Universal to reduce CD prices

[STING2]

Popmartijn,

The first website you mention forgets and important factor "inflation". They neglect to show that if the average CD price in 1991 was 13 dollars, that inflation would have naturally elevated that price to 16 or 17 dollars by 2001. Instead the industry price in in 2001 per CD is only 14.64. I assume these are the wholesale price and not the final retail price that is sold to consumers. The final retail price sold to consumers was already at 15.98 in 1992.

Because they don't take into account inflation, they don't understand that CDs today cost less than they did years ago. The figures they use make my point even more.

Next is understanding when the economic recession started in the USA and to what degree it was a recession. USA GDP grew at a rate of nearly 5% throughout the year 2000. In fact, it was perhaps the the most explosive year for the economy, yet unit sales fell by 7% and revenue by 2%. So this idea that the recession is to blame falls flat on its face. The recession did not start until early 2001. At no time has GDP growth been less than negative 1% yet, in 2001 you have revenue decline of 4%. 2002 and 2003 have boosted that to 10% despite the fact that the economy recovered in 2002 and GDP is growing again. Were still seeing massive negative downturn in both Revenue and sales for the music industry.

Video Games cater to a certain market that has not really started to get into music. There is nothing to suggest that people watch more movies all of a sudden than listen to music so the DVD explanation also falls flat.

Bottom line, millions of people are downloading and burning their own CDs instead of going to the store to buy them. The more the technology to do this has become widespread, the greater the dip in sales.

Why go to the store to buy something you already have?

 

[EvolutionMonkey]

This is the result of file sharing which is essentially stealing. Obviously people bitch and complain about paying 20 dollars for a CD when they can get it for free and at the same quality off the internet. But 20 dollars is not a lot for a CD.

The fact of the matter is that CDs are cheaper than they were 15 years ago. I bought my first CDs at about 15 dollars a pop back in 1988. Add inflation and the price of those CD's today is about 23 dollars. So CD's today are in fact cheaper than they were years ago. The same thing goes for Cassettes. A Cassette 15 years ago was about 10 dollars and today with inflation would cost 15 dollars, but most sale at about 12 or 13 dollars. Fact is that consumers actually have had it good.

The problem is that what most people want is music for free and the internet and file sharing has allowed that to happen. Thats the reason people have suddenly stopped buying large numbers of CDs. Its not the price, because 20 dollars for a CD and 13 dollars for a cassette is cheaper than what people payed 10 and 15 years ago when you adjust the figures for inflation.

Artist are the ones that will be hurt by this. Whether your U2 or an 18 year old in a new rock band, your profit per disk sold just got cut 35%. That might be ok if you have a good royalty rate and sell a million albums, but if you have a low royalty rate and only sell 25,000 albums, your going to be sleeping on someones sofa and using food stamps. [/QUOTE

You are the only one I have heard say that about $20 being cheap everyone I know says it's too expensive. You might be right about inflation but it's still way too much. I mean just because it was $15 in 1988 doesn't mean that was right either. We the people have a way of telling the record companies of how we feel about their product and it looks like it's working.

 

[STING2]

Popmartijn,

The second website survey is totally unreliable. It uses a survey of people to determine whether file sharing is effecting music sales or not.

Such a survey would only be accurate if the people in the Survey could have their downloads and fileswapping monitered along with their music buying. The Survey simply relies on people to either guess or be honest about their buying habbits. First, most people offhand will not be able to answer the question with any real sence of accuracy, although there are exceptions. Secondly, heavy downloaders have a politcal and legal reasons to say their activities cause them to buy more music. They love file sharing and downloading music for free and are willing to do anything to swamp the music industries attempts to stop this piracy which is hurting the industry. When it comes to music there is only one bottom line to them and thats their pocket book, and the less cash that has to come out of that the better.

When something comes along that enables people to get something for free and they become acustomed to it, its not surprising they will fight tooth and nail to keep it, regardless of whether it is fair to the music industry and artist.

