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FTC Settles With Big CD Makers-Cheaper CDs Coming?

Hemos posted more than 14 years ago | from the could-be-maybe dept.

United States 152

kid_wonder writes: "The FTC today announced that they had '... reached separate settlement agreements with Universal Music and Video Distribution, Sony Corp. of America, Time-Warner Inc., EMI Music Distribution and Bertelsmann Music Group (BMG), the five largest distributors of recorded music who sell approximately 85% of all compact discs (CDs) purchased in the United States to end their allegedly illegal advertising policies that affected prices for CDs.' "

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Lower Prices? (2)

nothng (147342) | more than 14 years ago | (#1079570)

This doesn't actually mean prices for cd's are being lowered. What it means is resellers now have the right to have "sales" on cd's. It may take a while for consumers to benefit from price wars if all the resellers decide to keep prices high. Second thing that could happen is this could be good for large resellers but small business owners may suffer if they can't afford to match the prices of larger resellers who buy bigger quantities and have less overhead. It is potentially good for the customers but perhaps bad for small business

Oh my god! (1)

the_other_one (178565) | more than 14 years ago | (#1079571)

Oh my god It'S flatlined!

Quick! Call the Code Blue!

Re:This explains alot (1)

luckykaa (134517) | more than 14 years ago | (#1079572)

CD prices are set at the price that the record companies think people will pay. Cost of production doesn't make a difference.

If you ask me, its no good buying a CD and then complaining about the price. Obviously you could afford it.

Re:This explains alot (1)

rebbie (165490) | more than 14 years ago | (#1079573)

In quantities of only a couple of thousand you can get music or data CDs pressed and inserted into jewel cases (with multi-color printed sleeves) for around $1.

Re:Japanese CD prices (1)

BoneFlower (107640) | more than 14 years ago | (#1079574)

Actually most, at least a year ago, hovered around the 3000 yen mark, or just under 30 bucks. Though I did find all three Beatles anthologys for 1800 yen once, that was during the economic problems so that was less than 15 bucks each at the time

Re:A tough one for libertarians (1)

Obasan (28761) | more than 14 years ago | (#1079575)

It's not as simple as you make it sound. Yes, you can probably buy a local band's music for a reasonable price. However, if that local band ever wants to be able to move beyond it's local band status they HAVE to sign a contract with one of the RIAA's member companies. At that point they also sign away any rights they have to distribute their music on their own, regardless of whether they _want_ fans to have access to their music at fair prices.

The libertarian recourse in this sort of situation is typically that they should "start their own distribution company". Small, starving start up bands don't have these kinds of resources, if they did they would have done it all ready. This is one area where Libertarianism is terribly naive.

Because of the monopoly status of the RIAA musicians have only two choices. Either remain insignificant forever, or sell out to the recording industry.


If a tree falls in the forest, and kills a mime, does anyone care?

Re:A tough one for libertarians (2)

Sloppy (14984) | more than 14 years ago | (#1079576)

it's hard to vote with your pocketbook when there's no competition.

There is competition, and it's on two fronts.

First, the consumer can choose not to deal with the retailers. Just as an example, specialized places like Century Media [centurymedia.com] sell for $11 per CD for things on their label, and $12 on other labels. And of course, CDs from mp3.com [mp3.com] is even cheaper and carries a much wider variety of genres. These also have a secondary advantage in that they have a lot more selection that Best Buy. I recall browsing through Best Buy several times, and for all the CDs they had, they just didn't .. well .. have anything.

The second front of competition is one that is still just emerging, thanks to technology and The Internet. The creators of music have the option of not dealing with the big media companies. Independent production is possible now without requiring too much capital, and The Internet is capable of competely obliterating the distribution problem. Musicians have a choice of whether to deal through the big labels and retailers, or going indy and selling other ways. Up to now, that choice has been quite lopsided. But that's changing fast, and it may soon be lopsided in the other direction.

I suppose one might argue (as many have) that the MP3 explosion did represent a popular response to the problem. But that too is outside the libertarian system which, if I recall, does respect IP.

Keep in mind that there's two sides to the MP3 explosion. It's not just about disrespecting IP (as mp3.com showed prior to their dumb idea of offering the my.mp3.com service). I don't see any reason why MP3s (or something like them, such as Ogg Vorbis [xiph.org] files) cannot be sold, and they've already proven themselves for marketing and promotion outside of the megacorps' channels (MTV, radio, etc).

(BTW, although I consider myself pretty libertarian, I must admit that I'm sometimes stumped as to how the market can fix certain types of problems. I just think that the current music situation isn't one of those cases.)


CDs have been overpriced for years (3)

miguelitof (67742) | more than 14 years ago | (#1079581)

It is amazing to me that the record industry has been able to fleece consumers for so many years. How long has it been cheaper to produce CDs than cassettes? Five years? Ten years?

When stamping CDs in bulk, the cost is next to nothing. I don't have any references off-hand, but I am positive that it is actually less expensive for the record companies to produce a CD than it is to produce a cassette.

So if the record companies can make a profit when cassettes are sold for $10, doesn't that mean that the extra $5 for a CD is pure profit? Doesn't that mean that the music companies have basically been sticking consumers $5 a pop for the millions of CDs that have been sold?

It's no wonder that the music industry so fears online music. One way or another, it is signalling the end of their consumer fleecing.

ah the irony (2)

briancarnell (94247) | more than 14 years ago | (#1079582)

Is anybody still selling CDs as loss leaders? Regardless the whole reason this policy was created was to protect small mom and pop music stores from large electronics chains such as Best Buy, etc. who were selling CDs at a loss in order to entice customers into the stores. Most of those retailers abandoned that practice after they grew their customer base sufficiently, and I doubt they'll be going back to it any time soon (i.e., this will probably have very little effect on the price of CDs, which are already very low anyway).

excellent news! (1)

acehole (174372) | more than 14 years ago | (#1079583)

now i can buy alvin and the chipmunks greatest hits on cd without worrying about the price!


Re:Before you americans complain about cd prices.. (2)

fishbowl (7759) | more than 14 years ago | (#1079584)

>...spare a thought for those of us in the u.k.
>who (sometimes) buy a cd for around 17 pounds
>(probably about 30 dollars).

