Music's lost decade: Sales cut in half

[bilbobaggins]

Originally Posted by Happy Musicfan

It's quite obvious the music industry still exists. No one has claimed it doesn't exist. What the theory and evidence indicates is that music has become less respected (as pure art) and less valued (as something worthy enough to spend money on). You can ignore the well documented *decline* and rationalize it if you want, but that only fuels the pattern we have witnessed over the last decade or so. The cause of the decline are the top level executives and their omnipotent wrecklessness, corporatism, stifling of progressive artistry and short-term greed along with those who choose to ignore the easily observable current scenario.

In this thread,The Pirate Party....Why the anti-copyright movement are wrong I argue that piracy promotes opportunism, stifles creativity, and has a tendency towards diminishing objective quality.

"there is a tendency for Objective Quality to diminish"

Whilst all this file-sharing *may* all be very good for bands who can make their fortune by gigs and t-shirt sales alone....what about all those people in the background? The Engineers, Producers, the Specialist Equipment needed (which we on GS know only too well), the studio rental, promoters, publishing, pluggers, management, right down to the support staff...the guy who puts up the posters, etc etc.

Whilst its generally par for the course that the artist will suffer for their art.....all these people in the background will generally not.....
They accept hard cash as currency.

In software/film, it gets even worse.....there are many, many more people involved than with music. They do not have the 'advantage' of having gigs to play either. The coders, animators, technicians, camera-people, actors, rental of studio-space, taxes, cleaners, plumbers, electricians. These specialist people with specialist skills do not work for free.

Traditionally it was the music-buying-game-playing-film-going public who pays for these people. Under the 'everything is free' model who pays for these people?

So there is a tendency for the objective quality to diminish in correlation with reduced revenues.


2- Piracy, instead of freeing us from opportunism, actually promotes it.

One of the greatest lies ever put forth from the anti-copyright movement is the one of. "when everything is free, the simon cowells and pop-puppets of this world will disappear"

Simon Cowell couldn't care less about Piracy. In fact he is doing better than anyone else in the industry at the moment....Why?
His x-factor shows generate the vast majority of their money by way of selling text-messages and advertising slots....The money generated from single sales by the 'winning' artist pales in comparision. [don't have the exact source for this, I remember reading it not so long ago on one of the Irish Broadsheets....Times/Independent]

In short..opportunism never goes away; it just follows the money.


3- Under the 'everything is free' model, there is also tendency for the most creative of people to be weeded out....

Whilst Piracy can never kill creativity, it can certainly stifle it.
If the investors follow the money to these opportunistic endeavours, then there is also the possibility that the very creative people who should be receiving financial backing will never get it....the money follows the less risky investments in lieu of the more creative, yet risky, projects.

[PeeWeeGee]

Originally Posted by GearBit

Yep.
And somehow the inverse correlation between those numbers and the OPs graph is called "speculation".
It's just astonishing.

What is astonishing is the fact that you present CRAFTED data.

Guys and gals, it goes like this: The arguments aren't "scientific" until you present ALL of the empirical data.

Dean, Gearbit et al - you have FAILED to do that. You can't cite one chart, make "relative" comparisons and extrapolate the state of an entire industry from that. You've seen folks do the exact same thing in defense of their position and it was just as much bullcrap.

There are some things that neither position can avoid discussing:

• You are citing REVENUE numbers without giving the associated COSTS
• You are NOT citing the differences in ALBUM sales versus SINGLES sales and how THAT has impacted revenues
• You are NOT considering the many FREE music sources available (internet radio, YouTube, etc.) and the impact to record sales
• You are not citing INDEPENDENT LABEL SALES FIGURES

Without bringing (at least) these facts into the discussion, your arguments are ill-informed at best and disingenuous otherwise.

No one is disputing that the recording industry has downsized. Nor does anyone argue that we're in an increasingly competitive landscape. But to summarily blame it on internet piracy is ridiculous.

At my workplace, overall revenues are DOWN. However, profitability and operating income is UP! That is because we've adapted our practices to meet a changed costumer landscape. Major labels haven't done that! They repeat the same tired tactics (for the most part) and their profits and viability are TANKING!

Conversely, independent artists are showing ever-increasing revenues and profits. If 'net piracy was the culprit, this simply could NOT happen! There is more to the story than you guys seem to want to admit.

I agree with the previous statement that you are really preaching to the converted here at GS. But I also contend that you're lying to us and yourselves if you choose to ignore key facts that are relevant to the issue you seem so passionate about.

@Dean: I would seriously encourage you to do a little "market research" and report back the revenues of the Top 10 independent labels over the last 10 years. Also, take a look at iTunes revenues during the same period. The delivery mechanisms have shifted (dramatically), but the majors simply caught on FAR TOO LATE.

[PeeWeeGee]

Originally Posted by bilbobaggins

In this thread,The Pirate Party....Why the anti-copyright movement are wrong I argue that piracy promotes opportunism, stifles creativity, and has a tendency towards diminishing objective quality.

