been around for years and has worked very well," he said.
      DVDs weren't always so dirt cheap. Aside from dot-com era startups selling DVDs for $1, DVD prices were extremely high for a long time. Even in 2000, it was difficult to find a lot of DVDs for much under $15-$20 at your big-box discount stores like Best Buy, etc. I remember reading an article around that time that one of the executives at Warner Bros. wanted to make a DVD an impulse buy, with a price matching that of a magazine ($6 or so). At the time, it sounded insane. A few years later, it was a reality: bins of $5 titles at Wal-Mart. Two-for-$5 titles on Black Friday. Even at corner drugstores, $10 DVDs.

      Record companies have done this. They usually repackage artists into a new "best of" and sell it for $11 or less. And Best Buy has had new releases of artists for $7 and below for many years, although that's usually limited to a single week and a handful of new untested artists.

      If one of the majors breaks off and starts offering discs at below-iTunes prices, the others will have to follow. They can still follow what they've been doing by mirrorring the DVD market: sell the basic CD for peanuts, sell the enhanced CD+DVD with a t-shirt or a poster or more tracks for $20.
      • Re:2004? (Score:5, Interesting)

        by MrAnnoyanceToYou (654053) <dylan.dylanbrams@com> on Tuesday March 25, 2008 @04:18PM (#22862218) Homepage Journal
        The really interesting thing about those two articles in tandem is that the quotes go from Wal-Mart being 10% of the record industry's business to 20% in three or four years.

        Can anyone say, "Vlasic" [fastcompany.com]?
      • Re:2004? (Score:5, Interesting)

        by Maestro4k (707634) on Tuesday March 25, 2008 @04:28PM (#22862336) Journal

        I remember reading an article around that time that one of the executives at Warner Bros. wanted to make a DVD an impulse buy, with a price matching that of a magazine ($6 or so). At the time, it sounded insane. A few years later, it was a reality: bins of $5 titles at Wal-Mart. Two-for-$5 titles on Black Friday. Even at corner drugstores, $10 DVDs.

        I was working at a Wal-mart back when they introduced the $5.50 DVDs (I think that's the price they were at first, I may have it confused with the current price though). There was an article in the company newsletter about it and according to that this was Wal-mart's idea. One of the buyers at HQ got the idea, and managed to convince a studio or two to go along with it. Once it was introduced and they started selling like hotcakes the other studios very quickly decided to jump on the bandwagon, and the rest is history.

        Personally I'm glad Wal-mart's putting pressure on the record labels, there's a lot of inefficiency in how they do things. I'm quite certain they could get that price down to around $10 pretty easily if they wanted to. It's really hard to believe that it costs more to produce a CD than it does to produce a DVD when movies cost a hell of a lot more to make. The record companies don't even want to lower the pricing on back catalog CDs, ones where they long ago recouped all investment they made in the actual production and marketing of it.

        One thing I thought of: if Wal-mart succeeds in this it should lower wholesale prices for everyone, including the mom and pop record stores. Wal-mart may still get them a bit cheaper (after all they buy in rather large volumes), but if CDs come down to close to $10 wholesale it'll be easier for the small stores to compete. Basically everyone wins -- except the record companies and probably the artists. I'm sure they'll find some way to screw the artists over.

        • Re:2004? (Score:5, Interesting)

          by hedwards (940851) on Tuesday March 25, 2008 @05:06PM (#22862858)
          If you look closely, there's quite a bit of fat in the figures that they cited as a reason to price it at $15.99.

          For example $3.89 for retail overhead, and $2.91 for label overhead. Sure that's cute and cuddly and numbers, but part of business is finding ways of maximizing efficiency. The implication that those are constant costs which can't be affected by the parties involved is just foolhardy. I'd be shocked if Walmart can't find a way of shrinking that retail overhead from there to something lower.

          $2.40 for marketing and promotion wouldn't be important if the music wasn't mixed in with so much garbage. Believe it or not, but there is still some mainstream music worth listening to, it's just not easy to find via adverts and radio play. Wading through all the crap to get to the stuff with actual artistry involved is far more difficult than it should be.

          Provide the users with reasonable exposure via TV, radio and the net and the consumers will decide if they like it. Playing the same damn 10 tracks every hour isn't something that cuts it. Expecting me to pay $2.40 per album for the labels to artificially restrict what I have access is silly at best. Word of mouth is free, and routinely provides better results anyways.

          Or better yet, provide a proper buffet style subscription. Sort of like the playsforsure plan, pay a reasonable monthly fee and listen to anything and everything, with the tracks expiring when the person stops paying. Having access doesn't necessarily mean that a person isn't going to value it enough to buy it. Plus opt-in anonymous stat collection ought to be able to do a better job of figuring out what people actually like than a bunch of execs in suits. Even with napster, I was willing to pay for the CDs because they had better sound quality and I could be sure that they were tagged properly. I recall my copy of Sweet Home Alabama was tagged as being by CCR.

