What the industry does not want you to know about CD copying

[David R.]

Wow. An eye opener.

Was just speaking with an attorney who is very in the know about copyright issues.

He told me that it is completely legal to make a copies of your friend's CD collection, make 10 (or 20) copies of that and pass them out to your friends.

The one catch is the CDRs used to make the copies have to say 'music' on them.

Each black CD with 'music' imprinted on it is subject to a 3 cent (aprox.) tax which is passed on to BMI/ASCAP.

Less of an issue in the iTunes generation, but still, wow.

[Unknown soldier]

Always a debatable topic - The music industry charges WAY too much for a CD, even at $10. What's there total cost including overhead for one CD? Probaby a buck, maybe two?
If CD's were $5 new, then there would be less of a demand of copies and both the industry and the consumer would win. Teenager gets music and is happy, industry gets 100% profit and spends less money fighting counterfeit sources. Seems like a simple solution, however pure greed often clouds judgement. And the music industry isn't exactly the Wally Cleaver of the business world.

[Medicine Dog]

There may be a "mechanical" fee paid on blank CDRs passed on to the performing rights organizations, but only covers songwriting and publishing. I think you'd have a hard time making that argument stick under the "fair use" clause of the copyright code when it comes to the actual owners of the copyright losing money.

Somehow, making 20 copies of your favorite CD and passing them out to your friends doesn't seem like "fair use" to me...

Your attorney might be "in-the-know," but I generally shy away from defintive statements like "completely legal." I would venture to guess he has a completely legal case of Optical-Rec.

And for those of you still bitching about the retail cost of a CD, trying running a record company for a while. I'm not defending labels in the least (the majors are certainly getting what they deserve). I'm just pointing out that there's a lot more to selling a CD than pressing them up and shipping them out to local record stores. Can you say Advertising? Publicity? Promotional Items? Independent Promotion? Mechanical Fees? Producer Points? The list goes on & on.

[Unknown soldier]

Originally posted by Medicine Dog
And for those of you still bitching about the retail cost of a CD, trying running a record company for a while. I'm not defending labels in the least (the majors are certainly getting what they deserve). I'm just pointing out that there's a lot more to selling a CD than pressing them up and shipping them out to local record stores. Can you say Advertising? Publicity? Promotional Items? Independent Promotion? Mechanical Fees? Producer Points? The list goes on & on.

I'd be curious to know the actual cost per CD is, taking into account all the expenses you mentioned. We all know that the CD's themselves, along with the process of making them, is extremely cheap in large quantities. The gross margin must be astronomical when comparing revenue against product cost. All the other costs you mentioned factor in, but I can't imagine it's more than a few dollars at most per CD, assuming you sell millions of them....

[David R.]

Originally posted by Medicine Dog

Somehow, making 20 copies of your favorite CD and passing them out to your friends doesn't seem like "fair use" to me...

Your attorney might be "in-the-know," but I generally shy away from defintive statements like "completely legal." I would venture to guess he has a completely legal case of Optical-Rec.

I do not think it is right to do so, but it is legal so long as the mechanicals are paid.

Normal blank CDR, nope. Copyright violation.

Blank 'music' CDR, OK.

What sucks about this is most of the money from the royalty will go to artists like Britney, Usher, J-Lo...who ever the publishing companies think is being copied most. Same as collecting money from clubs and bars that play music - no way to actually track who is being copied so the money goes in to a pool to be divided by the bigest players.

When they start tracking downloads (which should happen soon), there could be an actual accounting of who is being played/downloaded which could even the distribution of money.

I do believe this attorney, he argued the Napster case for a very large law firm.

Take it with a grain of salt and an ounce of precaution, but that is what I was told.

[hollywood_steve]

I don't think CDs are overpriced at all. FORTY (!!) years ago, in the mid-sixties, an LP was $3+ - about 10 times the price of a gallon of gas or a pack of smoke. Now a CD is barely 5x the cost of either of those other benchmark prices. And I know that I make just about exactly 10x what my father was making 40 years ago. When you consider that the actual selling price of CDs is around $12 to $15, I think that is just fine compared to how other costs have changed over 40 years, maybe even a bargain.