Silly brit, the most mundane UK import costs
$30-50 in the USA.

Quality of CDs (2)

The Dodger (10689) | more than 14 years ago | (#1079585)

I've been using CDs now for a long time, and I believe that the quality of the CDs themselves (i.e. the physical production quality, as opposed to the music quality) has declined over the years, to the point where the CDs I buy today don't last as long as ones I bought ten years ago... They're thinner, scratch easier, etc.

Anyone else have similar experiences?

..is for DJ Dot!

Not so clear-cut (5)

NMerriam (15122) | more than 14 years ago | (#1079586)

I know that the instant reaction is "hooray", and ultimately this will result in lower proces at places like Best Buy (remember when they used to sell new releases for $9.99?).

But this isn't necessarily the case of record companies gouging consumers, so much as record companies "protecting" stores.

Every store buys their CDs for pretty much the same wholesale price (maybe $11), and the MSRP is $15-20. But Best Buy was a new kid on the block and was will ing to lose a dollar on every CD to get you in the store, hoping you'd pick up a CD player or a video game while you're there.

Now this sounds like a good deal until you realize that a Record Store can't sell their music for less than what they paid, and essentially have no chance of competing with a megastore that can treat music as a loss leader. So record stores have been closing, and our musical choices at Best Buy are (needless to say) more along the lines of Britney Spears than Indy Imports.

Granted, this is pretty much the same issue as brick-and-mortar places will face in regards to online retailers offering significant discounts, even willing to lose money to build business the same way best Buy did the first few years.

But economics doesn't go away just because CDs are cheaper for a few years. What happens when everyone but Best Buy (or CDNow or whoever) has gotten out of the CD business? When all the local record stores have closed, and Best Buy decides to start charging $15/CD again? You're screwed, because there's no more record stores. Best Buy can survive a war of attrition a lot longer, and once they win they have no requirement to keep the proces low.

Not that this will necessarily happen (in fact i consider it unlikely simply because online retailers will always be available for CDs at the lowest retail cost).

But it isn't an imaginary fear that the record stores have -- look at the stores that have closed in the wake of the Wal-Martization of america...

Re:I wonder if you have the same problem with DVD' (1)

toupsie (88295) | more than 14 years ago | (#1079587)

Actually the prices of DVD movies, to me at least, are fairly reasonable when compared to music CDs. I usually pay about $19.95 for a DVD movie and $14.99 for the music CD. Concidering that the DVD is a chuck full of data compared to the music CD, the DVD is a better value. About my only concern about DVDs is the potential to force me to buy advertising along with the movie I want. Even though I work for a magazine and a TV network, I am pretty much tired of seeing advertising being rammed down my throat at every turn. My freaking apples from the bodega have dot com ads on them!!!

Hmmm (1)

mobiux (118006) | more than 14 years ago | (#1079588)

You gotta wonder how these companies can reach a settlement, but they claim not to have broken the law, and don't have to repay anything. Sucks for consumers.

Before you americans complain about cd prices.. (5)

pallex (126468) | more than 14 years ago | (#1079591)

...spare a thought for those of us in the u.k. who (sometimes) buy a cd for around 17 pounds (probably about 30 dollars).

Cant think why mp3 sites are so popular...

Would it be ironic (3)

the_other_one (178565) | more than 14 years ago | (#1079594)

If the resulting lower prices reduced pirating, increased cd sales and made these companies more money.

Do unto others (2)

Anonymous Coward | more than 14 years ago | (#1079596)

You see, its OK for the recording industry to screw consumers, but it's not OK for consumers to trade music over the internet because it costs the recording industry too many lost sales. Whatever.


CD prices are so high because of the lawyers... (1)

kwsNI (133721) | more than 14 years ago | (#1079599)

Maybe these companies should charge less for their CD's and fire some of their lawyers, fire NetPD and drop some of their stupid lawsuits.


Probably not cheaper CD's (3)

uqbar (102695) | more than 14 years ago | (#1079600)

This agreement has more to do with allowing mass merchandisers to advertise their low, loss leader prices without losing ad dollars from the majors. So in certain ways it's a blow to stores that deal exclusively in music. They sell only music, and make their money at this, while stores like Best Buy really just want to sell you a new Microwave.

Exactly (1)

nicedream (4923) | more than 14 years ago | (#1079603)

Most of the music I listen to is on small independent labels (Fat Wreck, Honest Don's, Lookout, Mutant Pop). These cds sell for $9-$12, and often that includes shipping. You would think that MASS PRODUCED cds would have much lower prices.

But they don't, and I think this settlement gives us a glimpse as to why.

Re:CD Production Amounts to an Oligopoly (1)

Dell Brandstone (127568) | more than 14 years ago | (#1079604)

Perhaps we should collect our mp3s at a higher quality and then just send the cash directly to artists? They get more money, we don't have to leave our homes, and it removes that pesky, bloated middleman.

The big distribution companies would hurt, but they have taken in a fair bit of cash already, and I like the idea of being able to pay half the price for a CD and give the artist three times what the would get had I bought music at a store.


Cheap CDs==Bread and Circuses (1)

laborit (90558) | more than 14 years ago | (#1079605)

Open your eyes! This is a government-initiated plot to kill Napster et al. -- if THEY can initiate a CD price war, music downloads will decrease as purchases become easier. With the MP3 fans placated, there will be far less popular support for Gnutella and Freenet! Used only by a small population of privacy-lovers and computer-intelligensia, these powerful tools for anonymity and privacy abandoned will be easy pickings for the Jackbooted Thugs! Then they'll come for /., and then for my precious bodily fluids!

Friends, we must RESIST this manipulative plot! Don't be bought with the promise of cheap music! Rise up and DEMAND your right to be overcharged for CDs!

Re:CD Production Amounts to an Oligopoly (1)

Maxintern9 (146292) | more than 14 years ago | (#1079606)

Can you cite actual proof for those figures? I'm not being crabby, it's just that everybody throws them around. As far as I know, the profit margins for these companies is in line with other businesses. If they really have such extraordinarily profitable business models, though, why don't more people enter the market? Just wondering.

yea (2)

jbarnett (127033) | more than 14 years ago | (#1079607)

The FTC estimates that U.S. consumers may have paid as much as $480 million more than they should have for CDs and other music because of these policies over the last three years.