"there is a tendency for Objective Quality to diminish"

Whilst all this file-sharing *may* all be very good for bands who can make their fortune by gigs and t-shirt sales alone....what about all those people in the background? The Engineers, Producers, the Specialist Equipment needed (which we on GS know only too well), the studio rental, promoters, publishing, pluggers, management, right down to the support staff...the guy who puts up the posters, etc etc.

Whilst its generally par for the course that the artist will suffer for their art.....all these people in the background will generally not.....
They accept hard cash as currency.

In software/film, it gets even worse.....there are many, many more people involved than with music. They do not have the 'advantage' of having gigs to play either. The coders, animators, technicians, camera-people, actors, rental of studio-space, taxes, cleaners, plumbers, electricians. These specialist people with specialist skills do not work for free.

Traditionally it was the music-buying-game-playing-film-going public who pays for these people. Under the 'everything is free' model who pays for these people?

So there is a tendency for the objective quality to diminish in correlation with reduced revenues.


2- Piracy, instead of freeing us from opportunism, actually promotes it.

One of the greatest lies ever put forth from the anti-copyright movement is the one of. "when everything is free, the simon cowells and pop-puppets of this world will disappear"

Simon Cowell couldn't care less about Piracy. In fact he is doing better than anyone else in the industry at the moment....Why?
His x-factor shows generate the vast majority of their money by way of selling text-messages and advertising slots....The money generated from single sales by the 'winning' artist pales in comparision. [don't have the exact source for this, I remember reading it not so long ago on one of the Irish Broadsheets....Times/Independent]

In short..opportunism never goes away; it just follows the money.


3- Under the 'everything is free' model, there is also tendency for the most creative of people to be weeded out....

Whilst Piracy can never kill creativity, it can certainly stifle it.
If the investors follow the money to these opportunistic endeavours, then there is also the possibility that the very creative people who should be receiving financial backing will never get it....the money follows the less risky investments in lieu of the more creative, yet risky, projects.

You make some good points, but still overlook some key elements.

1. What is the perceived value of the product?
No matter what the creator believes the value to be, the MARKET determines the acceptable prices. Deferring to your SAG analogy, the movie industry outmoded itself when it began to charge $8.50/ticket so that it could pay the lead roles $25M per movie. Suddenly, Blockbuster rentals EXPLODED. The market response was clear: "You're not worth $8.50! I will wait and rental the movie instead." Ticket sales plummeted and they blame it on internet piracy.

2. Is the money equitably distributed throughout the industry?
Clearly, it isn't. The leading roles and directors make $50M while the remaining crew make $5M for the entire lot. Hmmm... Could that impact retention and quality issues, as well? Take a look at many of the Fortune 2000 companies that participate in profit-sharing schemes with their employees. Their retention is usually up, costs are low, and profits are high. Why? Because ALL of the stakeholders are vested in the success of the business. In music, the principle commodity (the artist) receives SECONDARY income to the record company executives. The perversity of that business model is fairly easy to recognize.

3. Where does the "everything is free" model come from?
EVERY major industry (outside of utilities - which are monopolies) has to adjust to market dilution and price levels. There is more honor in the buying community than you give credit for. Smart vendors (like Cockos) can see that and make good by reducing the price of the goods to one that is acceptable to the buyer; thereby INCREASING over sales albeit at lower margins. When a buyer is FORCED to pay what they consider a premium for a product that they consider SUBSTANDARD or not "value-consistent", they will choose between the options given: Pay full price or steal it. Too many artists have shown considerable success with reduced pricing and donation-based sales to dismiss this principle.

Does opportunism abound? Of course! But it always has. But don't confuse opportunism with redirected activity. Simon found a way to get PAID for presenting his media.

[Dean Roddey]

The point is that downloading is solely responsible for the halving. Obviously there could be other unrelated factors. But, the point is that the consumption of music is vast. If people were not stealing it, then probably the legal consumption of music would have grown by this time to make up for any other downward trends.

And part of the reason for this argument is that the claims that music is less valued is just bogus. It's highly VALUED, it's just PAYED FOR. People don't spend that much time downloading that much stuff if they don't want it.

The only thing that has changed is that they no longer have to make a decision whether to spend money on music or something else. They just spend it on something else and steal the music. So in the capitalist market sense it has become not devalued but unvalued, without value, since you cannot assign value to something in such a system it's consumption doesn't come at the cost of consuming something else.

But the desire to consume it is still probably larger than ever, and therefore the claims that it's all just junk is also bogus. That's coming from people for whom the current crop of popuar music is not targeted. It's so repetively cliched now that it's funny. Any music you don't like is crap, but strangely it's being consumed in huge quanities for some reason, while Led Zepplin and The Beatles and so forth are all out there, just as easily and freely downloadable and those kids have the choice to listen to that if they won't, and mostly they don't. Because Lady Gaga is THEIR generation's music. Get over it, and stop claiming that sales are falling off because of low quality. It's just wrong based on clear facts on the ground. Downloading clearly tracks general popularity as well.

So the desire for the product is high. Huge amounts of it are being consumed. And yet the industry halved in value over the last ten years. I just think that puts it in the 'prove it's wrong' category rather than in the prove it's right category. Everyone here would, if they were on the losing end of something like this with that kind of correlation, take the prove it's wrong position and be in court probably.