          I'm terribly skeptical that the musicians are being paid $1.70 per disc. If you include mega stars, mega star perks and things like that, it's possibly accurate, but how about providing the groups with the money directly and require them to pay for the perks themselves. Seems like a much better incentive for them to decide whether or not they need the excessive stuff.
          • Re:2004? (Score:4, Insightful)

            by ProppaT (557551) on Tuesday March 25, 2008 @07:19PM (#22864184) Homepage
            I would like to add that that $2.40 per album marketing can be figured something like this:

            Record label sends out 5k-10k copies of this cd to every radiostation, music store, and website under the sun to try and get exposure. The MSRP of the cd is $18.99 which, in the label's eye means they just spent $94.95k-$189.9k on marketing. Do the math. If they send out 5k discs, that means that a cd that sells around 250k copies would have had around $2.50 in "marketing" spent on it. There is actually no marketing involved on most of these releases except for the major mainstream ones. This is one of the reasons you constantly hear these horror stories of bands putting out albums and not making a red cent off of them. The contracts are padded with so much absurdity like this it's asinine.
        • Re:2004? (Score:4, Interesting)

          by wumingzi (67100) on Tuesday March 25, 2008 @06:05PM (#22863526) Homepage Journal
          It's really hard to believe that it costs more to produce a CD than it does to produce a DVD when movies cost a hell of a lot more to make.

          Yeah and no.

          Obviously the manufacturing cost of a DVD is higher than a CD. That's obvious. When you consider that a CD needs to be recorded, mixed, etc. while a DVD needs five people to sit in a very expensive room in Los Angeles doing color correction for 6 weeks, you may be getting close to a push on the production costs. How the beancounters see the respective products is night and day tho'

          In the film world, the number everyone pays attention to is the North American box office gross. And by "everyone" I don't mean fans/freaks reading boxofficemojo.com. I mean the people who sit in the corner office bankrolling films also pay attention to this number.

          DVDs/television rights/foreign sales/toys/happy meals are all additional sources of revenue. The additional can turn into a nice chunk of change for everyone, but it's considered "extra", not a number which makes or breaks your career as a filmmaker.

          Of course, in the music world, it's exactly the opposite. CD sales are your PRIMARY source of revenue that keeps the whole show running. Touring, T-shirts, etc. are all "extra".
          • Re:2004? (Score:5, Informative)

            by molarmass192 (608071) on Tuesday March 25, 2008 @06:30PM (#22863764) Homepage Journal
            If I'm not mistaken, I believe that touring is actually the primary source of revenue for most artists. The typical deal is 50% of the box office for a venue. Think 20K people paying $40 a head and that's $400K for one night versus moving 250K CDs (1/2 to a gold record). Coldplay sold 8.3 million copies of X&Y globally, for a presumed global take of $13.2M on album sales (and X&Y was H-U-G-E). The band played 34 US cities for the supporting tour, not counting other countries, at an average take of $400K per stop for a presumed US take of $13.6M, that can probably be doubled given it was a global tour. So $27M for touring, versus $13M for album sales, granted that without the album, the tour would likely have been smaller venues than arenas.
    • Re:2004? (Score:5, Funny)

      by peipas (809350) on Tuesday March 25, 2008 @04:12PM (#22862108)

      Hardly news considering the article was posted on Oct 12th, 2004!

      Who the hell approved this?
      There's more. It's a dupe [slashdot.org]. Wow.
  • Proposed new budget (Score:2, Interesting)

    by tekiegreg (674773) *
    Proposed new budget (in my opinion):

    $0.17 Musicians' unions - keep this, someone needs to be a voice for the artists
    $0.80 Packaging/manufacturing - eliminate some of the paper involved, betcha I could find a dime there so now 70 cents
    $0.82 Publishing royalties - first thing to go, we'll halve this to 41 cents safely I imagine
    $0.80 Retail profit - Wal Mart has to do it's share, take 60 cents per CD
    $0.90 Distribution - that's fairly tight...transportation and all with oil prices being what they are,
    • by SatanicPuppy (611928) * <Satanicpuppy AT gmail DOT com> on Tuesday March 25, 2008 @03:48PM (#22861808) Journal
      Seems arbitrary. I notice you stuck up for the union...God forbid they feel the pinch of the industry.

      All this tells me is that artists should market aggressively with digital format music, and keep CD sales as a small-time sideline; they could charge 5 bucks plus shipping and handling and make a ~3 bucks a pop.
    • by jacquesm (154384)
      so, how about 20 cts per digital download from the artist direct or through some content delivery network. Or variable price, but still artist direct -> consumer.

      And 30 second samples ready to download from a huge catalog. And an open format please. And all the back catalog stuff as well.

      Who really needs a physical medium ? It's not as if you can actually listen to a CD, you listen to the music stored on it... (unless, of course you drop the CD or break it, then you can actually listen to it).
    • by gstoddart (321705) on Tuesday March 25, 2008 @03:56PM (#22861882) Homepage
      What amazes me most about that breakdown, is if you look at it, it's hard to figure out why the labels are whining about the iTunes pricing model.

