Must a CD Cost $15.99?

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.'"

Proposed new budget

[tekiegreg]

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, no change
$1.60 Artists' royalties - mega artists can get skimpier - down to $1 a CD even
$1.70 Label profit - worse than the artists, 80 cents a CD now
$2.40 Marketing/promotion - do we really need so much hype $1.20 a CD
$2.91 Label overhead - pinch a little, 2.60 cents a CD Now
$3.89 Retail overhead - pinch a little, 3.70 a CD (retail is tougher to save overhead, they run thin as it is)

New Cost: 11.35 (though double check my math) Well better than 15.99 but maybe someone here can be more creative still and get it below the $10 mark, I'm sure someone here will try :-)

Costs too much

[CastrTroy]

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.

Reap What You Sow.

[powerlord]

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?

Costs should be lower and/or falling

[weston]

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:The breakdown

[gEvil (beta)]

Shhh. Nobody tell SatanicPuppy that the Manufacturing and Distribution costs are the same for that $60 video game he just bought.

Difference between CD and DVD

[Malfourmed]

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:Proposed new budget

[j-pimp]

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:The real reason they make $90B in profit

[GungaDan]

Bullshit. Malwart was entitled to recover the costs they had paid because the trucking company ended up paying it. So... do you think the hospital should have been paid twice? Why should malwart not get back the money it paid that it turned out not to have been liable to pay?

They're wrong about lots of things, but they're right about this. No double-dipping. Simple enough. Pay 'em back.

Re:2004?

[MrAnnoyanceToYou]

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]?

Old news, but still relevant.

[cant_get_a_good_nick]

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.

Re:Proposed new budget

[Znork]

$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 - fair at $1.60. Again, this part fits in the purpose of copyright.
$1.70 Label profit - Zero. Labels are not in the public interest and should not be supported by government sponsored monopolies.
$2.40 Marketing/promotion - Zero. Marketing is not in the public interest and should not be protected by copyright.
$2.91 Label overhead - Zero again. Not in the public interest. They can compete like anyone else.
$3.89 Retail overhead - Print on demand reduces overhead drastically. $1.50 for amortized print-on-demand machine.

See, I cut the cost down to the $5 range, while doubling songwriter royalties and keeping artist royalties.

I also cut down the amount of annoying marketing, leveling the playing field for independent artists. Much easier to get playtime and gain popularity because people _like your music_ if you don't have to compete against juggernaut marketing machines and payola.

Now, to make it even simpler, dump the exclusive copying right of copyright, reconstruct it as a royalty right and simply put a 50% sales tax on the material going to the artists and writers in question. Wal-mart et al could copy and sell to their hearts content, _competing_ in a _free market_, while the social purpose of copyright is served by the appropriate institution that handles all such social purposes.

Re:2004?

[Maestro4k]

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:Define "Profit"

[HikingStick]

Amazon has far less invested in buildings and other fixed costs. Amazon also, while a large company for an Internet retailer, is small when compared to Wal-Mart in terms of staffing, and staffing is the #1 expense for any retailer (unless you count those folks who were selling cheap foreign backpacker guitars for 99 cents on eBay and then charging $16 for shipping). Remember, too, that while their fixed costs are diluted across all of their sales, not all stores are making sales every hour of the day. Wal-Mart doesn't make $4.69 on a CD--that's their gross margin. Their gross profit comes into play later when looking at their financial statements. If you've ever owned a business or been in management, these numbers should not seem unrealistic. I worked for a small, regional fitness club once as an accounts payable clerk. We had an outside audit and consulting firm come in to review our operations. They calculated the cost of writing each check to be $5 (this was in 1996). The calculation of cost seemed rediculous on the surface--writing a check might take two minutes inclusive of the time to log the entry in the books. Yet, if you considered all of the additional costs of having the employee--wages, taxes, benefits, office space, management time, payroll time (et al., ad nauseum)--justifying the $5 figure was very simple.

Difference between Tapes and CDs

[Anonymous Coward]

Some of the listed amounts in the cost breakdown just seem off to me. How is it you used to be able to buy tapes for $8 back in the mid 90s (while CDs were still $15)? Seems to me the only fee difference should be the physical production of the media and even that should not be that much. I understand there is a cost adjustment due to inflation every year but it seems like CDs should have gone down in price.

Re:Proposed new budget

[ckaminski]

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 be more work for the vendor, but possibly more automatable (think webservices).

I long for the day I can kick Gentran to the curb. It's nice, but it's not necessary for a small mom-and-pop (unless you WANT to sell to WalMart).