So far there is no solid, verifiable, emprical data that shows that file sharing is increasing music sales or keeping them from getting worse.

The simple facts are these and are widely available. I bought my first CDs in 1988 at 15 dollars a pop. In 1991, I bought Achtung Baby for 16 dollars. In 2003 dollars, that would be 23 dollars, yet the suggested retail price of Achtung Baby is 19.99 or lower.

Fact, when inflation is figured in CD's are cheaper than they were 5 years ago or 10 years ago. Because CD's are cheaper and more affordable today than they were 5 or 10 years ago, sales should be up. But instead, sales started to drop in 2000, right around the time file swapping, and access to the internet and other technology started to become more common.

I have no doubt that there are many who don't like the music industry and have their own theory's about why the music industry is in a downturn. But I have yet to see any of them acknowledge the basic ECONOMIC fact that CD's are less expensive than they were 5, 10, or 15 years ago when you adjust for inflation.

I have the annual rates of inflation for every year from the late 1970s up to last year if you would like to see them.

The basic economic data that is out there supports what the music industry is saying.

 

[EvolutionMonkey]

Popmartijn,
Bottom line, millions of people are downloading and burning their own CDs instead of going to the store to buy them. The more the technology to do this has become widespread, the greater the dip in sales.

Why go to the store to buy something you already have?

There is a scam going on the record companies side as well. Lots of people don't know this but around 1999 in the face of Napster the record companies axed a ton of artists off their labels to compensate for the financial loss of file sharing. They are concerned with the bottom line because they have to answer to shareholders. The part that is a scam is that they tell us that in 1999 2000 and 2001 less cd's were sold well NO KIDDING that's because they axed all but the money makers and what they rarely tell the public is that most of the big labels were actually making money because they had less losses from the crappy artists they used to have, the ones they axed.

If file sharing is so bad then why did Avril Lavigne sell like 10 million albums in one year and why is Eminem selling like hotcakes if everyone is stealing. How about brand new band Evenescence selling over 2 million in the states already. In other words there is a lot of fear mongering going on on the part of the record companies and RIAA.

The fact of the matter is they have been ripping off the artists forever and artists can't do anything about it because the record company is the only way to get your music heard on top 40 radio or mtv or muchmusic, if you don't got a record contract good luck getting your name out there to the majority of people. $10 a cd is a fair price I would be willing to pay IF there are better songs and not just 1 or 2 on there worthy of listening. Why should I spend $20 on a cd or even $10 for that matter if there are only 2 good songs on there. I don't care if people payed $23 a cd 15 years ago, it's not y fault they were stupid. People are downloading the music and making a decision that some of the cd's they were thinking of buying are not worthy of buying, what's wrong with that ?

Would you buy a car without test driving ? File sharing is here and I can't believe it took the record companies this long to figure that out it justs tells you the kind of people that are running the labels. I could have told them the future of music back in 1998.

 

[STING2]

EvolutionMonkey,

"You are the only one I have heard say that about $20 being cheap everyone I know says it's too expensive. You might be right about inflation but it's still way too much. I mean just because it was $15 in 1988 doesn't mean that was right either. We the people have a way of telling the record companies of how we feel about their product and it looks like it's working."

From a purely economic standpoint, CD's, when adjusting for inflation, have never been cheaper than they are now. Just name the year and I'll give you the inflation adjusted price of a CD then in 2003 dollars.

Can you give me a technical or economic reason as to why you think 20 dollars is to expensive for a CD? Most people did not think CD's were too expensive in 1998, sales were great. People were buying bundles of CDs 5 years ago at prices that exceed today's 20 dollar list price in current dollars. If todays CD's are to expensive, why were people willing to buy them by the truckload 5, 10, and 15 years ago?