      It seems like they'd get just as much money per track, and cut out a lot of overhead. That sorta seems to support this push to get higher pricing on iTunes tracks is just a cash grab (surprise) by the labels.

      Cheers
    • by Animats (122034) on Tuesday March 25, 2008 @04:02PM (#22861970) Homepage

      Distribution, $0.90? $900 for a thousand CDs? No way, not for WalMart.

      This is WalMart you're shipping to. You ship to them by the truckload, not one CD at a time. Any in-store costs come under retail overhead, not distribution.

      The promotion costs need to shrink. Maybe we'll see the labels begging for time on webcasts. Label overhead is far too high. The labels don't really do much today except promote; they don't directly employ artists, they don't run recording studios, they don't manufacture CDs, and they don't do physical distribution and warehousing. That's all outsourced. But management overhead hasn't been cut accordingly.

      As the WalMart VP says: "The labels price things based on what they believe they can get -- a pricing philosophy a lot of industries have. But we like to price things as cheaply as we possibly can, rather than charge as much as we can get. It's a big difference in philosophy, and we try to help other people see that."

      • by j-pimp (177072) <zippy1981.gmail@com> on Tuesday March 25, 2008 @04:11PM (#22862098) Homepage Journal

        As the WalMart VP says: "The labels price things based on what they believe they can get -- a pricing philosophy a lot of industries have. But we like to price things as cheaply as we possibly can, rather than charge as much as we can get. It's a big difference in philosophy, and we try to help other people see that."

        Walmart, sucks to be their vendor, great to be their customer. I love it when two things I consider to be evil lock horns. Its why I'm a libertarian.

        • Re: (Score:3, Interesting)

          by ckaminski (82854)
          Walmart could help out it's smaller vendors (like my father) but buying a giant license of EDI software and giving it to it's clients. When a smalltime vendor has to spend $2-10K a year to keep talking to Wal*Mart, it eats into profits. I'm not saying it's not a good thing, but it hurts the mom and pops who sometimes create jobs for other people. They have a HUGE web infrastructure for managing the EDI relationship, but they force you to use EDI software rather than straight web-interface work. It might
      • Re: (Score:3, Insightful)

        by sm62704 (957197)
        The promotion costs need to shrink.

        I agree with that, but it seems that promotion (getting airplay) is the only thing a lanbel can do for an artist.

        they don't directly employ artists

        Actually they do. Under US copyright law, all phonorecordings are "works for hire" thanks to the RIAA labels buying congresscritters back in the 1950s.

        Does Lynard Skynard's Workin' for MCA still have the (intentional) hum at the beginning of the song on CD like it did on the LP? My CD was ripped from an LP.

        Seven years of hard lu

    • Re: (Score:3, Informative)

      by tepples (727027)

      $0.82 Publishing royalties - first thing to go, we'll halve this to 41 cents safely I imagine

      This is the part that gets split 50/50 between the songwriters and their publishers. The Copyright Office dictates a cap for these royalties that is just over 9 cents per track [copyright.gov], and songwriters don't plan to settle for less without a really good reason. Do you want fewer songs per album? Or do you just want albums full of pre-1923 folk songs?

    • by garett_spencley (193892) on Tuesday March 25, 2008 @04:04PM (#22862010) Journal
      I printed 1,000 CDs for a personal indie project that I did (*cough*shameless self plug [cdbaby.com]*cough*) and $0.80 / CD is around what I paid INCLUDING what I paid the artist to do the art work.

      There's no freakin' way that that major labels are paying $0.80 / CD when they print runs in the tens of thousands. They should be getting WAY better bulk deals.
    • The problem with the cost plus model for pricing is that prices aren't fixed.

      One of the biggest determiners of cost is volume of sales; for the most part your costs go down as you sell more -- you share fixed costs like your factories over more units sold of course, but even your unit costs tend to go down with sales volume. Of course in special cases you may have per unit costs go up with volume, for example when you've bought all the plastic available at a certain price for your CDs...

      When it comes to pr
      • by Firethorn (177587)
        People aren't plunking down $15.99 for CDs on a whim, even though they very well could. They can blame it on P2P if they like, but if they can't manage a half dozen or so impulse buys for the average consumer over the course of a year, they've got a serious marketing problem.

        You know what I think is killing CD sales? Besides P2P? The movie aisle in Walmart and other stores. In most areas the movies are right next to the music.

