A Little Hypocrisy?

Playing devil's advocate as I am wont to do on occasion...

Looking at the economics of the situation (letting work spill over into the hobby), it appears the general gist of responses above concludes that the manufacturing cost of CDs is quite low and artists don't get much of the price of the CD. If it's not the artist or the CD stamper/manufacturer, that suggests all who think the price of CDs is outrageous thinks either the workers or owners involved in the business of music distribution are gouging consumers. I say, look at the result.

I, for one, would wish that those employed in the business get paid so they could support families and loved ones, provide for children's education, their own retirement, and if there is justice in this world, also provide them with the means to pursue their hobbies like we pursue ours. At the same time, I had not been under the impression that employees of the music distribution industry are disproportionately highly paid in comparison with other people. The ownership of the business is either private owners or publicly-owned companies (the vast majority of sales), meaning those who own stock in those companies through their investments, pension plans and retirement plans, etc. The businesses of manufacturing the software, promoting it, physically distributing it, or selling it by retail/internet are all businesses with low barrier to entry. I am also not convinced that shareholders of Sony, Philips, CircuitCity, and Borders are necessarily happy campers over the past five years either (Sony & Circuit City basically zero return, Philips -15%, Borders -25%). Amazon, BestBuy, and Walmart are up quite a bit, some of that may be from business other than CDs.

Personally, I believe music distribution is just like any other business. There is a demand curve, a supply curve (combination of cost of doing business, and profit (capital providers either deserve it or not but that is more of a political/philosophical question)), and the price point per product unit is the sweet spot where the two meet.

Some questions for those of who feel music software prices are too high...
1) What is the appropriate total value of the compensation and profit of the entire music software business?
2) If prices were to drop in half, would you buy twice as much music? [think about the consequences]
3) Are postage stamps overpriced because they cost 100x the "cost" of production? Are postal workers overpaid?
4) Are 850 baseball players worth $2bn in salary a year?

My answers to the questions above are 1) I hadn't thought about it until now and have no good idea even now, 2) probably yes but perhaps not (I only have a certain amount of time to listen to music), 3) No, 1st class airmail postage is one of the bargains in this world, 4) Probably, because that was the total salary of 854 major leaguers as of the start of the 2001 season.

That and $3 will get you a $3 coffee. But think about a $3 coffee... is it really worth $3? What's the cost of the beans and the ... OK Travis, get a life...

Interesting points T_bone. My answers:

1. No idea and no real interest in figuring it out. There will be music and I will listen to music. How it gets created / distributed is really not much of an issue for me as this is my past-time, not my livelihood. If it were my livelihood, I'd be very interested, and I'd do something to make sure it was very profitable and that I could employ a quality workforce.

2. The idea conveyed is an interesting question, but I think the ratios are wrong. Some of us might buy twice as much, but the real question is "would lower prices raise demand," which I find hard to argue any answer but "Yes, they would." Could the music industry change a 5% annual decline into a 5% annual growth in sales by merely lowering prices? I'll just say that a significant price decrease (and 50% would be a gigantic price decrease - I'm talking 20%), would be a key step in a plan to turn music sales around.

3. No, I agree that postage is one of the best bargains going.

4. A very interesting question, because it's another entertainment industry that doesn't have a clue, wants to blame everybody but themselves, etc. Over my life, I have been a huge BB fan, but I've all but given the game up. I haven't bought a ticket in years, because the sport is so screwed up. You call off your mid-season classic before it's over (and send everybody off to kiss their sister), you've created the most unequal "playing field" in sports with well over 1/2 the teams being "out of it" before the first pitch of the season, four hour games, and you're talking about folding teams. All the while, the people at the top (players and management) are grabbing every $ they can get their hands on regardless of the long-term health of the game / industry. All they need to do now is to figure out a copy-protection scheme for the morning boxscores and charge to view them, and tell me that I'm illegal if I let somebody else steal a glance at my copy and they'll have caught up. Actually, they're ahead of the music industry with me, as I've already written them off (though I am, for the first time in a decade, actually watching what is destined to be one of the lowest rated WS in history, as they accidently got a really interesting one)

Hey T Bone...you made some great points and I agree with most of them.

