[rack gear]

whole sale prices of physical product are much higher then the wholesale prices of digital music. physical product is much more expensive - manufacturing, shipping, returns, and most importantly RETAIL PRICING AND DISCOUNTS etc.

for example an $18.98 list title probably has a gross wholesale cost to retailers of about $12.00

then take 10% of off that for I/O discount
PAID TO THE RETAILER
so 12.00 - 1.20 = $10.80

then it cost probably about $3 per unit in coop (stocking) costs
PAID TO THE RETAILER
so $10.80 - $3.00 = $7.80

and there you go - the label ends up w/ about .80 more on physical product (before returns, shipping costs and warehousing costs)

this is also why frontline 18.98 list CDs can sell at retailers for $9.99-$11.99... and why list price is no longer relevant in the states as a basis for royalty calculations.