        As you walk down them you see all sorts of movies, from $5.50 to a high of aro
    • Re: (Score:3, Interesting)

      by Znork (31774)
      $0.17 Musicians' unions - Dump it, they're obviously not doing a good job.
      $0.80 Packaging/manufacturing - Cut it. CD burning is cheap; could be done in the shop on demand.
      $0.82 Publishing royalties - Double it to $1.60. This is what actually goes to songwriters etc, which is the actual reason for copyright
      $0.80 Retail profit - Whatever they feel they can take; that's free market competition, say it's fair as it is.
      $0.90 Distribution - CD's could be printed in the shop on demand.
      $1.60 Artists' royalties - fa
  • Commodity? (Score:5, Insightful)

    by jawtheshark (198669) * <slashdot&jawtheshark,com> on Tuesday March 25, 2008 @03:43PM (#22861710) Homepage Journal

    At Wal-Mart, we're a commodity and have to fight for shelf space like Colgate fights for shelf space.

    And you expect sympathy somehow? I mean, let's be serious: the music industry did all it could to make music a "commodity and throwaway product". I sorry, but what did you expect? You wanted to sell a commodity product, then you live by the rules of commodity products. Geez.... These people are obtuse...

    • by tekiegreg (674773) *
      I think the fact that the record company is starting to realize it's a commodity product is the point of the article, they're keeping awake at night now because they just realized they're on the shelves because of Wal-Mart's good graces...this may not be anyore at least according to Wal-Mart...
  • The breakdown (Score:4, Insightful)

    by SatanicPuppy (611928) * <Satanicpuppy AT gmail DOT com> on Tuesday March 25, 2008 @03:43PM (#22861724) Journal
    $0.17 Musicians' unions *Typical
    $0.80 Packaging/manufacturing
    $0.82 Publishing royalties *e.g The rights to the song itself
    $0.80 Retail profit *Poor bastards. No wonder they're going out of business.
    $0.90 Distribution
    $1.60 Artists' royalties
    $1.70 Label profit *Hmmmmmm.
    $2.40 Marketing/promotion *So why don't 20 year old albums cost any less?
    $2.91 Label overhead *Upgrade your equipment, jesus.
    $3.89 Retail overhead *Because if it weren't for music, they'd be selling crack in that space.

    Oh yea...No scam here. I'm not sure if it's just the bloated nature of the business or what, but this is a steaming pile of crap from my perspective. It's a fricking dollar seventy to make it and get it to the store, but the "price" is fifteen bucks?

    Breaking down the rest, we notice that all the combined "profits" amount to twice the cost of manufacture and distribution, and that the combined "overhead" is equal to more than all the profit, cost, and distribution combined...I imagine that's calcuated on the costs to maintain the machinery, the retail space, etc, that makes all the stuff possible.

    The whole thing screams bloated industry to me. Overhead is 50% of the cost? There is something wrong with your model. Fricking newspapers do better than that.

    Nice to see the evil of Wal-Mart being turned to a good purpose (subjugating the recording industry). Something nice about the world when two wrongs do make a right. One choice quote: "For the music industry, having such a dominant retailer is like being stuck in a bad marriage." Doesn't that sound like everyone elses relationship with the RIAA?
    • Re:The breakdown (Score:4, Interesting)

      by gEvil (beta) (945888) on Tuesday March 25, 2008 @03:48PM (#22861802)
      Shhh. Nobody tell SatanicPuppy that the Manufacturing and Distribution costs are the same for that $60 video game he just bought.
    • Re:The breakdown (Score:4, Insightful)

      by ivan256 (17499) on Tuesday March 25, 2008 @04:07PM (#22862048)
      If the studios spent some of that "label overhead" for artist development instead of treating it as another "profit" column without labeling it as such, you could bring the average marketing costs *way* down. Think $0.10 instead of $2.40.... After all, if 90% of pop hits weren't from one-hit-wonders you wouldn't have to spend all that money introducing a new face every month.

      Of course that requires a business plan with a greater than 3 month outlook, and if they did that they may realize suing their customers wasn't such a good idea either... Even less overhead!

      Additionally, publishing royalties + label profit should be less-than or equal to artist's royalties. If copyright law needs to be adjusted to help this change along, so be it.
  • Costs too much (Score:4, Interesting)

    by CastrTroy (595695) on Tuesday March 25, 2008 @03:44PM (#22861738) Homepage
    I personally think an CD costs way too much. When a movie with multi-million dollar production costs can be sold for the same amount, that's one big indicator that they are charging too much. I currently buy my music pretty much only on eMusic, because it comes down to about $4 an album, which is what I consider fair. A CD (or download of) really should cost less than $5, in order to bring it into the point where it's an impulse buy, and people just buy them without even considering if they are getting a good deal or not.
    • Re:Costs too much (Score:5, Insightful)

      by hanshotfirst (851936) on Tuesday March 25, 2008 @04:00PM (#22861952)
      While I agree with you, this reasoning may not hold up very well, since the movie more than paid for itself and DVD production at the box office - the DVD is gravy. (Assuming a movie worth getting the DVD for.)

      The CD on the other hand doesn't have that - maybe there's a concert tour, but the tour usually makes money on merch and CD sales, so we're back to the CD being the main profit center again.
      • Re: (Score:3, Insightful)

        by sheldon (2322)

        The CD on the other hand doesn't have that - maybe there's a concert tour, but the tour usually makes money on merch and CD sales, so we're back to the CD being the main profit center again.