[lucey]

Originally posted by Unknown soldier
Always a debatable topic - The music industry charges WAY too much for a CD, even at $10. What's there total cost including overhead for one CD? Probaby a buck, maybe two?
If CD's were $5 new, then there would be less of a demand of copies and both the industry and the consumer would win. Teenager gets music and is happy, industry gets 100% profit and spends less money fighting counterfeit sources. Seems like a simple solution, however pure greed often clouds judgement. And the music industry isn't exactly the Wally Cleaver of the business world.

The price of CDs is cheap looking at the costs of running a label, recording, promotion, retail and the artist's end. The quality of CDs is more the issue, and the fact that retail gets too much.


$5 CDs would bring even the most frugal indy companies to a halt. $7 is as low as I recall, yet that's not through stores. A band with good material and good CDs selling them for $15 at shows has a real chance of a sustainable career.

The fact that the labels have lawyers fighting people over copyrights is one thing, and I agree it's the wrong way to go, but a $5 CD is not the answer.

Next you'll suggest a $3 CD of all mp3's.

Then a $1 CD.

[seriousfun]

Not quite true.

The royalty on CD-Rs labeled "music" is administered by the AHRA.

The AHRA has, to date, distributed zero to copyright holders. You will notice that the list of covered titles stops in 2001. Yet, the royalty continues to be collected.

Now, ASCAP, BMI, etc., have a perfectly workable system for distributing funds to copyright holders for live performance, broadcast, etc. Many people agree that if we apply a similar fee to ISPs, enough revenue will be generated, at $1-2/month per subscriber, to compensate for any loss in revenue the record and movie industries have ever dreamed of from the trading of files.

I contend that the reason this very workable system hasn't been implemented is that it cuts the RIAA/MPAA out of the loop, and they (and their sister-org AHRA) have been the ones making the money at the expense of the copyright holders.

Also, Canada has already implemented such a system. File trading is perfectly legal in Canada because of this, and the Canadian recording industry has gone through the same boom/bust cycle as the US recording industry.

And yes, hollywood_steve is right - put the current cost of CDs and the historic cost of LPs through the inflation calculator, and you will find that CDs are not relatively expensive. Overpriced? Possibly, since per-unit replication costs for CDs are far less, adjusted for inflation, than costs were for LPs.

[NeoVXR]

this is all true but we are experiencing a destructive tension between our perceptions and possibilities.

computer hardware and partially software has dropped with prices enormously in the last decades.
also CD players.

no one can afford to fill an ipod with music legally.

so it should never be of any matter, how many millions of songs some person has on her harddrive or in the player. it is never possible to take any advantage of it, except illegal selling.
you have only so many hours a day to listen to music.

I think thats the problem of the current business model.
the only reasonable feedback must be, what songs are LISTENED HOW MANY times.
what you have in your shelf is only relevant as long as its actually beautiful and you take it in your hands and look at it, e.g. old vinyls with great posters and lyrics sheets.

so 20 bucks might be ok for a 16 song package that one listens many times.
it will need some ideas to get the feedback for the accounting.

what is always missing, is the observation that a Beatles LP was listened to much more often and for a longer time than the Britney CD of the day. what do you hear in radios? many oldies! this surely has relevance if we consider the prices.


the industry want to explain prices with costs. but this is not the primary formula in a free market economy, and it is also "cartell" behaviour. eventualy prices are defined by market value. break the rule and you lose your biz.
one thing else, when they explain prices with costs, and then unilaterally rise costs by crazy advertising wars and hybris in video production (500k...) they simply make the bill without the customer.
doing again and again - big problem...

[rabryars]

Hi All,

It's not so much the price of a CD, DVD etc that annoys me. Given how many people can be involved just in creation never mind recording and marketing I don't think £10-15 is unreasonable, my 2c worth.
Like Lucey I think it's the slicing of the pie and who gets what from whatever the price might be.
If one makes and sells CDs either privately or as Indy label I believe you soon find out that £10/15 retail doesn't go along way.
I think it's really up to internet sales to try and route more to the artist. Different online contracts might be a way to go ? A label or individual still has all those marketing costs don't forget.