MATH

[sxmjmae]

A little more math: An average of 12.54 tracks per CD. The $15.99 breaks down to $1.28 a track:
  $0.01 Musicians' unions
  $0.06 Packaging/manufacturing
  $0.07 Publishing royalties
  $0.06 Retail profit
  $0.07 Distribution
  $0.13 Artists' royalties
  $0.14 Label profit
  $0.19 Marketing/promotion
  $0.23 Label overhead
  $0.31 Retail overhead

So when you download you can cut out some of of the overhead. (IE: Packaging/manufacturing).
The Distribution cost is almost nil. I hope the Retail overhead associated with an online store is significantly cheaper. Mind the artist claim they get less per song for a download (but at 13 cents a track it is not like they get more of the pie anyways) - The LABEL bills on all there overhead and then tacks on profit (which is more then the Artist!). Also does the LABEL alway do Marketing/promotion - if you audited there books for a particular album would they have spent 19 cents per track for each track sold? Do you think they spend $26.2 million Marketing/promotion on the 11 Million Albums Sold of Sgt. Pepper's Lonely Hearts Club Band?

But it tells me the label makes way more than any artist and the only people I am hurting is the label by downloading a copyright infringement MP3. I can put $5 in an envelope and mail it to my favorite artists (that should cover me for a long time 13 cents a track).

Ah now I can sleep well tonight.

Could be $2.00

[Noexit]

I like to buy CD's. I like reading the album notes, I like the artwork, and I like the smell of a freshly opened disc. I hate the music companies and don't like shelling out $15.00 for a disc. But the one thing I hate more than that is Wal-Mart censoring and altering the original work *without* placing a warning sticker on the label. And until they stop doing that, I will NOT buy any CD from them for any price. I live in a small town and as such I end up buying a lot of stuff at Wal-Mart; music CD's are not on that list.

Re:2004?

[hedwards]

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.

if compared to the value of the dollar...

[RickBauls]

if you compare the price of a cd to the value of the dollar, the cd is the only thing I can think of that cost $16 in 1995 and in 2008.

Re:Wait

[Urza9814]

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?

Is it THAT big a deal?

[popmaker]

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.

Looking at the costs listed for the labels

[CodeShark]

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.

Must a downloaded album cost $9.99?

[dlim]

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?

Re:2004?

[wumingzi]

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".

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:surprise, surprise

[elrous0]

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).

Re:record industry as villains

[h3llfish]

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:Wait

[Technician]

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.

Re:The real numbers

[quag7]

Your comment is interesting. From my perspective:

(*) The sooner music stops being a viable business the better. The sooner people just record for the love of it and put it up on the net for free, the better. I'll hunt it down. I can google. I can read music blogs. No problem.

(*) Even the utter annihilation of the music industry (something I don't see happening) would not mean the end of music. Walk down any cultural center in any city in the world and there are musicians who can't stop playing. Some people can't stop playing for 5 minutes even if you want them to. Every other person I meet is a self-described musician. A large percentage of those people really want to do it professionally.

I really wish I didn't have to work for a living, but you know, I find it hard, working a soul-sucking dayjob, to feel bad for some musician who has to have one too. I am unconvinced that songwriting itself is "work." Touring is work. The business side of music is work, but I'm hoping to see that go away, leaving people and their instruments to do the magic. If it's such hard work, don't do it. Civilization will march on. There will be enough others to fill the gap. There are ten million songs that will never make a dime being written as I write this.

The consolation prize is the musicians will still get laid more than I will because they are musicians. That's the magic of music. So enjoy that. But I can see no reason why any rockstar should be a multimillionaire when there are teachers funding school supplies out of their own wallets, or poverty such as it exists in the third world still exists. (I'm all for musicians making a decent wage or salary if they're good enough.)

I love music. I'm even willing to pay a little bit for it. I am triply more likely to *donate* to a musician than I am to buy the commodity he has transformed his music into.

I'm jealous of musicians. I wish I was one, and I wish I could make music, because I think music is important in a non-financial way. But if I did, I sure as hell couldn't live with the pretentiousness of posing as a musician, as opposed to a normal guy who "makes music" as an expression of my mind and spirit.

Should the day come when there are no more rock stars, I will applaud that.

Re:Wait

[prestomation]

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 forget about the setup fee.

How the talks really went

[zymurgy_cat]

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......

Re:Wait

[pyrbrand]

Wow, and you sell those CDs? I go to a fair number of shows here in Seattle and even relatively successful acts (ones that don't have day jobs) like Viva Voce only charge $10 a pop for their CDs. Now, maybe you're only counting the kinda-indy stuff from folks like The Shins in which case I don't try to buy CDs at their shows so I'm not sure how much they cost.

Re:Wait

[amRadioHed]

Indie doesn't actually mean not signed to a record label, if it did then that would be quiet a problem for indie labels such as Sub-Pop and Alternative Tentacles. All indie means is that the band is not signed to one of the big labels.

You're almost right in that the term means the only guaranteed good point of an indie band is that they aren't signed to the RIAA but it certainly doesn't mean it's the only good point. I've heard some very good (and some very bad) indie music covering a huge spectrum of styles. Please don't hold it against the music just because you don't like the pretensions of some of the fans. Their are insufferable fans of all kinds of music.

Re:You're not really making $7.50/unit.

[WhiteWolf666]

" 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

[NosTROLLdamus]

This confuses me, as their are many bands/musicians on major labels that would define themselves as "indie". That also confuses me.