        That depends.

        For a small band... touring helps to promote the CD sales.

        But for a mega band like U2... CD sales help to promote the tour.

        As CD sales increase, you get more radio airplay, or at least more attention which means more people come to the concert, which means you can fill all the seats and charge more for ticke

      • Re: (Score:3, Informative)

        by Hektor_Troy (262592)

        the movie more than paid for itself and DVD production at the box office - the DVD is gravy
        Actually, several people in the industry have made it clear that now DVD sales are bigger than box office, and that many studios consider box office a commercial for DVD sales.
      • Re: (Score:3, Informative)

        by rbf2000 (862211)
        A lot of movie studios allow for bigger budgets because even though they know they won't break even on the box office sales alone, the profits will be supplimented by the DVD sales. This day and age it seems as if theatrical releases are just big commercials for the DVD version of the movie, where the studios seem to make most of their money.

        The CD is the main profit center for the Record Companies, but tours are where the artists make most of their money. Artists have to look at it the opposite way th

      • Re: (Score:3, Informative)

        by Lumpy (12016)
        I have produced several DVD's. I can tell you some facts on it.

        Equipment cost is 100% = to that of what is needed to master a CD. It's the same MAC quad core running the same priced software. (Pro Tools costs as much as Scenarist)

        I have to buy more graphics and "art" but licensing music is gravy. when music is bought for a movie the studios screw the artist hard. Basically we have the right to what we damn well please with the music. Some older films this was not the case, which is why "Heavy Metal" too
    • Re: (Score:3, Informative)

      by pjt33 (739471)
      If you think $15 is too much, spare a thought for we Europeans. Over here an album costs twice that, for no obvious reason.
  • Correction (Score:2, Informative)

    by caffeinebill (661471)
    [A Wal-Mart spokesman said:] should read [A Best Buy VP said:]
  • by davidwr (791652) on Tuesday March 25, 2008 @03:44PM (#22861744) Homepage Journal
    If a very large retailer prices something at a loss for a very long time, consumers expect that will be the "market value" and will balk at paying more. They will assume, usually correctly, that if it can be sold for $10 over the long haul, it can be sold for a profit at that price or that anyone selling it at that price can continue to do so indefinately.

    You see this with cars and "free with rebate but only once or twice a month" computer software, where consumers won't buy when incentives are removed.

    When is the last time Joe Sophisticated Consumer paid full price or for that matter anything more than sales tax for Acme Antivirus?
  • by johnny cashed (590023) on Tuesday March 25, 2008 @03:44PM (#22861748) Homepage
    Let us price it like one. Whoever thought that it would be Wal-Mart to break the industry.
  • Reap What You Sow. (Score:4, Interesting)

    by powerlord (28156) on Tuesday March 25, 2008 @03:45PM (#22861752) Journal
    Somehow its odd and appropriate to see the RIAA that has been hounding consumers find itself the "Big fish in the small pond."

    On the other hand, what does it say for the future of ANY goods producer when WallMart wields that much muscle in your sales chart?
  • by weston (16146) * <westonsd@canncen ... g minus caffeine> on Tuesday March 25, 2008 @03:45PM (#22861754) Homepage
    OK. The article is old news, but it's a good topic for anyone interested in the industry's future to consider, and most of the points are still relevant.

    Consider this:

    Production costs should be down with the advances in tech and refinement of manufacturing.

    Wal-Mart *is* a distributor, so distribution costs should be lower.

    Promotion costs *could* be lower if more of the music industry understood new media rather than treating it as somewhere between anathema and tolerable evil.

    So, real CD costs should be falling. They probably are *somewhat*, given inflation, but in context of the given advances, it really doesn't seem like enough.

    The costs in the article are also interesting. Some of 'em look on, but others don't:

    $0.17 Musicians' unions - Unions get royalties on CDs? That's interesting. I've never heard that before.
    $0.80 Packaging/manufacturing - You can get smallish (2000-5000) runs for near this cost. A major label release really should be benefiting from an economy of scale here.
    $0.82 Publishing royalties - if it's cover songs, sure. If this is original material written for a contract or under licensing from a signed artist, this cost shouldn't be this high.
    $0.80 Retail profit - $.80 ain't anything a profit I'd begrudge the retail establishment.
    $0.90 Distribution - See Wal-Mart *is* the distributor.
    $1.60 Artists' royalties - Given the information available about industry accounting practices, is anyone else skeptical that the artists are getting this money?
    $1.70 Label profit - I'm OK with this.
    $2.40 Marketing/promotion - Since this is what a label is really supposed to do, I'm not surprised it's this big a portion, and maybe that's OK.
    $2.91 Label overhead - What exactly is supposed to be here other than production costs and everything else on this list? I suspect this is really one of two big issues.
    $3.89 Retail overhead - And this is the other one.