No wonder the RIAA hates .mp3 so much, $480 Million

That is a huge rip off man..

Re:CD Production Amounts to an Oligopoly (1)

the_other_one (178565) | more than 14 years ago | (#1079608)

You may be forgetting about some unsanctioned mind altering substances.

Ah the good old days of Columbia House Mail Order (1)

nospoon (126741) | more than 14 years ago | (#1079609)

CD Prices aren't high - look at Columbia House I have bought hundreds of CDs from them at 11 for a penny! I think I've spent a total of about .20 for my entire collection of over 200 CDs! - but it does get harder and harder to think up fake names - maybe i should try Slash Post (the first) or OOG OS CAVEMAN

Re:CD prices are so high because of the lawyers... (2)

streetlawyer (169828) | more than 14 years ago | (#1079610)

A moment's thought about the magnitudes involved would show that this couldn't possibly be true. If legal services were a significant factor in making CDs more expensive then 1) it would be the legal practices making huge supernormal profits, not the record companies, and the FTC would have no case against the record companies. 2) Music industry lawyers would be as rich as rock stars; there are rather fewer lawyers working in the entertainment industry than there are recording artists with record deals. 3) Utterly implausible things would have to be true about the economics of CD manufacturing. But of course, a moment's thought is far too much for the average slashbot.

Japanese CD prices (1)

meta4 (4862) | more than 14 years ago | (#1079611)

UK folks have nothing on Japanese CD prices, where one disk can easily set you back 4300 yen (40 bucks or so). Ever tried importing one of these babies? Get ready to shell out $50 per disk.


Re:How many of you think.... (2)

[docgui] (151663) | more than 14 years ago | (#1079620)

I have a better theory for you. This is imunization from consumer class action AND getting the Feds off their backs. If the FTC found them guilty it would expose them to the ligation of the millions of consumers who got fleeced. Imagine if they had to pay even some of that money back to consumers in some kind of mass settlement.

Hmmm kinda sounds like what a company in Redmond might experience.

Re:Before you americans complain about cd prices.. (1)

yankeehack (163849) | more than 14 years ago | (#1079621)

Are your figures including sales tax and whatever else?

Re:Probably not cheaper CD's (1)

John_Booty (149925) | more than 14 years ago | (#1079622)

True, but merchadisers will be more willing to offer those low, loss-leaer prices if they can actualy advertise them. Not much incentive to cell a new CD at $11.99 just to get people in your store if you can't actually, uh... tell anyone about it.

There might be a downside to this plan... smaller, cooler record shops can't compete on price with the big boys (economies of scale and so forth). Sometimes the smal shops are the only places you can find independant, imported, or just plain cool music... Wal Mart's nice if you want the new Trisha Yearwood CD (ack), but what if you want the latest import Blur or Super Furry Animals single?

Now what's the excuse (4)

Anonymous Coward | more than 14 years ago | (#1079623)

Gee, so if prices drop down to $10 US, what excuse will all the Napster kiddies use? I know, they'll just insert the new price and make the same argument! "Dude, CD's are way overpriced at $10 bucks. I'd buy them if they were priced at $5, they way they should be." Moderate away

Mp3 to Vinyl (1)

burgatron (65985) | more than 14 years ago | (#1079624)

I know a little of topic.... What will the record companys do about the Kingston dubplate cutter [vinylium.ch] ?. I know i'll be cuttin some of my mp3 collection to vinyl. Will we see the dinsour record companys try to kill this wonderful invention ?

Re:CD Production Amounts to an Oligopoly (1)

Fleet Admiral Ackbar (57723) | more than 14 years ago | (#1079625)

Can you cite actual proof?...

Well, my brother has played on a variety of Sony and MoJazz albums, and his ska band just turned down a Sony contract because they wouldn't see any money from the disks until they sold approx. 75,000.

I know a lot of musicians, particularly, jazz ones, who lost money selling 50,000 CDs.

Not sure if that falls under "proof", but that's where my numbers/info come from.

Re:This explains alot (1)

richieb (3277) | more than 14 years ago | (#1079635)

If you ask me, its no good buying a CD and then complaining about the price. Obviously you could afford it.

But people are not buying CDs, instead they swap MP3s on Napster. Why do you think Napster is so popular?

What do the record companies do? Lower prices? No. They send their lawyers to stop Napster...


On the contrary... (1)

luckykaa (134517) | more than 14 years ago | (#1079636)

To increase sales you need to set your price at a more competitive level. mp3's are free. Therefore CD prices should cost less than an MP3

What I want to know is... (1)

RomulusNR (29439) | more than 14 years ago | (#1079637)

...can I now sue these record companies for "losses" incurred by purchasing their illegally priced CDs?


Re:This explains alot (1)

CoreWalker (170935) | more than 14 years ago | (#1079638)

I could also afford a $5 cup of coffee, but that doesn't mean it's not grossly (and unfairly) over priced - ESPECIALLY if that price is being fixed by the coffee bean growers. Sure, I can afford to buy a cd at $17, but I could probably afford 2 cd's at $10 a piece. Think of how big your cd collection is, and then think that, for the amount of money you spent, it should be almost twice as big. Sounds like a good reason to complain to me.

The Entertainment Industry is a Cartel (4)

dave_aiello (9791) | more than 14 years ago | (#1079639)

As I said in my story submission on this subject (that was rejected), U.S. Federal Trade Commissioner Robert Pitofsky said, ""The FTC estimates that U.S. consumers may have paid as much as $480 million more than they should have for CDs and other music because of these policies over the last three years." If you turn over your envelope and do the arithmetic that's nearly $2 stolen by the recording industry for each man, woman, and child alive in the United States today. And this is just over the last three years.

It's so obvious why the recording industry settled this case. Taking it to court would have raised the profile of the case, and eventually some journalist who thinks for himself would have asked the inevitable question: Is the mp3 issue the biggest problem facing the entertainment industry, or is the real story that the entertainment industry takes every opportunity to act in unison, to the detriment of the consumer.