"There is a scam going on the record companies side as well. Lots of people don't know this but around 1999 in the face of Napster the record companies axed a ton of artists off their labels to compensate for the financial loss of file sharing. They are concerned with the bottom line because they have to answer to shareholders. The part that is a scam is that they tell us that in 1999 2000 and 2001 less cd's were sold well NO KIDDING that's because they axed all but the money makers and what they rarely tell the public is that most of the big labels were actually making money because they had less losses from the crappy artists they used to have, the ones they axed."

Axing an artist who is not selling any CD's is not going to result in the record company selling less CD's. The artist in question was NOT selling to begin with! Of course the music business is concerned with the bottom line, its a business. At the end of the day, if you don't profit or start to loose money, you eventually are forced to go out of business. Long before that happens, cuts have to be made to attempt to save the business, which means less money for Rock acts that often take longer to develop than Pop acts. When you start to make less money, you focus on quick returns. Record companies cannot support the next 10 REM's or Pearl Jams if those artist are unable to sell. Losses have to be cut. Unfortunately, when times are tough in th music buisness, its the new unknown rock artist that suffer the most.

"If file sharing is so bad then why did Avril Lavigne sell like 10 million albums in one year and why is Eminem selling like hotcakes if everyone is stealing. How about brand new band Evenescence selling over 2 million in the states already. In other words there is a lot of fear mongering going on on the part of the record companies and RIAA."

Avril Lavigne albums sales which are much less than 10 million represent a tiny fraction of over all sales. Listing a couple of multi-platinum acts is not a sign that the industry is healthy. A look a overall music industry numbers tells the real story. Any business that is suffering a 10% annual decline year after year is in not doing well.

"The fact of the matter is they have been ripping off the artists forever and artists can't do anything about it because the record company is the only way to get your music heard on top 40 radio or mtv or muchmusic, if you don't got a record contract good luck getting your name out there to the majority of people. $10 a cd is a fair price I would be willing to pay IF there are better songs and not just 1 or 2 on there worthy of listening. Why should I spend $20 on a cd or even $10 for that matter if there are only 2 good songs on there. I don't care if people payed $23 a cd 15 years ago, it's not y fault they were stupid. People are downloading the music and making a decision that some of the cd's they were thinking of buying are not worthy of buying, what's wrong with that ?"

The more money the industry makes, the more money there is to sign new rock bands and promote them to the public. When the industry suffers, new unknown rock bands suffer the most. If you think 10 dollars a CD is a fair price in 2003, then your saying that people should of only paid $6.50 for CD's in 1988!?!? $6.50 for a CD in 1988 would have been less than the price of a cassette.

Now people have the technology to get what they want for free and will there for make any arguement to justify continuing getting their free music. So all of a sudden CD's or overpriced, despite the fact that CD's were more expensive 6 years ago when everyone was still buying them by the truckload. CD's have never been cheaper and now there being refered to as overpriced!?!

I think there is something wrong when thousands of people go online to download music instead of purchasing it and allowing the artist and lables to recieve money for their product. Its no different than walking into the store and taking what ever product you like without paying for it. There are arguements that attempt to rationalize shoplifting as not stealing and they are basically the same as the arguements that rationalize file sharing and downloading of music as not stealing.

"Would you buy a car without test driving ?"

If you were selling cars, would you mind if customers on their test drives never came back with the car and did not pay any money for it?

Say you own a business that sales a unique copyrited product. Would you mind if I made an exact duplicate of your product and gave it out for free to people about to enter your store to buy your product, eventually forcing you out of business?

 

[Calluna]

STING2, you just have to take the contrary opinion to everything, don't you? You'd think that after all this time in FYM you would have learned how to quote other people's quotes properly. It's a pain in the ass to read.

 

[IWasBored]

i guess people don't buy things they've already copied. i mean if i could copy october, joshua tree, pop, ATYCLB, AB, and zooropa from the library, why did i buy the albums?


i find it very hard to beleive that i'm the only person who's like that. i've had yet to talk to more people who wouldn't buy an album than those that would go buy it as soon as they had the money.

and 20 bucks for a cd is not cheap, i don't care what you say.