1) I do think the industry is making a lot of money (by gouging the consumer), but they're wasting it...it's not coming in as profits. I think they're managed poorly and could easily turn much higher profits (and still charge less for music) if they knew what they were doing. They're blaming their lack of management skills on piracy, which is ridiculous. And yes...I'm sure music industry employees are paid too little and taken advantage of on a daily basis, just like most corporate employees. Isn't that what this country is all about? :-)

As far as CD costs and artists royalties go...I think most major labels are incredibly out of touch with all of the fringe markets that have been developing over the last decade or so (some of them quite large and desireable to advertisers). Most of the music I buy is sold direct by the artist themselves or by independent labels (where it is not uncommon to have a 50/50 label/artist split AND the artist usually owns their recordings, which is not usually the case with major labels). Many of the msucians I like were once on major labels, but eventually dropped because the labels had no idea how to market them (or chose not to spend the money to market them). Richard Thompson and Aimee Mann are two prime examples. People like Ani Difranco have proved that major labels are no longer necessary.

2) I buy most CDs that I'm interested in (usually for much less than the $17 the industry would prefer). Lower pricing would let me buy more than I currently am, but I think it would increase sales for the mass market by quite a bit. I realize most people on this site have spent thousands on equipment (myself included) and $17 for a CD isn't considered to be a lot, but to the majority of the country's population, $17 (per CD) is quite a bit of money to spend on leisure activities. Lowering the price to $10 or $11 would certainly make CDs more affordable to millions of potential buyers (including the students that are doing most of the downloading), and charging a small fee to download individual songs would also be a very smart move.

3) Yeah...$.34 is a deal for first class postage, but I'd gladly pay more if it meant that it wouldn't be destroyed or misdelivered by my local carrier (I won't even mention how frightening it is to visit my local post office). Same issue...how wisely and efficently is that $.34 being spent by the USPS??

4) Wouldn't it be more accurate to say, "Are 50 baseball players worth $1.85 billion in salary while the other 800 split the remaining $.15 billion?"? :-)

And no, the coffee itself isn't worth $3. You're paying for the luxury of having a well-trained, college graduate froth your milk for you. After all, he has a family to support and he might buy more CDs if they weren't so expensive).

Guys, Postage is now 37 cents a stamp.
Frankly I think postage is a rip off due to the fact we have email now. Most stuff can be done electronically. And this is why the post office is raising rates. More and more people are using email.

Always remember that Baseball players were almost effectively slaves to the owners up until about 30 or so years ago when they were granted 'Collectively Bargaining'. Little by little the Owners have tried to whittle away at their collectively bargaining agreement. Anyway, one must always remember... If the players do not make the money, the OWNERS will. Do you think an Owner deserves to make hundreds of millions a year or many players make millions a year? It is easy to say ticket prices shall be cut and sallaries decreased/rolled back... BUT this is not how our 'Free Market' economy works. Short of the fans stop going to see the baseball games, ticket prices will not drop and neither will players salaries. So we can blame us fans for inflated players salaries.

Now about CDs... In some instances, the CDs could be compared to the baseball players and we are the fans. Until we quit buying them and record companies start loosing money hand over fist, record companies are probably not going to reform the way they market/distribute/sell CDs. Personally, I would like everyone to boycott the digital medium altogether. But that is a nieve wish.

I tend to buy CD's from Boarders Books because I know the low profit margins that are in new book dealing. New book stores tend to loose money every month except for November and december.

This and 37 cents will get you a 1st class stamp.

KF

A small note on Travis' point 1)

*Marketers (talent "spotters", new product/biz development) in the music industry do (did?) very well vs. other industries. Artists USUALLY get proceeds on a fixed scale -- unless they're on their way up and that "fixed" scale falters...:)

*A significant part of the asking price of a cd (ex sales tax, of course) goes to retailers -- i.e. the people who take care of the logistics involved in bringing the s/ware to us, the end users.

*Large retail chains also play on returns & payment terms for the s/ware they buy. Also, they may physically return cd's that do not sell. This raises the issue of financial mgt for production companies (I'm not saying they don't do it well).

*Some music industry execs bemoan (to me) the fact that times have changed irreversibly: before, all they had to was produce an LP, then cd, and it would sell (via radio support & other ad means). NOW they actually have to find ways of convincing us TO BUY the d*mn stuff -- something they were NOT used to having to do...

*Piracy, as in copying, exists it seems and eats into the industry's T-Over. OTOH, whatever is locked can be unlocked... coming back to mgt & creative mgt at that: locking doesn't seem to address the issue adequately. BUT sound quality could...

*At the end of the day, what we're debating here IMO is not whether we should PAY for s/ware & how much. It's the perceived ADDED VALUE ADD of what we get for the asking price that has us wondering, isn't it? I.e. "what am I really paying for, and is it justified? Cheers