Bob

[Unknown soldier]

Originally posted by hollywood_steve
I don't think CDs are overpriced at all. FORTY (!!) years ago, in the mid-sixties, an LP was $3+ - about 10 times the price of a gallon of gas or a pack of smoke. Now a CD is barely 5x the cost of either of those other benchmark prices. And I know that I make just about exactly 10x what my father was making 40 years ago. When you consider that the actual selling price of CDs is around $12 to $15, I think that is just fine compared to how other costs have changed over 40 years, maybe even a bargain.

OK, but why pay $12-15 when you can copy it for almost free? That's what the problem is. You need to make it more attractive to buy a CD rather than just copying it....all morals aside, if you are some kid scrounging up your allowance, you'd quickly assess that $15 a week can go to pizza and candy rather than a single CD. And $15 can buy you what, 50-100 blank CD's?

The business model should be profit based on high volume/less margin, kinda like a supermarket...these aren't high ticket furniture items that sit for 14 months before it sells. I'm sure the sell many more CD's at the 9.99 special rather than the $14.98 regular price. And you are still making money; sounds like a no brainer to me....

[Last Legend]

The songwriting/publishing copyright is not the same as the copyright of the actual recording...but I think you can make copies for *personal* use...legally.

[seriousfun]

Originally posted by Unknown soldier
...
The business model should be profit based on high volume/less margin, kinda like a supermarket...these aren't high ticket furniture items that sit for 14 months before it sells. I'm sure the sell many more CD's at the 9.99 special rather than the $14.98 regular price. And you are still making money; sounds like a no brainer to me.... [/b]

But IMO that is precisely why the music industry is creatively in trouble these days.

High volume/low margin is why we have Britney and Ashlee as our leading musicians instead of artists with more substance.

The greatest part of the profit from a CD sale, if it is sold at retail price, is to the retailer. I think we can get this industry to make economic sense (is that an oxymoron?) if we can turn it around so retail profit is 10-20%, marketing costs are 5-15%, and the rest goes to the front-end.

[Albert]

Originally posted by Unknown soldier
I'd be curious to know the actual cost per CD is, taking into account all the expenses you mentioned. We all know that the CD's themselves, along with the process of making them, is extremely cheap in large quantities. The gross margin must be astronomical when comparing revenue against product cost. All the other costs you mentioned factor in, but I can't imagine it's more than a few dollars at most per CD, assuming you sell millions of them....

The actual cost of producing a CD depends on so many factors it would take a book to cover the possibilities. When I read people saying that CD's shouldn't cost more than $5 I have to laugh. Just go ahead and try producing a CD with a national release for that.

Anyone who has been there knows that there are ALL SORTS of costs, from before the first recording session to years after it has been released.

On a short run release I wish that I could charge, per CD, the actual amount that it would take me to recoup my money. That wouldn't be $5. It would be more in the vicinity of what the adjusted-for-inflation numbers for an old LP release, or even an inflation-adjusted number of what CD's originally cost when they first appeared on the market roughly 20 years ago.

$5-10 CD's are not sustainable for an artist who is not moving a major number of units, and probably not even for them. It's not a big pie and there are a lot of hands out, reaching for their piece. A national release with marketing and the various promotions gets expensive fast. Don't forget all the radio and promotion copies you have to give away. At $5 per CD you are talking about a money pit, not an ongoing enterprise.

And to calculate the figures assuming sales of millions is basically delusional!

[NeoVXR]

>and the rest goes to the front-end.

that's the dinosaur problem. brain did not grow with body. all the weight was greedy self serving administration and transport.

[tigger]

Medicine Dog,

when you say that the "majors are getting what they deserve" tsk tsk tsk.

the majors pay my wages. Do I deserve the hardships we all now face with the demise of studios/ music in general? I Think NOT! Fortunately i can do a good impression of a chamelion . . . . .