 

[STING2]

I just thought of another interesting statistic. While the price of a CD today is several dollars less than it was 15 years ago, how about the price of U2 tickets?

The average price of a U2 ticket on the Joshua Tree tour was about 18 dollars. In todays money thats about 27 dollars. The price of U2 tickets on the Elevation tour was around 80 dollars which is about 84 dollars today.

So CD's today are about 20% cheaper than they were 15 years ago, but the price to see U2 has more than tripled. Now I have no problem paying the increased price to see U2. I'd rather see U2 make the money than ticket resellers. But what I find puzzling are those that are concerned about CD's that are cheaper than they were years ago being overpriced, but their favorite band is charging triple the price of admission, and they don't recieve nearly the level of flak that the record companies have been recieving for selling a product that is cheaper today than it was years ago.

 

[Salome]

I think that making cd's has become less expensive over the years
doing a tour hasn't become less expensive

if U2 would play for $ 27 they'd probably have to do more shows to meet the demand which would mean they'd probably have to tour (/be away from home) even longer
I don't think anyone would have to work longer hours to put more cd's into the shops

I don't think comparing cd's to tickets is a fair comparison

 

[STING2]

Salome,

"I think that making cd's has become less expensive over the years doing a tour hasn't become less expensive"

CDs became less expensive to make over the time from the first introduction in 1983 to around 1994 when they had completely cornered the market. But the cost of making CDs in 1994 is really no different than today. Yet, CD's are less expensive today than they were 5, 10, and 15 years ago.

What do you think is more expensive about touring today than say 10 or 15 years ago? To what degree has it grown more expensive than the cost involved with recording, distributing, and promoting an album around the world?

"if U2 would play for $ 27 they'd probably have to do more shows to meet the demand which would mean they'd probably have to tour (/be away from home) even longer
I don't think anyone would have to work longer hours to put more cd's into the shops"

If U2 played stadiums, they could avoid having to play so many shows or an unusually long tour. Remember, the cost of a CD is more than simply the physical production of it the factory. It is involves the artist royalties and record lable royalties, and the cost associated with promoting and distribution. If Promoting and distribution were easy nearly cost free situations, most record lables would not exist.

"I don't think comparing cd's to tickets is a fair
comparison"

Its not completely accurate, but it is close. Think of any product that was made 15 years ago and after counting inflation, has it tripled in price by 2003?

 

[anitram]

CDs do not cost $20 to produce. I don't care if you add up all the studio time and the salaries and the signing bonus and the incentives, it still doesn't add up. Plus, it's not like the record company is only making money from CD sales. They get money from airplay on radio stations, etc.

If a CD cost $20 to produce, you can bet Universal wouldn't be slashing prices to $13. And you can further bet that if a CD cost $13 to produce, they wouldn't be selling it at no profit. They're still making a killing here. This notion that they're lowering prices out of the goodness of their hearts is just pure bullshit.

 

[u2popmofo]

CDs do not cost $20 to produce. I don't care if you add up all the studio time and the salaries and the signing bonus and the incentives, it still doesn't add up. Plus, it's not like the record company is only making money from CD sales. They get money from airplay on radio stations, etc.

If a CD cost $20 to produce, you can bet Universal wouldn't be slashing prices to $13. And you can further bet that if a CD cost $13 to produce, they wouldn't be selling it at no profit. They're still making a killing here. This notion that they're lowering prices out of the goodness of their hearts is just pure bullshit.

Amen.

 

[STING2]

anitram,

"CDs do not cost $20 to produce. I don't care if you add up all the studio time and the salaries and the signing bonus and the incentives, it still doesn't add up. Plus, it's not like the record company is only making money from CD sales. They get money from airplay on radio stations, etc."

Take U2 for example. Bono, Edge, Adam, Larry and Paul get 5 dollars off the bat, because they have a 25% royalty rate on their albums. Yes, there are other expenses and yes the record company should and has every right to make a profit of of what they sell.