I argue that we ought to be looking at a lot more than CD prices here. What about the price of movie tickets? What about the cost and features of your local cable television monopoly^H^H^H^H^H^H^H^H service? What about the retail cost of (ahem) Microsoft Windows and business applications for the PC when they are not bundled into a PC at purchase?

There are dozens of examples of consumer goods and services where no effective competition exists, at least in the industrialized countries. I am not as much of a populist as it might seem from what I've said. But, the least these multi-national companies could do is to let the retailers compete on the price.

Dave Aiello

It really sounds like payola too (2)

Randy Rathbun (18851) | more than 14 years ago | (#1079640)

Last night, on All Things Considered [npr.org] they had a really wonderful story about the thing. Check it out (ya need Real Audio).

Basicly, the record companies pay for the ads that the stores run, but they will only pay for the ad if the store does not advertise a price below what the record company wants it to be sold at. Well, call it price fixing or whatever, but payola is payola.

The story also goes into MP3s and how people are really fed up with paying $17 for a crap CD with one good song on it.

Re:Before you americans complain about cd prices.. (1)

Dusty (10872) | more than 14 years ago | (#1079641)

>...spare a thought for those of us in the u.k. who (sometimes) buy a cd for around 17 pounds (probably about 30 dollars).

The last CD I bought in the uk, was for three for 18 ukp. But since I opened an account at amazon.com I haven't paid over 10 ukp for a single CD, including postage. Shame they don't get all the uk releases though.

Re:They should raise the prices! (1)

Misch (158807) | more than 14 years ago | (#1079642)

Are you sure about that?

RIAA reports [riaa.org] units shipped:
1997 753.1 Million
1998 847.0 Million
1999 938.9 Million

True, these are number of units shipped (not bought), but still, demand doesn't seem to be dropping off... I don't think they'd increase shipments by 12% if the demand wasn't there... Even more funny... there's a reported "cash value" of these CD's there too...
1997 $9,915.1 Million
1998 $11,416.0 Million
1999 $12,816.3 Million

And even funnier still, taking the "cash value" per unit...
1997 $13.17
1998 $13.48
1999 $13.65
Not a pretty trend, huh?

spot the troll (1)

EnderWiggnz (39214) | more than 14 years ago | (#1079643)

ok... i'll bite on this troll

THe cost to manufactur a cd is significantly less than it is to manufacture a tape, let alone a good old vinyl LP (mmm... I love vinyl).

THey use the same master recordings, so there isnt any increase in marginal cost, the cost to produce each additional unit.

so then the question becomes why on earth do CD's cost $4-6 more than they're cassette counterparts?

In the late 80's the records companies phased out vinyl in favor of cd's. Supposedly, there was a higher production cost for CD's at this time, and the recording industry being the nice guys that they are, they passed the increase onto us, and promised to lower CD prices once the production costs fell...

Well, production costs fell, but the CD prices didnt... go figure...

and as for lowering sales... well... the recording industry had an 8% increase last year... one of their best years ever. So there is no evidence that there was a negative effect from MP3's...

The Recording industry should learn from the software industry on this one...

A friend of mine's father is a VP at MickeySoft, and the unofficial stance at MS is that low-level non-commercial "pirating" i.e. you giving your friend a copy of Windows or whatever, actually is beneficial to MS in the long run.

As in - you're gonna end up buying SOMETHING from them eventually....

Now the large scale bootleg software that is SOLD... there is a problem with that...

Re:Reminds me of my comment to Metallica (1)

Hammer (14284) | more than 14 years ago | (#1079644)

With the introduction of the CD the average price jumped 35-50% even though the total cost of producing,distributing and selling a CD is 3-5% lower than the old 12" vinyls...
And we are supposed to cry over pirates...

Is there really a disparity? (2)

Danse (1026) | more than 14 years ago | (#1079645)

Is it just US imports that are expensive in the UK, or is it all cds? If it's all cds, then whose fault is it really? UK imports purchased in the US also cost an arm and a leg, usually from $30 on up. Pretty much any Euro imported cds are priced similarly. It would seem like both sides are getting screwed on the imports, and this case seems unlikely to affect that.

Re:This explains a lot (1)

CoreWalker (170935) | more than 14 years ago | (#1079646)

I only checked one company, if you go here [oasiscd.com] you'll see that for $3485 you get 5000 pressed cd's (no jewel case or sleeves). That's about $0.70 a piece. Considering how pathetic artist royalties are, this means a ridiculous profit margin for record companies (or whomever). The only thing I know of with a greater profit margin is soda (profit: about $0.95 on the dollar!), but at least in most restaurants they give you free refills.

This is a Red Herring (1)

carlhirsch (87880) | more than 14 years ago | (#1079655)

The fact of the matter is that CD's produced my major labels will always be incredibly overpriced. It's intrinsic in the business model of multinational media corporations.

A CD costs around a dollar to produce, including mastering, production, and printing/packaging. This price goes down farther when you start manufacturing in volumes like a Sony or BMG produces.

Corporate labels gouge customers and the product they offer often ranges from lackluster to poor. Why bother when you can get a better product from an independant label for less? I would liken it to open source software. Why buy crap from BMG/Microsoft when you can obtain a better, cheaper product from a Touch & Go/Red Hat?

And you can't argue that good independant music is hard to find. Look in a locally owned music store instead of a Coconuts or Tower. And the Southern Records consortium distros lots of great indie labels.

Basically, there's no reason to settle for crappy, overpriced CDs.

Just out of curiosity (1)

the_other_one (178565) | more than 14 years ago | (#1079656)

How long have you been working for the music industry?

Exemption from antitrust? (3)

sphealey (2855) | more than 14 years ago | (#1079657)

Does the entertainment industry (in the USofA) have any sort of statuatory exemption from antitrust regulation, similar to that held by major league baseball? As a non-lawyer, it seems to me that many things the recording industry does (DVD "regions" comes to mind, as does SCMS) are gross violations of antitrust regulations and potentially vulnerable to class-action lawsuits on behalf of _all_ consumers. Am I missing or misinterpreting something here?


Re:Before you americans complain about cd prices.. (1)

e7 (117450) | more than 14 years ago | (#1079658)

An' if you buy stuff on eBay the prices are even more inflated. Case in point: the Gumby tribute album. Go ahead and laugh, but somebody paid $26 US [ebay.com] for it ... this is a hunk of plasticine we're talking about. :-)

Capitalism at work. Reduced speed - double fine zone.

