Sunday, October 15, 2006

Wal-Mart vs. RIAA: which is more evil?

Rolling Stone has this interesting piece about another battle between Wal-Mart and the RIAA. Wal-Mart wants the RIAA to drop CD prices. Well, so does everyone else. The RIAA, however, argues that CDs aren't overpriced! Rolling Stone provides this breakdown:

This breakdown of the cost of a typical major-label release by the independent market-research firm Almighty Institute of Music Retail shows where the money goes for a new album with a list price of $15.99.

$0.17 Musicians' unions
$0.80 Packaging/manufacturing
$0.82 Publishing royalties
$0.80 Retail profit
$0.90 Distribution
$1.60 Artists' royalties
$1.70 Label profit
$2.40 Marketing/promotion
$2.91 Label overhead
$3.89 Retail overhead

I'll buy this breakdown, but I don't see any evidence to suggest that this justifies the price of CDs. The industry's myopic vision has prevented them from seeing the obvious: these are not actual per unit costs. In fact, if the industry moves more units, most of these per unit costs will decrease. Costs per unit for packaging/manufacturing, marketing/promotion, and overhead would all decrease if the industry could move more units, and they'd move more units if they lowered prices. Likewise, if they move more units, they can choose to lower their per unit profits and reap the same net profit.

When I was 20, I probably bought close to 12 CDs per month. I'm 25 now, and I doubt I buy 12 CDs a year anymore. I can't afford it. I love music, but I'm completely out of touch with what's going on in music because I simply can't afford the prices they're charging.

Apple's iTunes provides a decent alternative, but I prefer to own the CD. I like to have the sleeve. I like to hold it in my hands and read the lyrics. I think a lot of people feel this way. But until the RIAA gets its head out of its head, my music purchasing will remain minimal.


  1. I don't buy much new music either for the same reason. Cheap, used LPs have given me a new lease on older music in the interim.


  2. When you were 20, you had different priorities and different obligations. Has the price changed?