"If a CD cost $20 to produce, you can bet Universal wouldn't be slashing prices to $13. And you can further bet that if a CD cost $13 to produce, they wouldn't be selling it at no profit. They're still making a killing here. This notion that they're lowering prices out of the goodness of their hearts is just pure bullshit."

Thats incorrect. What happens is that everyone gets a smaller piece because the whole pie is smaller. So at 13 dollars, U2 will probably only make 3 dollars per album rather than the 5 dollars they were making before. The Record company will make less money as well, which means less money to develop new rock acts.

If the music industry was not hurting, there would be no lay offs, no retail chains closing, and no need to lower CD prices to 13 dollars. Because its popular now for consumers to get their music online for free(stealing), the music industry is suffering. Any business would suffer in a similar situation where consumers were able to get what they wanted without paying for it.

All this is happening despite the fact that at 20 dollars a pop, CD's have never been this cheap before, when count the cost of inflation.

 

[IWasBored]

CDs do not cost $20 to produce. I don't care if you add up all the studio time and the salaries and the signing bonus and the incentives, it still doesn't add up. Plus, it's not like the record company is only making money from CD sales. They get money from airplay on radio stations, etc.

If a CD cost $20 to produce, you can bet Universal wouldn't be slashing prices to $13. And you can further bet that if a CD cost $13 to produce, they wouldn't be selling it at no profit. They're still making a killing here. This notion that they're lowering prices out of the goodness of their hearts is just pure bullshit.

Originally posted by STING2
Its not completely accurate, but it is close. Think of any product that was made 15 years ago and after counting inflation, has it tripled in price by 2003?

i think the difference between the actual tour set up is too great for it to be a close enough comparision

Thats incorrect. What happens is that everyone gets a smaller piece because the whole pie is smaller. So at 13 dollars, U2 will probably only make 3 dollars per album rather than the 5 dollars they were making before. The Record company will make less money as well, which means less money to develop new rock acts.

only if there is some sort of equality in the way price reductions and cuts are distrubited. in your example you have artist profit per cd going from 5 bucks to 3. that might happen, but i guarentee that if it were the label, the change might be more like 7 to 6, while the artist's is considerably less. did that make sense? probably not. i was trying to illustrate the point that if anyone might make less money off this, it won't be the record label, it will be the artist. forget it.

 

[u2popmofo]

Sting2, please provide some proof/evidence/sources for your arguements and numbers.

Most everyone else here has, it would be nice if you also did.

 

[STING2]

u2popmofo,

"Sting2, please provide some proof/evidence/sources for your arguements and numbers."

Could you be a little more specific? My main arguement has been that the standard retail price of a CD that is 19.99 today is cheaper than it was 5, 10, or 15 years ago when you count inflation. There for, this idea that the music industry is falling because CD's are "overpriced" is in fact false. CD's in 2003 have never been cheaper once you count for inflation.

I know this by simply taking the price of CD in 1988 or 1992, and then multiplying by the anual inflation rate. I get the standard retail price from copies of Billboard magazine that I still have from years ago and today. The inflation rate can come from multiple sources, but I get mine from the Encyclopedia Year Book that always reports the latest economic numbers from the following year. I have annual inflation rates from every year from 1975 to the present.

So I could site the yearbook sources that I have and the Billboard magazines that I have as well, for the inflation rates and standard retail prices for different years.

U2s royalty rate I got from Rolling Stone Magazine just as POP was about to be released.

The Industry numbers which show I decline in music sales starting around 2000 have already been reported here by others. I could go out and get the latest issue of Billboard magazine which will give the difference in sales from this week and this same week last year.

Is this what you had in mind?

 

[u2popmofo]

I'd just like something I could read for myself, not just having to take your word for everything.

Please give up on the inflation arguement too. It really doesnt make sense in this context. Honestly, when DVD's came out, they were $50. Now you can buy them for as low as $10. I'm guessing that's because of downloading too, right? I've honestly never even seen the music industry try to use inflation as a reason for their cd prices. It really seems off base, maybe it's just me. I dont know.