Re:Before you americans complain about cd prices.. (2)

waldeaux (109942) | more than 14 years ago | (#1079659)

..spare a thought for those of us in the u.k. who (sometimes) buy a cd for around 17 pounds (probably about 30 dollars).

... so, if we work to get CD prices lowered here, then maybe just maybe the price would also go down in the UK (and Canada, and elsewhere) too.

Re:CD Production Amounts to an Oligopoly (2)

Kintanon (65528) | more than 14 years ago | (#1079660)

If you check out 'Behind the Music' on VH1 for a lot of bands, including TLC, you will find out that they make pretty much dirt from CD sales. TLC made $.50 per CD, divided among the 3 group members. And they had to pay all of their own production costs. So they sold 5 million CDs and were broke.


Re:A tough one for libertarians (1)

Fleet Admiral Ackbar (57723) | more than 14 years ago | (#1079661)

This is the kind of situation I'd like to see
libertarians explain away

Well, in any business you have "barriers to entry." The barriers to entry in the lemonade-shop business are low. The barriers to entry in the aircraft-carrier-production business are high.

The barriers for CD distribution are not necessarily high, so anyone who has, say, half a million bucks could probably do it. However, with this as in all other businesses, government intervention (taxation, interstate commerce regulation, et al) raises the barriers to entry. Since the music industry is notoriously sue-happy, you would have to be very careful about entering any facet of it without a substantial legal defense fund. In the ideal libertarian world, you and I could start a distribution service and enjoy unfettered access to the retail channels.

The libertarian response to the MP3 problem, as it is to many things, is a "can't beat them, join them" response. In a libertarian world, music companies who wanted to compete with MP3 would create a reasonable, fair, low-cost MP3 system. In the Democrat/socialist view of things, the companies run to the government/legal system and beg for protection, and they'll get it, just like China will get their most-favored status no matter what! (with the exception of importing firearms, of course. It's okay to have a kid shackled to a sewing machine, but not to have inexpensive firearms available to Americans.)

Re:CDs have been overpriced for years (2)

The Roach (181025) | more than 14 years ago | (#1079662)

Well, if you look at the numbers involved. According to the quoted site, US customers over paid about 500 mio. on a total volume of 15 bio. - that translates to roughly 3.3 per cent.

Also, the prices have increased, there is no mistaking that. The artists, authors and everyone is paid more - they also have to pay more for their living. I don't begrudge them that.

Yet I cannot help but wonder how much of the money remains with the different steps of the channel - out of the, say, 40 DEM or NLG I pay for a CD, how much does the retailer retain, how much the other salespeople, how much the record company - and how much reaches the creative people? And 'creative' includes authors, cover designers etc....

Re:Not so clear-cut (1)

nostrodecus (65186) | more than 14 years ago | (#1079663)

problem is that the wholesale price is too high. large record stores (or online retailers) should be able to get volume discounts. if a corner record store sells 35 copies of a CD and virgin sells 50,000 copies of the same CD, shouldn't virgin get a volume discount?

well yes in any other industry, but the record companies have refused to budge on the issue. it's not hard to see why - with no competition to their monopoly on distribution, they have no need to. they'll get the $550,000 out of virgin anyway.

IMHO this is a Good Thing(TM) not just becuse record companies are evil (even though they are) and not just because it's gonna cost them money (even though it will - wait until the class action lawsuits start), but also because it's just one more small step in the irreversable decline of their power. less power for Them (TM) is more power for Us.

This hurts small buisnesses... (1)

nuxx (10153) | more than 14 years ago | (#1079664)

Remember back in the early 90's when Circuit City, Best Buy, and other such stores had CDs solely as loss leaders? They would sell disks for prices sometimes as low as $10 just to get customers in the door. When the cost price of a disc (from distributors) is usually $10.50 - $11.50, small, independant stores just cannot compete. What we need to do is start shopping smaller outlets. Don't blindly concern yourself with price alone, else before you know it we all will only be able to buy what Mr. Corporate Music Outlet deems to be our favorate song this week.

Disgusting (1)

GSearle (40628) | more than 14 years ago | (#1079665)

And Big Music is wondering why pirating MP3's is so popular. Sheesh! Wake up and smell the consumer disgust! They're disgusted with the whole system. I'd love to download only the music I want, and pay $1 for each song DIRECTLY TO THE ARTIST.

There are too many middlemen who are getting too rich, while the artists get sucked into unfair contracts. Let them sell CD-burners, MP3 devices, and music download services instead, and see if they can survive REAL competition. This is where the future lies.

Re:well, not really... (2)

Danse (1026) | more than 14 years ago | (#1079666)

True, but with the rise of sales, the record industry will have a difficult time proving harm in their various mp3-related lawsuits. Granted, it might not be a requirement in every case, but if it is, i'm not sure how they would offer proof of harm. Same goes for the MPAA in their DeCSS lawsuit. I hope the injunction against the defendants is overturned due to the fact that there is simply no evidence of "irreparable harm" to the movie industry.

End Result (1)

LazloTheDog (39236) | more than 14 years ago | (#1079667)

While the initial reaction to this news for a consumer is "Yippie, cheaper CD's!" The end result of this ruling is that the retail CD market will become dominated by a few major players (read- Big Corporations). I worked in the music retail/wholesale for 5 years and the profit margin at that level is small compared to other business'. When Best Buy et al were using loss-leader tactics it was just killing everybody in the business.

Save a couple bucks on your Cd's and say hello to limited choice and corporate domination.

Jonathan Moran

I can sell 'em cheap worldwide -- so can Sony. (1)

YIAAL (129110) | more than 14 years ago | (#1079668)

I have a small indie record company. I make CDs for $1.50 with full color booklets, tray cards, etc. that look and sound as good as major releases. I also sell through MP3.com (click above to see an example) for $6.99; they handle credit cards, shipping, and manufactruing and give me half. All I do is upload songs and graphics files. If that's not proof that retail CDs are ridiculously overpriced, I don't know what is.

used cd's (1)

lubricated (49106) | more than 14 years ago | (#1079669)

For the longest time now I've been buying used cd's in my area. I remember there was a time a while ago when the recording industry tried to prohibit the sale of used cd's. This ended up backfiring. I hope that napster will force the price of cd's down to where the used ones are now. They are just to damn expensive. I'm just glad I live in an area where there are 5 that I can think of used cd store's and probably plenty more. It's also alot like mp3s you get to find alot of good old discontinued stuff. Plus the stuff costs alot closer to what it's supposed to cost, $5-9.