    Those last two numbers pretty much tell the story of why disintermediation is going to continue to be a strong trend for the music industry. Slash them numbers and you're down *below* Wal-Mart's sale price and certainly competetive with prevailing online retailers. Fail to do it and you're not. Especially if you're acting like you're entitled to it in the meanwhile.

    • Re: (Score:3, Informative)

      by Rev.K (1262222)

      Although the article is over three years old, Wal-Mart's position on CD pricing hasn't significantly changed since its publication. As for the breakdown in cost on a $15.99 CD, here is the real skinny:

      $0.17 Musicians' unions
      It's not a royalty, but rather an average cost per CD. Even if you play in a band, you should get paid union scale for the recording sessions on your album. For many bands, this and publishing (below) might be the only money they ever see on an album.

      $0.80 Packaging/manufacturing

  • surprise, surprise (Score:5, Insightful)

    by Red Flayer (890720) on Tuesday March 25, 2008 @03:46PM (#22861774) Journal

    'Wal-Mart has no long-term care for an individual artist or marketing plan, unlike the specialty stores, which were a real business partner. At Wal-Mart, we're a commodity and have to fight for shelf space like Colgate fights for shelf space.'
    Why are people constantly surprised by the fact that at some point, they need to pay the piper?

    When you do business with Walmart, you should know that you're going to be asked to reduce your price. When you stop supporting mom-and-pop shops by not giving them the volume discounts you give to Walmart, to the point where Walmart has a potentially sufocating grip on your retail pipeline, then you're in trouble.

    This is what happens when you dance with the devil... you find out he's clumsy and steps on your feet, and has bad breath to boot.

    There's an op-ed piece written by the founder of Snapper that sheds a lot of light on why/how a manufacturer should choose not to do business with Walmart. Too busy to dreg up a link, but well worth the read, for anyone who cares enough to do a google search.
    • Re: (Score:3, Interesting)

      by elrous0 (869638) *
      It's probably telling that I didn't even realize that Snapper was still in business. Seriously, I don't think I've seen a Snapper mower since the 70's (my Dad had one when I was a kid).
  • by inode_buddha (576844) on Tuesday March 25, 2008 @03:47PM (#22861790) Journal
    Memo to record labels: What's wrong with having to fight for shelf space like everyone else? Competition? Has it occurred that maybe Wal-Mart would like to sell even more?
  • Boo-fucking-hoo (Score:2, Insightful)

    by Gay for Linux (942545) *
    Am I supposed to feel sorry for the music labels? The article wanks them off and swallows every last drop.

    Tough shit if they have to do business with a smart retailer- if people wanted to pay $16 for CDs at Tower Records and Music Land, those places would still be in business.

    RIAA, wake up to the internet already. There's a reason iTunes sells songs and Amazon sells lots of books- they can have a huge catalog without the need for retail space, you don't have to pay that $3.89 retail overhead charge to
  • by Malfourmed (633699) on Tuesday March 25, 2008 @03:55PM (#22861876) Homepage
    In my opinion the key difference between music distribution and movie/TV distribution is that the latter has access to multiple revenue streams.

    You make a movie and you show it at the theatres and get money. You sell the cable/free-to-air TV rights and get money. By the time you release it on DVD you've (hopefully) made back most of your production costs or are even showing a profit already.

    You make a record on the other hand and when it's played on the radio (the equivalent of free-to-air TV distribution) you don't get any money; in fact it costs you (in marketing or other incentives) to get airplay. You have to make back all your production costs via CD sales. Granted, it doesn't cost as much to cut a CD as to make a (Hollywood) movie, but then there are only limited ways to get your money back, necessitating a higher unit-charge.

    If labels would be able to charge radio stations to play their music (something highly unlikely to happen, by the way) I believe CD prices would likely fall.
    • Re: (Score:3, Informative)

      by rrkap (634128)
      If only there were another way for musicians to make money.... hmmm.... I've got it! They could try to get a bunch of people to pay to see them perform. That's just crazy enough to work!

      By the way, radio stations pay significant fees to broadcast music to music publishers (ever hear of BMI or ASCAP?) There's plenty of money to be made in music with $5-$8 albums (hmm, that's about what Amazon charges to download an album in MP3 format).
  • by Rinisari (521266) on Tuesday March 25, 2008 @03:58PM (#22861904) Homepage Journal
    The artists should be making the most profit. If it's not like that, then the system is broken. The producer of an item should always make more money than any other person involved in the process.
    • Re: (Score:3, Insightful)

      by Shados (741919)
      It should, though we have to agree: writing and singing a song isn't much compared to all of the processing that has to be involved to print thousands of CDs, handle all of the stuff with the retailers (thats one of the worse parts), all the marketing, etc. Its 1 person's work vs hundreds, who will also most likely spend douzans of time more man hours on it than the artist.

      That being said, they are still pushing it a lot, as artists don't even get that.

      Also a note of interest, in other fields, such as the g
    • Re: (Score:3, Insightful)

      Sorry, the person who risks his own money should get more reward than everyone else. In this case, the record labels pay to produce records that may not make any money. The artists risk nothing. In more familiar terms, the artists are employees and they don't get to make the rules. If they don't like their deal, they can try to negotiate a better one or take out a loan and produce their next album themselves.