The only way that huge numbers of people could be consuming an industry's product, and it's way more than is being consumed legally now, while that industry is going downhill fast is because a lot of people are stealing the product instead of buying it. I mean, how hard is that to fathom?

[Dean Roddey]

Originally Posted by haymedic

either way, thieves will be thieves no matter what, and the internet is too big to be policed. maybe someone should focus on the honest people and not create and sell to the highest common denominator; who are probably the one's stealing the most music because they DON'T know what actually goes into the craft.s

I've made that argument many times. However, it's far hard to do than to say. For those of us who make music, we really need to make music that moves us, or we might as well go get an office job and make the music we like for our own amusement. A lifetime of having to make music you don't like wouldn't be really any better than an office job, and will likely not have as many benefits (well, other than some probably medium grade groupies and some free drugs.)

And it also means that you lose out on what has always been the prime music consuming demographic as well. So you are still going to take a huge hit in terms of ability to sell, because you'll be tossing out the biggest buyers.

So it's a hard thing to actually do, though some folks could probably do that, a la Susan Boyle.

[PeeWeeGee]

Originally Posted by Dean Roddey

And part of the reason for this argument is that the claims that music is less valued is just bogus. It's highly VALUED, it's just PAYED FOR. People don't spend that much time downloading that much stuff if they don't want it.

I don't think that the DEMAND for music is decreasing either. But I believe that you are confusing "demand" for "perceived value". Further, there is still the issue of fair market pricing. I really don't understand what is so hard to grasp about that point.

The cost for delivering the music has decreased drastically, but the cost for CDs don't reflect a similar decrease. It's the same reason why everyone was pissed off a couple of years ago when gas prices didn't reflect the drop in oil prices.

It remains that you aren't directly addressing the OTHER metrics that impact industry revenue numbers, though. It's impossible to sidestep the success of alternate distribution systems and claim that the decreases in revenue are due largely to internet thieves. That is an anecdotal claim.

Let me position the issue differently:

• How many different price points have been offered by the majors to the music consumers via LEGAL delivery channels? What was the take up rate of sales at each price point? That's a good place to start to understand where you can curtail theft. You will hit a plateau that will reflect what your paying customer thinks your product is worth.
• Why are non A-list artist the BIGGEST critics of their own industry payout structure? Does everyone have it wrong or is there something fundamentally flawed with the system? Why isn't it open to discussion?
• Why have/did so many A-list artists defect from their labels and pursue the Indie route? Shouldn't they have the leverage to strike equitable deals? Besides, they should clearly see the value that the label offers. Or.... they've had visibility to the inner workings of the machine and understand that they are losing money to gross mismanagement and an overburdened "corporate" structure.

I try to reserve comment on the "quality" of music, because one man's trash is another man's treasure. But it remains true that the masses tend to devalue anything they can do themselves. I haven't seen any kazoo acts go platinum. But talented singers/performers usually get a fair amount of following. Accepting the fact that they probably won't get the best deal from the majors, a growing percentage of those talents choose the Indie route and those sales are also lost by the majors.

I'm not trying to be inconsiderate to your point(s). But you're just not taking the 10,000ft view of why the dinosaur business model of the record labels in the #1 factor in decreased sales; not kids stealing music on the net.

I mean really.... I wonder if 50Cent sold his DISASTROUS album for $3 how many kids would buy it. (Even after they decided it was too sh!tty to pay $12 for.) I wonder if iTunes had "blow out" sales, what the sales figures (units sold) would like at the reduced prices.

Check out the No-Brainer deals at audiomidi.com. Incredible take rate for the items sold. But instead of using that model, software producers take the old route and lose the revenue to pirates. It's the same sh!t, different toilet.

The times, they are a-changin', my friend. And those who don't change with them are doomed to go the way of the Dodo bird.

[Dean Roddey]

Originally Posted by PeeWeeGee

I don't think that the DEMAND for music is decreasing either. But I believe that you are confusing "demand" for "perceived value". Further, there is still the issue of fair market pricing. I really don't understand what is so hard to grasp about that point.

The cost for delivering the music has decreased drastically, but the cost for CDs don't reflect a similar decrease. It's the same reason why everyone was pissed off a couple of years ago when gas prices didn't reflect the drop in oil prices.

I already addressed that in depth previously on this thread. The price of CDs have dropped about 4x since they were released. They have gone down somewhat in dollar amount and inflation has gone up 2.5x in that period. So they are effectively about 4x or so less expensive today. They are one of the best values out there. Amazing music that you can have for that price and enjoy as many times as you want.

How many different price points have been offered by the majors to the music consumers via LEGAL delivery channels? What was the take up rate of sales at each price point? That's a good place to start to understand where you can curtail theft. You will hit a plateau that will reflect what your paying customer thinks your product is worth.

If you don't think that a great song is worth 99 cents, then you don't don't think music is worth anything. I mean come on. I'm so tired of this argument that you should just keep lowering your prices until it finally gets slightly more aggravating to steal than to buy.