Reminds me of my comment to Metallica (2)

Dungeon Dweller (134014) | more than 14 years ago | (#1079670)

I said in the Metallica story that CDs are too expensive. You would figure that since the medium is so cheap, they would be about the same price at tapes used to be. Prices jacked up all over. What the hell do they think they are pulling? Really think everone is going to pay thousands of their salary for a few crappy CD's?

well, not really... (1)

The Queen (56621) | more than 14 years ago | (#1079671)

...since the rise of piracy and mp3s, record sales HAVE gone up, even without lowering the price. That's one of the major arguments in favor of free music...it doesn't really seem to be hurting anybody's sales at the moment. The lowering of CD prices will only continue the trend, IMHO.

The Divine Creatrix in a Mortal Shell that stays Crunchy in Milk

And They Wonder (1)

buzzcutbuddha (113929) | more than 14 years ago | (#1079672)

Why we use Napster or Gnutella to get our music...

How many of you think.... (4)

nicedream (4923) | more than 14 years ago | (#1079675)

How many people think that this is just a quick fix by the record companies to get the feds off their back? Maybe cd prices will go down, but I can't see the prices going down any more than a dollar or two, but nowhere near where they should be.

In other words, this is probably just for show. Then when mp3 pirating continues, the monopolistic pricing excuse just won't be able to hold up.

This explains alot (3)

acomj (20611) | more than 14 years ago | (#1079678)

I think CDs actually cost less to make than tapes (in large quantities).. I always wondered why they were so expensive... I underestood it when they came out (late 80's) because of limited capacity, but now?
I also found it odd that some small bands sell there CDs at 10$ a pop for a small cd run, vs 18 dollars for a mass produced cd. I couldn't figure out how the additional promotional/engineering/mixing cost would not be offset by the "mass production"

This explains it.. Illegal tactics al-la microsoft.

I wonder if you have the same problem with DVD's (2)

SuperKendall (25149) | more than 14 years ago | (#1079680)

They didn't mention DVD's in the article, but it would seem that the arguments for cheaper CD's could also be applied to DVD's - I wonder if this descision does apply to DVD's, or if they have the same kinds of issues with a lockdown on advertising below a suggested price.

Fight Fire with Fire (1)

sherpajohn (113531) | more than 14 years ago | (#1079681)

If I was an American I would be screaming "CLASS ACTION SUIT!" against these compandies. But I am a Canadian, so can I just have another beer and a backbacon sandwich please?

Going on means going far

Re:I wonder if you have the same problem with DVD' (1)

SuperKendall (25149) | more than 14 years ago | (#1079686)

DVD's are starting to wander up to about $30 for really well-known new releases (like the Sixth Sense), which I think is a bit high.

I think even $20 is a bit much. Between dvdpricesearch [dvdpricesearch.com] and mobshop [mobshop.com] , I usually pay about $15 for a DVD. I do realize though that we probably have to pay a bit more for good transfers and interesting extras! I've been wondering if directors and stars do commentaries for free (doubtful!), or if they have to be payed a lot to do a commentary track. Perhaps they gain an increased percentage of sales.

Re:CD Production Amounts to an Oligopoly (1)

Fleet Admiral Ackbar (57723) | more than 14 years ago | (#1079687)

No wonder Left Eye burned down Andre Rison's house!

I admire that guy... when they asked him about staying with her despite his $2.5 million loss, he said, "I can replace the money, but I can't replace her"

The course of true love never did run smooth!

Re:You money at work (1)

um... Lucas (13147) | more than 14 years ago | (#1079688)

*: To get the four to six dollar estimate, I am considering a $0.50-$1.00 cost of manufacturing and then a much larger advertising and distribution budget.

tell me this: Why does a red hat CD cost $50-$120, depending on the version? Why does a Windows 2000 CD cost $300? And why does Netscapes Application Server run $35,000 for the CD? They all cost exactly as much as a music CD to produce, except some of them come in bigger boxes and have manuals... so add $.50 for the box, $1.00 for the manual, and that means that we should be seeing all software sold at Cheapbytes prices.

I mean, you're completely forgetting all the people involved in the CD... Go learn more about the record industry, or at least exactly what it takes to produce a CD, before you make up figures, please.

Re:Before you americans complain about cd prices.. (1)

Domini (103836) | more than 14 years ago | (#1079689)

How about this.

I could buy 5 CDs or a month of groceries...

Sickening. (But that's 3rd world for you...)

MAP agreements (1)

bperkins (12056) | more than 14 years ago | (#1079690)

With this statement by the FTC, it seems that they are saying that MAP agreements are generally illegal.

MAP agreements are widespread in the electronics industry and are used by Apple. What does this mean for them.

Re:Quality of CDs (2)

Lev_Arris (60782) | more than 14 years ago | (#1079691)

I definitely have made similar experiences. I'm working for a small Disco-Team here in Luxembourg and one of our CD decks is really picky about the discs it reads. It doesn't read CD-Rs, refuses scratched discs and don't even think about trying CD-RWs. Anyway over the years we've noticed that it refuses to read more and more of the newer discs. (The old ones are still fine)

The same applies for some of the CDs I've had on several mags. (I encountered some that were absolutely unreadable and I tried multiple different drives)


Re:Quality of CDs (1)

karnal (22275) | more than 14 years ago | (#1079692)

Of course, I'm not questioning cd-quality, but it's a possibility that the laser in your unit is going bad as well. I had a similar issue about 5 years ago -- playback just kept getting worse and worse. 100$ later, playing just fine, new laser and all...... and it still works to this day.

Re:Not so clear-cut (1)

Maxintern9 (146292) | more than 14 years ago | (#1079693)

One thing nice about the big chains is they have a tremendously better selection than the little stores ever had. This is great for consumers. Note also that the small shops still thrive in market niches like Used CD's and alternative shops..