      The burden of risk is the most expensive thing thing in the economy. It is more expensive
    • Re: (Score:3, Insightful)

      by tezza (539307)
      The producer of an item should always make more money than any other person involved in the process.

      Your argument breaks down in so many ways. Here is one suitable to slashdot.

      Take the sale price of a computer. At what stage do you class someone the "producer"?? - who you say is the most important.

      * The miner who dug the silicon out of the ground
      * The refiner who turned that into wafers
      * The chip designer
      * The chip fabricator
      * The assembler
      * etc.


      It's not easy to assign who should
  • Previous breakdown (Score:5, Informative)

    by duranaki (776224) on Tuesday March 25, 2008 @03:58PM (#22861916)
    I'd be curious to compare this against the breakdown when the CD was introduced. I vaguely remember something like, "Sure, it's $16 now, but if everyone gets on board the economy of scale will reduce the price closer to the record prices you are used to paying! (~$8)". I think these misc. overhead costs are probably just fudge factors to avoid listing them under profit, like how movie production companies make up data to keep their net profits artificially low.
  • by cant_get_a_good_nick (172131) on Tuesday March 25, 2008 @04:22PM (#22862262)
    In the rare cases you can find tapes, they're cheaper than CDs. WHen CDs came out, i remember hearing the labels say something along the lines of "they're expensive now, but once we mass distribute, they'll be cheaper than tapes". It sill hasn't happened.
    I'm not sure why a tape which has at a minimum:

    • 2 case sides, two 2 part spindles, a tape leader, the tape substrate, the electromagnetical coating that actually records the data, 2 rollers, the metal thing to push against the read head and the sponge to not scratch the tape, and 2 clear windows, possbly 5 screws if the case doesn't snap together, possibly 2 inserts if the case is clear

    is easier and cheaper to manufacture than a CD, especially know that CDs get more economies of scale than tapes. The fact that AOL switched from floppies to CDs probably also shows that CD manufacture is cheaper (though i'm sure it wasn't the only motivation in the switch.)

    As far as the CD being an arbitrary price point, i remember when Public Enemy came out with "There's a Poison Going On". Their album was $8 for a download, $10 for an autographed CD. Once their label imploded (they were true pioneers in internet distribution, though a bit too early and the infrastructure wasn't ready for them yet) the same, non-autographed CD was sold in Virgin for 17.95. I'm not sure why virgin deserved the 7.95 (or more, depending on the value you put on the autograph) price delta.

    As an aside, people don't recognize that Public Enemy was one of the first bands to really use the internet. They have several blogs and websites, released Bring The Noise 2000 on the internet for free (before the label made them take it down), released the single Swindler's Lust for free, and for Revolverlution, pre-released some tracks and asked for the remixes to be sent back to them, and included a pretty good remix (plus the original of course) of "Give the Peeps what they Need" on the Revolverlution disk.
  • by popmaker (570147) on Tuesday March 25, 2008 @05:34PM (#22863210)
    If the record companies just decided to agree to tell Wal-Mart to go fuck themselves, what would actually happen? Do they matter SO much that that is not a possibility? Do people buy music at Wal-Mart just because they saw a CD there (a CD they wouldn't have bought otherwise) or would they actually go buy that CD elsewhere if it wasn't at Wal-Mart.

    Even though record companies are by no means my favourite, they would gain some tiny bit of respect if they decided to just drop Wal-Mart. A way of saying "we only do business with people who care about music". Though we know that it's not true.
  • by CodeShark (17400) <ellsworthpc@yahoo . c om> on Tuesday March 25, 2008 @05:35PM (#22863218) Homepage
    I say "like hell". Most of those costs only come into play for the so-called "mega" artists -- the major labels do not devote any where near the amounts shown for marketing, etc.


    The only costs that matter are the royalties and the manufacturing, packaging, and distribution, as every other cost -- marketing included -- is variable based on the music being recorded and how heavily the particular CD is promoted. The major labels systematically cheat most artists on everything else, and if an act gets pennies on the dollar they are lucky.

  • by dlim (928138) on Tuesday March 25, 2008 @05:51PM (#22863380) Journal
    Ok. CDs cost money to produce, but the article is dated, and I think a more interesting question with respect to the cost of music is "how do the costs translate to online sales?" I am clearly guessing here, but if anyone else has real numbers, please reply. Given that everyone likes to talk about Radiohead's "In Rainbows", I'll base my estimates on that. The album has 10 songs, so...