Don't people get it that, if you cut your price in half, you have to sell TWICE as much just to break even? And it'll still be 50 cents more per song than free. Anyone who steals a song because it's 99 cents is going to just steal it anyway.

Why are non A-list artist the BIGGEST critics of their own industry payout structure? Does everyone have it wrong or is there something fundamentally flawed with the system? Why isn't it open to discussion?

Because they aren't getting rich despite never having made it ot the A list. They don't understand the economics of venture capital. This is EXACTLY what happens in the venture capital world. If someone invests in your dream, and your dream doesn't get big, then don't expect to make any money. It's not going to happen. If you want to keep all the money, then you have to pay the tab. In the business world, if you go a VC without any track record, you will end up not owning your own business in the end. That's just the way it goes. They aren't going to invest their money in a highly risky venture otherwise. And every artist is a massively risky venture.

Why have/did so many A-list artists defect from their labels and pursue the Indie route? Shouldn't they have the leverage to strike equitable deals? Besides, they should clearly see the value that the label offers. Or.... they've had visibility to the inner workings of the machine and understand that they are losing money to gross mismanagement and an overburdened "corporate" structure.

Because the label has spent the money to build them up to the point that they CAN go out on their own and be sure that they will remain above the noise. As has been pointed out more times than I can count, and it just gets ignored, if it wasn't the label marketing that got them where they are, then were are their equivalents who did it straight through the internet? They don't exist, and they don't exist for a reason.

[Dean Roddey]

Originally Posted by PeeWeeGee

3. Where does the "everything is free" model come from?
EVERY major industry (outside of utilities - which are monopolies) has to adjust to market dilution and price levels. There is more honor in the buying community than you give credit for. Smart vendors (like Cockos) can see that and make good by reducing the price of the goods to one that is acceptable to the buyer; thereby INCREASING over sales albeit at lower margins. When a buyer is FORCED to pay what they consider a premium for a product that they consider SUBSTANDARD or not "value-consistent", they will choose between the options given: Pay full price or steal it. Too many artists have shown considerable success with reduced pricing and donation-based sales to dismiss this principle.

This would be a remotely viable argument IF it wasn't for the fact that they were buying it in droves up until downloading started. There's absolutely no way that all music suddenly started sucking in 1999 and therefore people suddenly thought it wasn't worth what it was a year ago when they were buying it in large numbers. So I'm sorry, but I just reject that out of hand.

[DontLetMeDrown]

Originally Posted by Dean Roddey

The price of CDs have dropped about 4x since they were released. They have gone down somewhat in dollar amount and inflation has gone up 2.5x in that period. So they are effectively about 4x or so less expensive today.

Dean, cmon now. Don't use math examples if you can't hang. Let's see... CD's average $11.99 around here. $11.99 x 4 = $47.96?!?! I don't seem to remember them EVER costing that much. If you expect to be taken seriously, maybe take the time to make sure you're numbers jive with your argument.

I've never paid more than $20 for a CD that wasn't an import and I've been buying them since day one. Yes, lots of people are stealing-- what does that have to do with your wacky inflated numbers?

[Lrmusic]

Originally Posted by DontLetMeDrown

Dean, cmon now. Don't use math examples if you can't hang. Let's see... CD's average $11.99 around here. $11.99 x 4 = $47.96?!?! I don't seem to remember them EVER costing that much. If you expect to be taken seriously, maybe take the time to make sure you're numbers jive with your argument.

I've never paid more than $20 for a CD that wasn't an import and I've been buying them since day one.

Dean's point is that $x in the age where CD's were released is now worth $(x/2.5) due to inflation. In addition, the nominal price of CDs has also gone down some amount. When you combine these 2 factors, CD's are now effectively around 4x cheaper.

He made it pretty easy to understand imo...

[DontLetMeDrown]

Care to show us your formula/calculation?

[PeeWeeGee]

Originally Posted by Dean Roddey

I already addressed that in depth previously on this thread. The price of CDs have dropped about 4x since they were released. They have gone down somewhat in dollar amount and inflation has gone up 2.5x in that period. So they are effectively about 4x or so less expensive today. They are one of the best values out there. Amazing music that you can have for that price and enjoy as many times as you want.

I'll take one more stab at this and resign. You can't address "fair market pricing" without addressing COSTS. For the sake of simple numbers, if CDs were priced at $20 to start, but costs $15 to produce; then your gross margin is 25%. If they now sell for $5, but costs to produce dropped to .50 cent, your margin is 90%. Inflation is factored out, because businesses should operate on margin and operating income not gross figures unless your revenue is the exceptional extreme. You own a business, you should know that all too well. Consumers are savvy enough to know that they're paying an unreasonable mark-up when THEY can produce the equivalent product for less at local dupe houses. I think you'll have a hard time disputing that when the ENTRY package at DiscMakers is $597 for 300 discs in jewel cases with inserts.

Originally Posted by Dean Roddey

If you don't think that a great song is worth 99 cents, then you don't don't think music is worth anything. I mean come on. I'm so tired of this argument that you should just keep lowering your prices until it finally gets slightly more aggravating to steal than to buy.

