Must a CD Cost $15.99? 586
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.'"
Wait (Score:5, Funny)
Re:Wait (Score:5, Insightful)
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)
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?
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Re:Wait (Score:5, Informative)
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Re:Wait (Score:5, Funny)
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)
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
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Seriously though, most artists make pennies on the dollar for every CD sold, thanks to draconian contracts they're duped into signing when they're young, naive and can't afford legal representation. There are a few exceptions, and speaking of debauchery, the most notorious being Led Zeppelin, their manager Peter Grant being one magnificent, tough-minded son of a bitch.
What the OP said,
Re:Wait (Score:5, Insightful)
Because you guys probably had talent. The pros have to spend megabucks on marketing to sell crap.
You're not really making $7.50/unit. (Score:4, Insightful)
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.
Re:You're not really making $7.50/unit. (Score:5, Interesting)
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)
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.
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Re:Wait (Score:5, Insightful)
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!
record industry as villains (Score:5, Insightful)
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.
Re:record industry as villains (Score:5, Interesting)
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?
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It was of the rhetorical variety.
>>The answer is that the money goes to marketing
No, it does not. It seems that you might not have read TFA. They break down where the money goes, and marketing is it's own huge chunk, as is distribution.
So to restate my question in a way that might be a bit more pleasing to you, given that we've already accounted for profit, marketing, distribution, and manufacturing, why is the lab
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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)
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.
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If anything, I wonder if the big box retailers haven't helped the 4 ma
Re:Wait (Score:4, Insightful)
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I was feeling slightly guilty, since I usually buy music from the USA (where it would have been about £15=$30 for the two CDs). Unfortunately, a small UK-based retailer of this type of music just went bust, blaming it on the $/£ exchange rate and claiming everyone was buying from the USA
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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 style
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What exactly is the flavor of the month getting out of their
major label for all of this hot air?
Re:Wait (Score:5, Interesting)
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)
Who the hell approved this?
Re:2004? (Score:5, Funny)
Re:2004? (Score:5, Insightful)
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:
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)
Can anyone say, "Vlasic" [fastcompany.com]?
Re:The Empire vs the Borg (Score:4, Funny)
Vlasic was, for lack of a better word, stupid in their dealings with Wal-Mart.
IIRC from an article I read a few years ago, they agreed to sell industrial-sized jars of pickles to Wal-Mart. For (figurative) peanuts, a few bucks a piece. They were making a loss on every picke sold.
Why'd they still go through with it even though they were taking a loss? 'Cuz they were selling a lot of them!
Re:2004? (Score:5, Interesting)
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)
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)
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)
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)
Re:2004? (Score:5, Funny)
Who the hell approved this?
Proposed new budget (Score:2, Interesting)
$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,
Re:Proposed new budget (Score:5, Insightful)
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.
Re:Proposed new budget (Score:5, Insightful)
They're certainly not doing ~20% of the work that the retailer is doing, or ~13% of the work the artist is doing...Just irritates me. Artists are getting fricking screwed all the time; why do they even have a union?
Comment removed (Score:5, Informative)
Re:Proposed new budget (Score:5, Insightful)
Re:Proposed new budget (Score:5, Insightful)
Comment removed (Score:5, Insightful)
Re:Proposed new budget (Score:5, Insightful)
I'd hate to be a small time, MTV2 band without a union to back me up against a major label.
Re:Proposed new budget (Score:4, Insightful)
I can get insurance for instruments and equipment through ASCAP without being part of any union.... Bear in mind, though, that the people in unions are not the artists. The folks in the unions are the studio session musicians, the composer/arrangers on hire by studios, etc. I see no reason that they should be a line item on the CD sales costs, though. They should be getting their money in the form of union dues from the hired musicians in question. That money should fall under the "label overhead" column. The only reason to break that out into a separate column is to make anti-union people see red. Unless, of course, the unions are actually getting money directly from each sale, in which case, the anti-union people should be seeing red.
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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).
Re:Proposed new budget (Score:5, Insightful)
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
Re:Proposed new budget (Score:5, Insightful)
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."
Re:Proposed new budget (Score:5, Interesting)
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.
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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.
Re: (Score:3, Informative)
$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?
Re:Proposed new budget (Score:5, Informative)
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.
This is not how a business prices things (Score:3, Insightful)
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
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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
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$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)
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...
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The breakdown (Score:4, Insightful)
$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)
Re:The breakdown (Score:5, Insightful)
Re:The breakdown (Score:5, Informative)
In the old days, you had to do that in some big recording studio, but these days there isn't any reason you couldn't do it in a sufficiently padded basement with a laptop running some basic music software.
Now some games, obviously, are cheaper than that...Your 60 dollar figure is pretty much aimed at the console market, where the margins are also quite thin since they have all the expenses above, plus a hefty licensing fee. But the vast majority of developers have huge NRE in terms of equipment, artists, programmers, etc, even on failed games that sell poorly.
In short, it's not an apples to apples comparison. It'd be like complaining when a movie DVD is cheaper than a music CD, without acknowledging the tiny difference the box office returns make in the movie profits.
Re:The breakdown (Score:4, Insightful)
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.
High overhead isn't actually shocking. (Score:3, Insightful)
You're saying that it costs the music industry three times as much as the whole process of creating a single CD to maintain all the CD making equipment, and pay all the guys to run it.
It wouldn't be as shocking as you think. I'm more familiar with software companies so I'll use their income statements as an example because they are similar in a lot of ways and it's hard to get clean financial numbers from the labels. Only 10-30% of the costs of ANY software company is in the actual engineering and manufacturing. The rest is sales, marketing and overhead. Varies a little depending on the company but it's pretty similar. Don't take my word for it, look [yahoo.com] it [yahoo.com] up [yahoo.com]. I expect the music indu
Costs too much (Score:4, Interesting)
Re:Costs too much (Score:5, Insightful)
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.
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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
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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
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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
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Correction (Score:2, Informative)
Consumer expectations of pricing (Score:3, Insightful)
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?
'bout time, music really is a commodity item (Score:5, Insightful)
Reap What You Sow. (Score:4, Interesting)
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 (Score:5, Interesting)
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)
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)
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.
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Memo to Record Labels (Score:5, Insightful)
Boo-fucking-hoo (Score:2, Insightful)
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
Difference between CD and DVD (Score:4, Interesting)
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.
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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).
Artists should make the most money, not the label (Score:3, Insightful)
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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
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The burden of risk is the most expensive thing thing in the economy. It is more expensive
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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)
Old news, but still relevant. (Score:4, Interesting)
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.
Is it THAT big a deal? (Score:4, Interesting)
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 (Score:3, Interesting)
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? (Score:4, Interesting)
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?
Comment removed (Score:3, Interesting)
Comment removed (Score:3, Insightful)
How the talks really went (Score:3, Interesting)
no wonder they are in trouble (Score:3, Insightful)
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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Not the way things were intended to work (Score:3, Insightful)
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(*) 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. Som