.... (1)

Jasonv (156958) | more than 14 years ago | (#1079694)

As a Canadian who is going to be paying tax on recorable CDRs to offset the cost of people burning music CDs, I'd like to see the record companies give *US* money back to offset the $480 million they stole from us...

Re:End Result (4)

Alan Cox (27532) | more than 14 years ago | (#1079695)

Competition will I think help. The big vendors will continue to rip off the music stores who will continue to rip off the customer in self defence.

Independants and people looking for better margins will pick up music from outside the expensive megamedia cartel. This is classic business technique. You break into a new market by selling a product to the stores at a higher margin for them but similar RRP to the competition. The stores love you, they want to sell your product more so you get better coverage. If they make more selling one of your CD's versus 5 of the cartels whose CD's will they push. If small bands start granting cheap radio play deals to radio stations who are they going to play more of.

MP3 is just one of the tools, the time is about ripe IMHO for an incomer into the industry to make an absolute killing by making consumers and bands far happier. In fact if they were smart a group of big name bands probably ought to get together to found such a label and get out from under the thumb of the cartel.


Monopolistic Practices (1)

nharmon (97591) | more than 14 years ago | (#1079696)

These appears to me as being more like a version of OPAC for record companies. Everyone agrees on a price, and everyone gets to charge more for CDs, as a result of zero competition.

I think our current copyright laws contribute to the monopolistic practices of these companies. Basically, they have individual monopolies over the artists. And this is why the FTC's actions will be fruitless.

Essentially, if you want to buy a that new pop CD, you don't have a choice of who's CD you get. Meaning, you can't choose between producer A, and producer B.

And what's evn more strange is that feels perfectly normal! What if intellectual property laws were set up that does not allow an artist to give up their rights to music. Suddenly, there may be 5 different companies producing the new CD you're looking for. And with all this competition, prices go down, and people stop whining about piracy. Piracy is a result of price bloat!!! So instead of being reactive, we need to be proactive!

In my opinion, competition is good. Unfortunately, comporatism isn't into competition.

P.S. Did anyone catch the Tom Leykis show (talk radio) on Tuesday night concerning Metallica and Napster? Wondering where I can get a copy or maybe transcript of the show.

Too high everywhere (1)

browser_war_pow (100778) | more than 14 years ago | (#1079697)

It would seem like the internet should have been hailed as the greatest BLESSING ever by the recording industry. It gives the big labels the opportunity to cut prices almost in half and split the revenues 50/50 with the artist by cutting out the store from the equation. Add in ownership of the means of producing the cds by the lables and you get a golden opportunity for the recording industry. But then again I guess they are run by old foggies with the money to pay $17 for a popular cd.

Re:Monopolistic Practices (1)

ibpooks (127372) | more than 14 years ago | (#1079698)

Three words...GM, Ford, Chrysler.

Oligopoly happens all the time, and the customers have no choice but to take it up the ass.

Re:What about the UK? -- taxation?? (1)

sporkboy (22212) | more than 14 years ago | (#1079699)

I'm just a dumb american, but I thought the disparity was due to the taxation system in the UK (possibly the VAT?)

CD Production Amounts to an Oligopoly (2)

Fleet Admiral Ackbar (57723) | more than 14 years ago | (#1079700)

I can't think of anything sold today
which enjoys a higher profit margin than a music CD... except perhaps for software...

The sad thing is that, of the seven or eight bucks made by the music companies, only a dollar or so usually goes to the artist, and even that only after they pay their promotion fees et al. And then the poor artists are expected to turn around and serve as mouthpieces for the anti-MP3 folks!

Re:Before you americans complain about cd prices.. (2)

Dell Brandstone (127568) | more than 14 years ago | (#1079701)

Up in Vancouver, BC, Canada, I pay 13 to 18 dollars per CD. Most brand new CDs that come out are on sale for 13 dollars. 13.00 = $8.84 USD 18.00 = $12.24 USD

What about the UK? (3)

JamesSharman (91225) | more than 14 years ago | (#1079702)

If this is going to cause CD prices to drop for US customers this will further increase the (already significant) difference between CD prices in the UK and the US. It is already clear that the music distributors are taking advantage of strong import rules (as lobbied for by the music and film industry) to screw the British customer.

Even now, before this agreement you can expect to pay 50% more for a cd in the UK than in the US, does anyone know if this will affect prices across the board or will it (as I suspect) just serve to further increase the price difference between our countries? If this is the case what can we in the UK do to improve our situation, we are fed up with our own government supporting this kind of abuse of the British citizen.

Exactly the same situation exists for DVD (that is why I am strong support of the DeCss case) and for a while their was a strong import market until the police/ce (prompted by the government, who were themselves prompted by the US movie industry) raided all the distributors to enforce the region coding system.

Re:Hmmm (1)

nicedream (4923) | more than 14 years ago | (#1079703)

From the bottom of the page:

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation.

In other words they're wrong and everyone knows it, but this saves the gov't time and $$$ in prosecuting a case, and the record compaines don't have to actually admit to anything, technically.

You money at work (1)

First Person (51018) | more than 14 years ago | (#1079704)

At least in this monopoly we know where all the money is being spent - litigating against MP3, DeCSS, etc.!

On the bright side, if the record companies realize that the $12 (US) that they make on each $4 CD* is going to shrink to only a $4-6 margin, maybe one or two will embrace electronic distribution.

*: To get the four to six dollar estimate, I am considering a $0.50-$1.00 cost of manufacturing and then a much larger advertising and distribution budget.

I wonder... (1)

CoreWalker (170935) | more than 14 years ago | (#1079705)

how did a band like Fugazi (and all other Dischord label bands) manage to sell all of their cd's for under $10.00? Also, will this effect the cost of cdr and cdrw media? This would make it even easier for bands to create their own product and, along with mp3's, completely undermine the idea of record company and radio control over what people listen to. Now if we could only get rid of mtv (sigh).

Re:Would it be ironic (1)

Vaz (23672) | more than 14 years ago | (#1079706)

Tell that to R2 DVD publishers. They are ripoff. No wonder R1 DVD are cheap. Even you factor in delivery costs!