It doesn't matter what I "think". What matters is what the customer base is willing to accept. I don't think that a Coach handbag should cost $1200 fvcking dollars, but they sell at that price. Again, just a lesson in PERCEIVED value. It's the recording industry's job to alter that perception. If folks are willing to pay more for an apple pie at McDonald's than for your song, that is a MARKETING problem.

Originally Posted by Dean Roddey

Don't people get it that, if you cut your price in half, you have to sell TWICE as much just to break even? And it'll still be 50 cents more per song than free. Anyone who steals a song because it's 99 cents is going to just steal it anyway.

Again, Dean, you've factored out COSTS. Prices are dropping because production costs are dropping. You recoup at the same rate as before - BECAUSE YOU ARE PERFORMING AGAINST A MARGIN TARGET, NOT GROSS REVENUE. Other (honest) companies are doing this DAILY without ANY problems. And you can't throw the "99 cents" number out there without mentioning the production costs of that ONE song. What is the GM% or even DPM% (direct percentage margin) on that single?

Cry-baby industries are screaming because they want to return to yesteryear instead of embracing a new paradigm.

The last two sentences are absolute conjecture and not quantifiable. iTunes wouldn't NOT be a multi-million dollar BOOM business if those statements were wholly true.

Originally Posted by Dean Roddey

Because they aren't getting rich despite never having made it ot the A list. They don't understand the economics of venture capital. This is EXACTLY what happens in the venture capital world. If someone invests in your dream, and your dream doesn't get big, then don't expect to make any money. It's not going to happen. If you want to keep all the money, then you have to pay the tab. In the business world, if you go a VC without any track record, you will end up not owning your own business in the end. That's just the way it goes. They aren't going to invest their money in a highly risky venture otherwise. And every artist is a massively risky venture.

Unfortunately, you may be a step too far removed from the labels. The majors have already severely limited A&R and marketing budgets while demanding things like "x" number of MySpace visits, "x" number of radio spins, "x" number of unique web visits, etc, etc, BEFORE they will pick up an act. Don't take my word for it. Ask ANYONE is the process of signing a deal right now and see what they tell.

Using the model of VCs, you should know well that the profit percentages are based on the capital risk. Because much of the legwork was already done by the unsigned artist, they are entitled to a greater share because the risks have been mitigated and they have considerable "sweat equity". The recording industry has only honored one side of the bargain by reducing the investment.

Case and point: The girls from the Pop/R&B group, TLC, each walked away with roughly $55K each from the sales of their first album. Fact. I'll let you figure out what kind of convoluted math it takes to arrive at numbers like that when you have THREE top ten singles.

Originally Posted by Dean Roddey

Because the label has spent the money to build them up to the point that they CAN go out on their own and be sure that they will remain above the noise. As has been pointed out more times than I can count, and it just gets ignored, if it wasn't the label marketing that got them where they are, then were are their equivalents who did it straight through the internet? They don't exist, and they don't exist for a reason.

You've missed my point. Why would an artist want to go through the added effort to "remain above the noise" if the labels are equitable with profits? These artists are trying to RECOUP (and we all know that word) the monies that they didn't get in the early stages of their careers.

Yes, the label marketing machine SHOULD get a chunk of the money. But if a sports agent tried to take 50% of an athlete's gross income just for brokering the deal, they would be made to drag to death by a 'herd' of chickens! Seriously, there is a point where the viability and revenue generating potential of the artist should be recognized and rewarded. It just ain't so in music.



Look - I respect your passion and the fact that you have remained civil and respectful throughout our dialogue. But until you objectify the discussion with complete, hard data; we're just exchanging opinions as to why you 'believe' the graph looks the way that it does. In the meanwhile, other folks who understand and exploit the continued shortfalls of the major label mentality will keep laughing all the way to the bank. Please believe me. I make a comfortable living analyzing businesses like this every day.

Much respect -
PWG

[DontLetMeDrown]

Originally Posted by PeeWeeGee

It doesn't matter what I "think". What matters is what the customer base is willing to accept. I don't think that a Coach handbag should cost $1200 fvcking dollars, but they sell at that price. Again, just a lesson in PERCEIVED value. It's the recording industry's job to alter that perception. If folks are willing to pay more for an apple pie at McDonald's than for your song, that is a MARKETING problem.

I agree completely! Very well said!thumbsup

[Lrmusic]

Originally Posted by DontLetMeDrown

Care to show us your formula/calculation?

No. It's not my point. I'm just making sure you understood his point as he meant it. I just find it extremely hard to believe that he meant that CD's used to cost 40-something $.

[Dean Roddey]

Originally Posted by PeeWeeGee

I'll take one more stab at this and resign. You can't address "fair market pricing" without addressing COSTS. For the sake of simple numbers, if CDs were priced at $20 to start, but costs $15 to produce; then your gross margin is 25%. If they now sell for $5, but costs to produce dropped to .50 cent, your margin is 90%. Inflation is factored out, because businesses should operate on margin and operating income not gross figures unless your revenue is the exceptional extreme. You own a business, you should know that all too well. Consumers are savvy enough to know that they're paying an unreasonable mark-up when THEY can produce the equivalent product for less at local dupe houses. I think you'll have a hard time disputing that when the ENTRY package at DiscMakers is $597 for 300 discs in jewel cases with inserts.