    Online Distribution (10 songs / CD)

    $0.17 - Musicians' unions - no change
    $0.22 - Packaging/manufacturing - 2% of revenue to license mp3 format for content distribution [mp3licensing.com], AAC is free for distribution [daringfireball.net], don't know about Fairplay DRM.
    $0.82 - Publishing royalties - no change
    $1.00 - Retail profit - 12 @ $.10/song [macnn.com]
    $0.10 - Distribution - Bandwidth ~5MB/song (downloaded from Radiohead) = 50 MB * 0.0005/MB [findarticles.com]=$.025 (the estimate is for Video on Demand, but that's all I could find). I bumped it up a little to cover hardware maintenance.
    $1.60 - Artists' royalties - no change
    $1.70 - Label profit - no change
    $2.40 - Marketing/promotion - no change
    $2.91 - Label overhead - no change
    $0.00 - Retail overhead - not sure

    Total: $10.92

    Apple sells "In Rainbows" for $9.99. Amazon sells it for $7.99 as a download. I don't believe Apple loses money on downloads. I'm not sure about Amazon. While this is strictly hypothetical, it would seem the difference between a $15 CD and a $10 downloaded album is more than just the cost of production and distribution of the CD. Assuming I'm not totally off on my numbers, and the numbers that aren't related to production and distribution do not change, it should not be possible for Apple to sell the record for $10 or Amazon for $8. I believe the pricing model must allow for online retailers to make a profit, so what makes up the difference? Are the labels giving up profits? Are they operating more efficiently than they used to?

  • by toejam13 (958243) on Tuesday March 25, 2008 @06:11PM (#22863586)
    I recall there was a Congressional hearing sometime back during the 1980s when several CEOs from various music companies were forced to testify as to why the cost of compact discs were so much higher than audio tape.

    One lady in specific stated that it was due to the higher manufacturing costs associated with digital mastering and compact disc pressing. She continued to state that as the technology became more mature, it would fall in price.

    Back then, a compact disc was often between $10 and $12. Today, they are often between $12 and $18. While adjusted for inflation, the real cost of an audio CD has come down somewhat, that cost has not dropped at the same rate as the technology needed to create a disc. In short, we are getting ripped off.

    Furthermore, as the article states near the end, most of the costs are due to "fuzzy" expenses as opposed to manufacturing and the costs associated with "brick and mortar" retail outlets. So again, while some prices have come down, others may have gone up.


    /haven't purchased a new CD in over seven years
    //have no plans of doing so anytime soon
    ///expects the music industry to shrink by over half within the next decade
  • A new model (Score:3, Insightful)

    by Colourspace (563895) on Tuesday March 25, 2008 @06:14PM (#22863610)
    I was thinking about the whole Trent Reznor thing the other day. Now Trent's not really been my thing ('Head like a hole' excepted, but that was waaaay back).. But he is absolutely right and I think what he is doing is very exciting for the future of the music industry (read:artists, not labels). My particular favourite band are New Order. Yes, they have had their day, I know.. But if they released a new album tomorrow, I would actually be prepared to pay $200 - without actually hearing it - simply because I am a big fan of theirs and always have been. OK this will need to scale down to lesser artists (who don't have the fan base desperate enough to hear their new tunes for that sort of cash yet) but in this whole micropayment climate I'm sure it would somehow if more took the risk/adopted the model.. It's the old piracy argument - Just because I might rip something for free, doesn't mean I would ever have paid for it in the first place. But there's been many times I have liked something I have had as a taster (say on a mix cd) that's led me to buy from an artists I may never have heard of, or thought I might like before. We get a whole load of TV for free, but plenty of people keep the DVD market alive because people will always pay for the things they like best. And if they like them a lot, and the quality is there, they might just pay a lot.
  • by zymurgy_cat (627260) on Tuesday March 25, 2008 @09:22PM (#22865124) Homepage
    I had a customer who once had a meeting with a Wal-Mart rep. Here's how it went (almost verbatim): Customer (e.g, WM supplier): Hi. How's it going? Wal-Mart rep: You fucked us in June. You fucked us in July. You ain't fucking us in August. This was a supplier for store equipment (the physical stuff in the store, not stuff that is sold) that was well run and was about the only supplier for the items they made for Wal-Mart. They ran efficiently and satisfied very big orders that went into new stores. I'm sure Wal-Mart didn't "ask" for low CD prices. They probably talked to the music companies the same way they talked to my customer. It's how they do business......
  • by budgenator (254554) on Tuesday March 25, 2008 @10:47PM (#22865586) Journal

    Wal-Mart has also urged the labels to create exclusive new products that would lower music prices. In a short-lived test, Universal excerpted seven songs from existing albums by acts such as Sum 41 and Ashanti and sold them at Wal-Mart for $7. Few other labels wanted to participate. "They proposed it to a bunch of artists and managers, but everyone was worried that we are sending a message that instead of the sixteen-track album we sold, those nine extra songs were filler," says a label executive.

    Other than a every few really classic albums like "Tommy" and "Dark Side of the Moon" and a few Beatles albums it's pretty much 2 good tracks and 14 tracks of filler! You can't blame the artists either, if I was locked into a contract that required my band to produce 2 albums minimum, I sure wouldn't want to blow my wad and put all my good stuff on the first album either.

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