cost of CDs, inflation ...

["tony schinella" <radiotony@attbi.com>]

Yesterday, I had put together three paragraphs about the costs of CDs and
then decided not to send it. However, since it was raised again, some quick
points and questions.

I have been watching the industry trades and the problem seems to be record
company "profits" and not necessarily "units sold," which is amazing when
you consider the markup on CDs is tremendous - even though it may not have
kept up with inflation and the advance tracking system via SoundScan.

But here are some simple arguments to make the point: Blank CDs for my
Philips deck cost about 65 cents, with computer-based CDRs going for about
30-35 cents. If I wanted a market-ready CD pressing from a company with
color covers, etc., I can get 1,000 units for about $1,000 to $1,200
depending on the company. So, using these figures, record companies are
spending minimal amounts to press CDs. Of course, there are recording costs,
band advances, marketing, staff, distribution, and radio promotion, so it
adds up. But there is no reason in my mind why CDs shouldn't be regularly
priced around $6-$7-$8, although sometimes, at Newbury Comics, which is very
aggressive, you can see CDs for $9.99 to $11.99 which isn't too bad in the
scheme of things.
As an aside, Mike Dreese, the owner of Newbury Comics, explained in an email
recently about ending their discount buyers program, that on most sale
items, the store is lucky to get $1 a unit and the record companies get the
rest. Now, these are all simple arguments and a lot of assumptions are
made - but do the addition: 30 cents production, maybe another $1 or $2 for
promotion and overhead, $7-$8 per unit profits. Someone is making scads of
money somewhere.

The inflation argument is an interesting one. Although, I like to joke with
other friends that when I made a third of what I do now, I could afford to
buy two or three records a week. Rents/mortgages, family costs, car
payments, etc. have slowly chipped away at the disposable incomes of our
youth. However, in 1985, you could get an LP for $4.99 on sale at Tower
Records in NYC. So, in 15 years, the price has pretty much doubled, unless
you pay full price at Wal-Mart, in which case it has tripled. I know rents
have doubled and tripled in the same amount of time. Paperbacks have doubled
in price during the last 10 to 15 years from $4 to $7-$8. But gasoline
hasn't. Two weeks ago, before the latest jump, gas was priced $1.30 a gallon
[now, it is back up to $1.40]. Between 1987 and 1997, gas prices pretty much
stagnated between 90 cents and $1.05. But then again, blank cassettes
haven't increased much and blank CDs have actually dropped in cost, so, I
don't know.

----- Original Message -----
From: "A. Joseph Ross" <lawyer@attorneyross.com>
To: "tony schinella" <radiotony@attbi.com>; <bri@bostonradio.org>; "Dan
Billings" <billingsdan@yahoo.com>
Sent: Sunday, January 05, 2003 12:53 AM
Subject: Re: Clear Channel ends streaming broadcasts ... please explain


> On 4 Jan 2003 at 12:06, Dan Billings wrote:
>
> > CD sales dropped last year.  Sales have been flat or
> > down for the last several years and the industry
> > blames digital copying and internet distribution for
> > the drop in sales.  I don't know if that is really
> > true, but that's what the big players in the industry
> > think so they are playing hard ball on webcasting.
>
> We've sometimes talked about the outrageously high prices of CDs as a
factor, but I was
> just wondering:  If you adjust for inflation, is a CD really more
expensive than an LP album
> was in the 1950s?  An LP album used to cost something like $3.98 back
then, but a
> postage stamp cost 3 cents.  How do the prices actually compare?
>
> --
> A. Joseph Ross, J.D.                           617.367.0468
>  15 Court Square, Suite 210                 lawyer@attorneyross.com
> Boston, MA 02108-2503                    http://www.attorneyross.com
>
>