The price of a CD is NOT the price of the actual CD. This is one of those things that I despair of because it has to be refuted time and again. If you want to buy some blank CDs from me for $3 each, I'll be glad to sell them to you. You are buy what's on the CD. Do you really think that because it costs 5 cents to mass produce a CD that SONAR should cost $5? The CD and it's cost have nothing to do with it, or very little to do with it.

It doesn't matter what I "think". What matters is what the customer base is willing to accept. I don't think that a Coach handbag should cost $1200 fvcking dollars, but they sell at that price. Again, just a lesson in PERCEIVED value. It's the recording industry's job to alter that perception. If folks are willing to pay more for an apple pie at McDonald's than for your song, that is a MARKETING problem.

But they always were quite glad to do so. That's what you keep ignoring. They didn't just suddenly stop thinking that when downloading became available. They just no longer had to make that choice anymore because they could take it for free and spend that money on other things that they cannot steal.

Look - I respect your passion and the fact that you have remained civil and respectful throughout our dialogue. But until you objectify the discussion with complete, hard data; we're just exchanging opinions as to why you 'believe' the graph looks the way that it does. In the meanwhile, other folks who understand and exploit the continued shortfalls of the major label mentality will keep laughing all the way to the bank. Please believe me. I make a comfortable living analyzing businesses like this every day.

Much respect -
PWG

Where are those people who are laughing to the bank? There aren't any. That's the problem with this argument. No one has found any viable way to compete with free. The best anyone has come up with is stop being a musician and just sell t-shirts and whatnot. Or perhaps sing about Budwieser beer in your song as a product placement.

[Dean Roddey]

Originally Posted by DontLetMeDrown

Dean, cmon now. Don't use math examples if you can't hang. Let's see... CD's average $11.99 around here. $11.99 x 4 = $47.96?!?! I don't seem to remember them EVER costing that much. If you expect to be taken seriously, maybe take the time to make sure you're numbers jive with your argument.

I've never paid more than $20 for a CD that wasn't an import and I've been buying them since day one. Yes, lots of people are stealing-- what does that have to do with your wacky inflated numbers?

A CD in 1985 would have cost, let's say 16. If you add in inflation, that would be $37 in today's dollars. So, if they did nothing but track with inflation, which most companies do because everything costs them more because of inflation, then the cost of a CD today would be $40. In fact they are generally more like $11 to $12, they are almost 4x less expensive in real dollars (look up the concept of real dollars vs nominal dollars if you don't know what it means) than they were in 1985.

http://en.wikipedia.org/wiki/Real_ve...lue_(economics)

So, in 1985 dollars it was really 4x times more expensive to buy a CD than it is now in real dollars. The inflation rate may be somewhat lower than that now since the housing crisis, but not that much less and the concept still stands. It's multiple times less expensive to buy a CD now in real dollars than when they first came out. And the inflation rate will go back up again once we get back up and out of the recent debacle.

[PeeWeeGee]

Originally Posted by Dean Roddey

The price of a CD is NOT the price of the actual CD. This is one of those things that I despair of because it has to be refuted time and again. If you want to buy some blank CDs from me for $3 each, I'll be glad to sell them to you. You are buy what's on the CD. Do you really think that because it costs 5 cents to mass produce a CD that SONAR should cost $5? The CD and it's cost have nothing to do with it.

ALL of the costs are a factor. Stop ignoring the fact that the labels don't have the discs mass produced for less than $.50/each. The remaining money has to cover ALL of the other cost + profits. Business 101. AND you have to hit a target "units sold" number to maximize profitability. Period. It is up to the marketing team to increase the sales.

Originally Posted by Dean Roddey

But they always were quit glad to do so. That's why you keep ignoring. They didn't just suddenly stop thinking that when downloading became available. They just no longer had to make that choice anymore.

Fact: Cars USED to get 12 miles/gallon.
Fact: The market changed - technology was the catalyst.

Fact: Mobile phones USED to be considered luxury items only for the VERY wealthy.
Fact: The market changed - technology was the catalyst.

Fact: 300baud USED to be a kick-ass transmission rate for internet connections.
Fact: The market changed - technology was the catalyst.

See a trend here? That's what YOU keep ignoring. The rules have CHANGED - time for the industry to stop crying about it and play by the new rules.

Originally Posted by Dean Roddey

Where are those people who are laughing to the bank? There aren't any. That's the problem with this argument. No one has found any viable way to compete with free. The best anyone has come up with is stop being a musician and just sell t-shirts and whatnot.

Check out the links/articles below. You are woefully under-informed, Dean. As an independent, Cash Money Records inked a $30M deal. That's a lot of fvcking t-shirts! TVT, Koch, Matador and others.... you are terribly out of the loop.