Re:A tough one for libertarians (1)

Obasan (28761) | more than 14 years ago | (#1079709)

In the ideal libertarian world, you and I could start a distribution service and enjoy unfettered access to the retail channels.

We could? Not if the major company requires retailers to agree not to deal with other distribution services, using their leverage and power as a monopoly leader to enforce the agreement. Eg. "You either deal only with us, or you don't deal with us at all." If the major company has a large enough place in the marketplace, no retailer will be able to abandon them completely and stay in business.


If a tree falls in the forest, and kills a mime, does anyone care?

Re:This explains a lot (1)

Maxintern9 (146292) | more than 14 years ago | (#1079713)

Then why don't you start a record company? Seriously, independent labels start up all the time. Why don't they undercut the big names by offering a reasonable profit margin? Answer: you are grossly overestimating the profit margins.

It's worth noting, too, that the gross profit margin for Coca-Cola (KO) last quarter was under 9%.

Re:Not so clear-cut (1)

e4 (102617) | more than 14 years ago | (#1079714)

I'm not quite getting your point. I understand the part about big corporations underselling the smaller stores to drive them out of business, but how do inflated wholesale prices factor in? Say the wholesale prices drop by $1, presumably the big chains and the little guys both get them cheaper. What if the price drops by $5? Or let's make it extreme and drop the price by $10. As the wholesale price drops, the profits become a bigger part of the retail price. If it costs me a buck to get a CD and I can sell it for $3, there's a lot higher profit margin than buying for $11 and selling for $13. Less risk for the little guy, and even Best Buy can't drop the price below zero. Not for long at least....

Re:Quality of CDs (1)

Fishstick (150821) | more than 14 years ago | (#1079715)

Yes, the most bothersome 'defect' I've noticed lately is that they seem to not be manufactured as well in terms of 'rotational balance'.

What I mean by this is that the disc wobbles a lot in my CDRom drive either because it isn't balanced or has a slight surface warp. Of course, this is more of a problem when used in a 48x CD reader than in an audio CD player. I've had problems where the drive buzzes very loudly and refuses to recognize that there is a disc in the drive at all. I've ended up pulling out an old 8x reader and using it to do ripping on another box because some of the CD's I've bought recently just can't be read on the 48x drive in my PC.

I'm sure the RIAA is all broken up about that, huh?

Actually, I've been thinking about setting up a machine to do just ripping/encoding anyway. I've got this P150 machine that I got from a friend as payment for helping put together a new box to replace this one. (hmmm... forgive me while I think outloud about this...) All I would really need is a cheap NIC so I could NFS mount a volume over on my file server to be able to dump the mp3 files when they are done. Wonder which distro I could use which would have a small enough footprint to fit on the 1.28 Gig drive I have in this thing? The biggest issue would probably be having enough drive space for holding the .wav data while it gets encoded. I'm assuming I'd have to use a local filesystem to rip and encode and then I could ship the finished mp3 files off to the file server, or maybe a NFS mounted fs would be fast enough if I went and got a 100 mbit NIC instead of a cheap 10 mbit card?

I would probably need to install X since I like using grip and would probably keep using it. I don't have the space for a monitor and keyboard and all for this so I'll set it up to export the grip window to my workstation's X server. Hmmm... (sorry for the OT ramble)

Re:A tough one for libertarians (1)

rreay (50160) | more than 14 years ago | (#1079716)

The distributors who own the vast majority of popular music were collaborating to fix prices at a level higher than retailers wanted to charge and customers wanted to pay. This is the kind of situation I'd like to see libertarians explain away.

Seems easy enough to do. With any purchase you have three choices, buy the product you want at the asking price, buy a substitute, or don't buy anything.

There are substitutes. Plenty of small bands that sell their own CDs at $10 a pop. Some labels do sell their music cheaply as well. Heck, some bands release free music.

Customers today do have the option to buy cheaper music, but they aren't using it. Instead they're paying what's asked and grumbling.

Re:CDs have been overpriced for years (1)

Deeter (180318) | more than 14 years ago | (#1079717)

So if the record companies can make a profit when cassettes are sold for $10, doesn't that mean that the extra $5 for a CD is pure profit? Doesn't that mean that the music companies have basically been sticking consumers $5 a pop for the millions of CDs that have been sold?

Actually, no it doesn't. Value, as expressed in price is a subjective thing. As an example, if I stumbled on a Diamond laying on the ground it would be worth as much as the diamond someone dug out of the ground at great expense and personal effort.

They can charge more for CD's because a CD is worth more to most people. Most people like the ability to hop from track to track, and the increase in sound quality that the CD brings.

Re:Do unto others (1)

coloneyb (168242) | more than 14 years ago | (#1079718)

which is actually quite funny - w/ the whole mp3 thing and all also cause in the Atlanta paper today it was stated that last year the 5 major record co.'s had a record 15 billion or something like that.

Re:Reminds me of my comment to Metallica (2)

Dell Brandstone (127568) | more than 14 years ago | (#1079719)

As the past few years have clearly demonstrated, nearly everybody does, in fact, blow their cash on high-priced music CDs. Where have you been? -DB

Re:Before you americans complain about cd prices.. (1)

anaticula (124949) | more than 14 years ago | (#1079720)

Sheesh. I thought records were expensive here in Sweden. I believe the 'standard' pricing for a CD here is 179 Swedish crowns, about £13 or $20, depending on what you're used to..

A tough one for libertarians (5)

laborit (90558) | more than 14 years ago | (#1079721)

The distributors who own the vast majority of popular music were collaborating to fix prices at a level higher than retailers wanted to charge and customers wanted to pay. This is the kind of situation I'd like to see libertarians explain away. Although I agree that many things are over-regulated, it seems like government intervention on antitrust grounds is in this case positive for the consumer and good for business (i.e., the retail businesses gain more than the distributors lose). A small group of companies were using their power to our detriment, while their wide-ranging IP rights made a selective boycott impractical. I can't see how market forces could have solved this one; it's hard to vote with your pocketbook when there's no competition.

I suppose one might argue (as many have) that the MP3 explosion did represent a popular response to the problem. But that too is outside the libertarian system which, if I recall, does respect IP...

- Michael Cohn
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