Tigger

[Unknown soldier]

Originally posted by Albert
The actual cost of producing a CD depends on so many factors it would take a book to cover the possibilities. When I read people saying that CD's shouldn't cost more than $5 I have to laugh. Just go ahead and try producing a CD with a national release for that.

Anyone who has been there knows that there are ALL SORTS of costs, from before the first recording session to years after it has been released.

On a short run release I wish that I could charge, per CD, the actual amount that it would take me to recoup my money. That wouldn't be $5. It would be more in the vicinity of what the adjusted-for-inflation numbers for an old LP release, or even an inflation-adjusted number of what CD's originally cost when they first appeared on the market roughly 20 years ago.

$5-10 CD's are not sustainable for an artist who is not moving a major number of units, and probably not even for them. It's not a big pie and there are a lot of hands out, reaching for their piece. A national release with marketing and the various promotions gets expensive fast. Don't forget all the radio and promotion copies you have to give away. At $5 per CD you are talking about a money pit, not an ongoing enterprise.

And to calculate the figures assuming sales of millions is basically delusional!

Maybe this is correct, however wasn't it recently determined in a law suit that record companies were overcharging for CD's? I got something in the mail that said I could claim $13 or something like that. I did get the check, wasn't even enough to buy that CD I wanted.
So what is a breakeven #? $8? $10? Do they really need to charge $17.99 to make a decent profit? I really don't think so...and as far as giving away free copies, well, when it costs you chump change per CD including the cases and artwork/layout, I don't think giving out a few hundred is going to hurt your pocket book.

The whole point of going to CD technology was the fact that eventually they new it would be dirt cheap technology (maybe not then in 1982, but surely now in 2005). All the other costs increase too, and I'll give you that, however when it's already been shown that overpriced CD's both turn off the consumer and hurt sales, it's tough to make my heart bleed for the music industry...

[seriousfun]

Originally posted by Unknown soldier
... wasn't it recently determined in a law suit that record companies were overcharging for CD's? I got something in the mail that said I could claim $13 or something like that. I did get the check, wasn't even enough to buy that CD I wanted.
...

No, the class-action suit was because they were price-fixing with some retailers.

[NeoVXR]

I step back from bashing the "industry".

but there is not only the wellknown kind of competition between songs, artists, prices, features, marketing skills etc.

there is a bigger, slower cycle of competition of not doing something that need not be done any more in such a scale. a competition of instant availability of "real" values versus logistic machinery and taking a ride in small printed complex contract paragraphs.
the "video on demand" business model is such a factor. no more need to run down the street for a video cassette or DVD. one day all these little video shops won't afford any more what they are doing now.
there won't be any CDs soon, only download sales. maybe another type of media that costs above 30 or 50, with better features, like videos, HQ surround sound, and lots of stuff like posters, interviews, holograms, eventually 3D video scenes. music DVD sales are not bad even today, and this will grow.

[T_R_S]

When I was a kid I used to record records on 8 Tracks and cassettes. But when always wanted to buy the album. Record companies used put lots of cool stuff in Albums, posters, stickers, pictures of the band. They hardly do anything like that anymore.

[Albert]

Originally posted by Unknown soldier
Do they really need to charge $17.99 to make a decent profit? I really don't think so...and as far as giving away free copies, well, when it costs you chump change per CD including the cases and artwork/layout, I don't think giving out a few hundred is going to hurt your pocket book.

The whole point of going to CD technology was the fact that eventually they new it would be dirt cheap technology (maybe not then in 1982, but surely now in 2005). All the other costs increase too, and I'll give you that, however when it's already been shown that overpriced CD's both turn off the consumer and hurt sales, it's tough to make my heart bleed for the music industry...

Have you ever calculated what it costs to send out a few hundred CD's for promotional purposes? For a national release? It is not chump change, I assure you!