Snapshot of CD Baby early 2008: 85 employees, $100M Revenue, 200,000 albums

Indie Bands Reach New Sales Heights Through iTunes | The Digital Entertainment Column | Fast Company

Top 10 Independent Pop Record Labels - About.com

[PeeWeeGee]

Originally Posted by Dean Roddey

A CD in 1985 would have cost, let's say 16. If you add in inflation, that would be $37 in today's dollars. So, if they did nothing but track with inflation, which most companies do because everything costs them more because of inflation, then the cost of a CD today would be $40. In fact they are generally more like $11 to $12, they are almost 4x less expensive in real dollars (look up the concept of real dollars vs nominal dollars if you don't know what it means) than they were in 1985.

http://en.wikipedia.org/wiki/Real_versus_nominal_value_(economics)

So, in 1985 dollars it was really 4x times more expensive to buy a CD than it is now in real dollars. The inflation rate may be somewhat lower than that now since the housing crisis, but not that much less and the concept still stands. It's multiple times less expensive to buy a CD now in real dollars than when they first came out. And the inflation rate will go back up again once we get back up and out of the recent debacle.

Sorry, Dean. By making blanket statements and using bad math, you defeat your own credibility.

According to you, the cost of cellular phones should be ~$3200 at the inflated rate. Entry level computers should be ~$8000. (These are real "prices" relative to 1990.)

If you don't factor in diminishing production costs as the technology is accepted on a mass scale then you are ALWAYS going to get skewed metrics. You have to concede that you don't have SOMETHING quite right.

[Dean Roddey]

Originally Posted by PeeWeeGee

Sorry, Dean. By making blanket statements and using bad math, you defeat your own credibility.

According to you, the cost of cellular phones should be ~$3200 at the inflated rate. Entry level computers should be ~$8000. (These are real "prices" relative to 1990.)

If you don't factor in diminishing production costs as the technology is accepted on a mass scale then you are ALWAYS going to get skewed metrics. You have to concede that you don't have SOMETHING quite right.

I'm just about to give up on you. They would be if they tracked inflation. They didn't. Therefore they are cheaper. CDs would be about $40 if they tracked inflation. They didn't. Therefore they are cheaper.

What about that don't you get? CDs are far cheaper than they were originally in real dollars, as are computers. Why are people complaining that CDs cost too much? Because they don't have to pay for them anymore, so it's easy to use the rationalization that they are too expensive as an excuse.

[Dean Roddey]

Originally Posted by PeeWeeGee

ALL of the costs are a factor. Stop ignoring the fact that the labels don't have the discs mass produced for less than $.50/each. The remaining money has to cover ALL of the other cost + profits. Business 101. AND you have to hit a target "units sold" number to maximize profitability. Period. It is up to the marketing team to increase the sales.

What are you talking about? I can't even figure out what you are trying to argue anymore. You were arguing that because CD costs are lower that CDs should cost hugely less. But the cost of the CD itself was never what you were paying for. You were paying for the content on the CD. The cost of the CD itself is fairly meaningless.

Fact: Cars USED to get 12 miles/gallon.
Fact: The market changed - technology was the catalyst.

Fact: Mobile phones USED to be considered luxury items only for the VERY wealthy.
Fact: The market changed - technology was the catalyst.

Fact: 300baud USED to be a kick-ass transmission rate for internet connections.
Fact: The market changed - technology was the catalyst.

See a trend here? That's what YOU keep ignoring. The rules have CHANGED - time for the industry to stop crying about it and play by the new rules.

Fact: None of those things happened because technology allowed people to steal those products. So they are all completely meaningless. Show many of those companies who are having their product stolen in mass quantities who are doing really well, and maybe you'd have something like a point.

Check out the links/articles below. You are woefully under-informed, Dean. As an independent, Cash Money Records inked a $30M deal. That's a lot of fvcking t-shirts! TVT, Koch, Matador and others.... you are terribly out of the loop.

Snapshot of CD Baby early 2008: 85 employees, $100M Revenue, 200,000 albums

The industry just deflated by $6B and you are putting forward CD Baby's $100M as an answer to that problem?

[PeeWeeGee]

Originally Posted by Dean Roddey

I'm just about to give up on you. They would be if they tracked inflation. They didn't. Therefore they are cheaper. CDs would be about $40 if they tracked inflation. They didn't. Therefore they are cheaper.

- Honestly, I think we all understand your point. I'm trying (desperately) to show YOU how you're notion that CD are relatively "right-priced" isn't sound. But now....

Originally Posted by Dean Roddey

What about that don't you get? CDs are far cheaper than they were originally in real dollars, as are computers. Why are people complaining that CDs cost too much? Because they don't have to pay for them anymore, so it's easy to use the rationalization that they are too expensive as an excuse.

I'm just about to give up on you. The issue isn't the "cost" of the CD, Dean. The issue is the market perceived value. No matter what you say, as a business you may NEVER set the price of your goods above what the consumer dictates is reasonable. You may, however, "alter" that perception through marketing.

If folks think CDs cost too much and the recording industry can't convince them that the price is acceptable, then they will lose the business of those customers. Period!

In the case of CDs, the GROSS MARGIN PERCENTAGE IS PERCEIVED AS BEING TOO HIGH!