 

[anitram]

Yes, there are other expenses and yes the record company should and has every right to make a profit of of what they sell.

Yes, just like Nike has a right to make a $100 profit off shoes that cost $6 to produce.

Unfortunately for the record company, file sharing is here to stay, and will stay, because the while the labels have every right to make a profit, the consumers apparently also feel they have every right not to be ripped off.

The internet will be the downfall of these companies as time goes on, and you can blame us for freeloading (because surely you never, ever downloaded anything yourself), but then some blame has to go to corporate greed as well.

 

[EvolutionMonkey]

I just thought of another interesting statistic. While the price of a CD today is several dollars less than it was 15 years ago, how about the price of U2 tickets?

The average price of a U2 ticket on the Joshua Tree tour was about 18 dollars. In todays money thats about 27 dollars. The price of U2 tickets on the Elevation tour was around 80 dollars which is about 84 dollars today.

So CD's today are about 20% cheaper than they were 15 years ago, but the price to see U2 has more than tripled. Now I have no problem paying the increased price to see U2. I'd rather see U2 make the money than ticket resellers. But what I find puzzling are those that are concerned about CD's that are cheaper than they were years ago being overpriced, but their favorite band is charging triple the price of admission, and they don't recieve nearly the level of flak that the record companies have been recieving for selling a product that is cheaper today than it was years ago.

Most people here did not pay $80 or more to see U2 the other year, most of us payed $45 for General Admission for an even closer experience being in the heart or outside the tip of the heart. Secondly the artists (U2) get most of the money from touring sales including merchandise sold at concerts this is why lot sof us don't mind spending money seeing them tour because we know the money we are paying is going into the artists pockets and not the rip-off record companies pockets. So by comparing cd solds to concert tickets sold you are comparing apples to oranges because the profits from each are not going to the same source.

 

[STING2]

u2popmofo,

"I'd just like something I could read for myself, not just having to take your word for everything."

I can give you sources for the numbers I got on inflation and the retail prices of CD's. The rest is economics 101 and my opinion.

"Please give up on the inflation arguement too. It really doesnt make sense in this context. Honestly, when DVD's came out, they were $50. Now you can buy them for as low as $10. I'm guessing that's because of downloading too, right? I've honestly never even seen the music industry try to use inflation as a reason for their cd prices. It really seems off base, maybe it's just me. I dont know."

Please take a look at the inflation arguement instead of brushing it aside. I understand what you said about the DVDs and its true there is a natural decrease in price as technology comes on to the market, normaly about 5 years. CD's first came on the market in 1983. By 1994 they had completely cornered the market, and pushed out records and made Cassettes a tiny fraction of the market. At that point the techonology is common, and the reduction in price do to new technology becoming more available is over. This is in 1994, nearly 10 years ago when CD's were selling at retail for 16.98.

DVD's may be relatively new, but Compact Disk are not. Compact disk had filled up the market by 1994 in a way that DVDs have yet to do.

Anyways, my whole point with inflation is that CD's are not overpriced. Products typically get more expensive over time in order to keep up with inflation or stay just ahead. CD's by contrast continue to drop despite the fact that they have been around for over 20 years. The price of CD's which should be stable now, is not keeping up with inflation.

That simply shows that CD's are not overpriced. The other thing that shows they are not overpriced is the mass consumption by consumers of CD's in the years leading up to the decline which started in 2000.

The decline in sales coincides with certain technologies making it easy to copy and download CD's becoming widely available to the public. The past 3 years has seen an increase in the availability of this technology along with continued decline in Album sales.

Yes the economy is dull, but GDP has not dropped by 10%. In fact the only GDP decline in the economy happened in 2001 and it was less than 1%. The losses incurred by the music industry could not be explained by the current state of the economy because the losses in percentage terms are far greater.

There is no evidence that people listen to music less today than they did 6 years ago, so why are sales down to this degree? The only answer is that people are getting what they want for free through the internet instead of going to the store and buying it.