Don't forget that we are not talking about a few hundred CD's either, it's going to be more than that. Each CD goes out in a promotional package, which costs money. Glossy paper costs money, the people that do the artwork, design, copy writing, etc for the promotional material cost money. Even if you do it yourself you are paying for color copies for at least some of the pages. How about the mailers, and of course the postage? It can *easily* cost $5-7 per package per promotional CD, if not more. It depends how nice you want it to look. Add it up, then multiply it by "a few hundred" copies. You are already talking about $1,500-2,100 for a small mailout of 300 copies.

Then don't forget about the promoter(s) you need to hire to make sure your CD gets heard by the DJ's you are mailing these CD's to. I'm not talking about folding up a piece of paper with your name on it with the CD and sending it out cold to DJ's and then not following up. I'm talking about doing it right, in such a way that will have the possibility of getting some results.

These costs go on and on. No one can really know what they are talking about when discussing the costs of releasing a CD to the public unless they've done it themselves. Because a person simply can't know the costs for real until they walk the walk. You could read every book and magazine article on the subject and you still wouldn't have a clue. I know I didn't until I went through the whole process for myself.

Let's also not forget that the retailer takes a hefty cut of the album's selling price. It's not like the label gets $15 every time a CD sells. Amazon.com takes a HEFTY cut of every album sold on their site. I lost money everytime I sold an album through them, which is why I don't anymore. And then we are talking about retail prices of $5-10? The numbers simply don't fly.

Again, the cost of the "dirt cheap" CD technology is the *least* of the expenses you have to worry about when releasing a CD. It's just the tip of the iceberg. All the other expenses are very real and pretty much unavoidable. This is what hangs everybody up in discussions on this subject. The manufacturing cost is only one of many, many, many expenses.

Try producing a CD and releasing it nationally with a real marketing and promotional campaign, even just to the independent stations, and then post back here in two years once you've gone through the whole process. I guarantee you won't be so sure you are getting ripped off by the labels.

[BrianT]

It's not a question of "Are CDs too expensive?" Or who thinks they are or are not too expensive. Or how much they "really" cost to make. Or how much they "should" cost, according to whoever.

The heart of the argument is this:

Does a company that makes any product have the right to decide how much they want to charge for it?

And if a consumer decides the price is more than they want to pay, do they have the "right" to steal that product, as long as they don't think they will suffer any consequences?

We could be talking about any sort of widget and the principle would remain the same. The only difference here is that stealing a CD player that is "priced too high" will get you jail time. But stealing a CD that is "priced too high" is just good clean fun.

Words like "principles" and "integrity" are less popular than they once were, and stealing music because it "should" cost less is merely one of the proofs.

[Bob Olhsson]

Originally posted by seriousfun
No, the class-action suit was because they were price-fixing with some retailers.

Folks, please get you facts straight. NOBODY was price fixing. Labels were refusing to pay for co-op advertising of CDs that were being offered below cost as loss-leaders because this practice was forcing record-only stores out of business. Wall-Mart Circuit City and Best Buy sued the labels forcing a settlement. This was spun in the tech-press as "proof" that the labels were artificially raising prices. The big stores won. The local independent retail stores, small labels and musicians lost big time.

[warhead]

I've got a hard on the size of Texas for Wal Mart, they've done the same thing with lots of other product as well. Selling below cost to put everyone else out of business.

When everyone else is gone, will Wal Mart sell you a lawn mower or stereo below cost?

They were caught several years ago selling pharmacy products below cost ONLY in towns where there was competition from mom and pop shops. Once mom and pop closed their doors...the price was nice and profitable.

Sorry, slightly off topic...but they are evil fukks who deserve a sweaty spot right next to Satan as they rot in eternal hell. I say this only because I can't think of anything worse right now?

War

PS: Was it illegal to make copies with cassettes that said "music" on them?

[lucey]

Originally posted by warhead


PS: Was it illegal to make copies with cassettes that said "music" on them?

A cassette was not an exact copy, and in that sense technology has not served musicians well. Metallica and the Grateful Dead and many others would not have been anywhere near the same without tape swapping.