[PeeWeeGee]

Originally Posted by Dean Roddey

What are you talking about? I can't even figure out what you are trying to argue anymore. You were arguing that because CD costs are lower that CDs should cost hugely less. But the cost of the CD itself was never what you were paying for. You were paying for the content on the CD. The cost of the CD itself is fairly meaningless.




Fact: None of those things happened because technology allowed people to steal those products. So they are all completely meaningless. Show many of those companies who are having their product stolen in mass quantities who are doing really well, and maybe you'd have something like a point.



The industry just deflated by $6B and you are putting forward CD Baby's $100M as an answer to that problem?

Fvck it. You win, bro.

Good luck with that.

[Dean Roddey]

Originally Posted by PeeWeeGee

- Honestly, I think we all understand your point. I'm trying (desperately) to show YOU how you're notion that CD are relatively "right-priced" isn't sound. But now....

I'm just about to give up on you. The issue isn't the "cost" of the CD, Dean. The issue is the market perceived value. No matter what you say, as a business you may NEVER set the price of your goods above what the consumer dictates is reasonable. You may, however, "alter" that perception through marketing.

If folks think CDs cost too much and the recording industry can't convince them that the price is acceptable, then they will lose the business of those customers. Period!

In the case of CDs, the GROSS MARGIN PERCENTAGE IS PERCEIVED AS BEING TOO HIGH!

That's completely incorrect. Do you want to bet me $10,000 that we go to the mall and and stop 100 kids and ask them what they think that the gross margin percentage of CDs is that even half of them will know what that even means? Or, if you explained the term that any of them could venture a guess as to the approximately correct answer?

They steal it because they can steal it. It's not that hard to figure out.

[initialsBB]

Originally Posted by Dean Roddey

So, in 1985 dollars it was really 4x times more expensive to buy a CD than it is now in real dollars.

There are a couple of problems with that assertion. First of all real wages are stagnant or down since the '60s and '70s and that will have had a dramatic effect on the consumer's perception of CD prices. Also, inflation statistics don't factor in housing, gas, or food, so they're largely B.S. If I'm making less money in real dollars today than I did in 1990, and spending a much larger percentage of it on gas and housing, I'm going to have much less disposable income left over for things like CDs.

[vincentvangogo]

I haven't read all of this thread, but I basically agree with Dean that blaming piracy on CDs being over-priced is naive. Sure the industry is run by people out for profit, but so is the movie industry, the publishing industry and all the others. It's a simple case of people thinking 'why pay for something you can get for free?' -nothing more comlicated than that. Industry overpricing is just an excuse they use when asked to justify it.

[Dean Roddey]

Here is a calculator that uses various types of indices:

Measuring Worth - Relative Value of US Dollars

I did it for $15 in 1985 vs 2008. The smallest is $26 and the largest is $51.


Anyway, it's a bogus argument, as has been pointed out countless times. They have enough money to have a computer and high speed network connection and iPod. And, as pointed out already, the falloff happened at the height of the internet boom when money was not in shortage and inflation was amazingly low relative to growth.

[chrisso]

Dean - I feel for you.

I really don't understand why we are arguing about CD's.

The industry has already moved to downloads.
As Dean said earlier - if 99c isn't cheap enough for you, perhaps you don't like music.
The industry has addressed it's customers. But here is the big point - how do you compete with free?
Because of people acting illegally (the uploaders) the perceived market value of a recording is zero. Not because music is crap, but because it's being offered (illegally) all over the net, free of charge.
That is surely the issue.
I'm sure the industry would love to do a Dolce & Gabbana and charge $1,999.00 per CD, but they have reacted to market forces and reduced the price of songs to as little as 0.99c.
In my experience, 99 cents is an OK price for a recording that will sell millions, however it wont fund/repay more left field artists who sell less copies.

[chrisso]

Originally Posted by initialsBB

First of all real wages are stagnant or down since the '60s and '70s and that will have had a dramatic effect on the consumer's perception of CD prices.
I'm going to have much less disposable income left over for things like CDs.

U.S. Census

Households that earn between $25,000 and $75,000 represent approximately the middle half of the income distribution tables provided by the U.S. Census Bureau. Over the past two decades, the number of households in those brackets decreased by 3.9%, from 48.2% to 44.3%. During the same time period, the number of households with incomes below $25,000 decreased 3.5%, from 28.7% to 25.2%, while the number of households with incomes above $75,000 increased over 7%, from 23.2% to 30.4%

[joelpatterson]

Well then guess what, the "profit" for making content to offer on a CD or as a digital download these days is minimal or non-existent, so don't do it if that's your criteria.

Who is the person holding a gun to everyone's head and telling them, "You must make money on this project, or I'll shoot you!"

[chrisso]

Why does the debate always have to be about personal gain?

Is it not ok to be concerned about piracy in general, as a principal?

Is it not ok to be concerned about the future of less easily marketable projects, because they can't make up the shortfall through corporate sponsors or signature clothing lines?

Is it not ok to worry about the future of the next generation of musicians - especially as we still don't have a workable business model going forward (much like the crisis in news).

I mean I worry about the future of journalists, but it's not my way of making a living.