Taken from the RIAA website: “A
typical music fan who buys a CD might use that CD at home, take
that CD in the car, make a tape of that CD, – or using it as part of a compilation, play that CD
with friends and for friends, and keep that CD for many years. That’s
probably why most consumers, when asked, describe CDs as a good
value. At the same time, when asked directly whether CDs cost too
much, some consumers will say yes! Why the contradiction? Because
some consumers don’t understand why the sales tag on a CD is so
much higher than the cost of producing the actual physical disc,
a cost, which in fact, has decreased over the years.
While
the RIAA does not collect information on the specific costs that
make up the price of a CD, there are many factors that go into the
overall cost of a CD — and the plastic it’s pressed on, is among
the least significant. CD manufacturing costs may be lower, but
it takes more money than ever before to put out a new recording.
Of
course, the most important component of a CD is the artist’s
effort in developing that music. Artists spend a large portion of
their creative energy on writing song lyrics and composing music
or working with producers and A&R executives to find great songs
from great writers. This task can take weeks, months, or even years.
The creative ability of these artists to produce the music we love,
combined with the time and energy they spend throughout that process
is in itself priceless. But while the creative process is priceless,
it must be compensated. Artists receive royalties on each recording,
which vary according to their contract, and the songwriter gets
royalties too. In addition, the label incurs additional costs in
finding and signing new artists.
Once
an artist or group has songs composed, they must then go into the
studio and begin recording. The costs of recording this work, including
recording studio fees, studio musicians, sound engineers, producers
and others, all must be recovered by the cost of the CD.
Then
come marketing and promotion costs — perhaps the most expensive
part of the music business today. They include increasingly expensive
video clips, public relations, tour support, marketing campaigns,
and promotion to get the songs played on the radio. For example,
when you hear a song played on the radio — that didn’t just
happen! Labels make investments in artists by paying for both the
production and the promotion of the album, and promotion is very
expensive. New technology such as the Internet offers new ways for
artists to reach music fans, but it still requires that some entity,
whether it is a traditional label or another kind of company, market
and promote that artist so that fans are aware of new releases.
For
every album released in a given year, a marketing strategy was developed
to make that album stand out among the other releases that hit the
market that year. Art must be designed for the CD box, and promotional
materials (posters, store displays and music videos) developed and
produced. For many artists, a costly concert tour is essential to
promote their recordings.
Another
factor commonly overlooked in assessing CD prices is to assume that
all CDs are equally profitable. In fact, the vast majority is never
profitable. Each year, of the approximately 27,000 new releases
that hit the market, the major labels release about 7,000 new CD
titles and after production, recording, promotion and distribution
costs, most never sell enough to recover these costs, let alone
make a profit. In the end, less than 10% are profitable, and in
effect, it’s these recordings that finance all the rest.
Clearly
there are many costs associated with producing a CD, and despite
these costs the price of recorded music to consumers has fallen
dramatically since CDs were first introduced in 1983. Between 1983
and 1996, the average price of a CD fell by more than 40%. Over
this same period of time, consumer prices (measured by the Consumer
Price Index, or CPI) rose nearly 60%. If CD prices had risen at the
same rate as consumer prices over this period, the average retail
price of a CD in 1996 would have been $33.86 instead of $12.75.
While the price of CDs has fallen, the amount of music provided
on a typical CD has increased substantially, along with higher quality
in terms of fidelity, durability, ease of use, and range of choices,
including multi-media material, such as music videos, interviews
and discographies. Content of this type often requires considerable
production expense and adds a whole new dimension that goes beyond
conventional audio.
In
contrast, CD prices are low compared to other forms of entertainment
and one of the few entertainment units to decrease in price, even
though production, marketing and distribution costs have increased.
In a USA Today article entitled, “Spending a Fortune for Fun:
The cost of entertainment is rising along with our willingness to
pay it ,” the reporter observes, “though some factions
of the industry see price resistance — CD prices are relatively
low and home videos rentals are still a bargain — consumers don’t
seem to balk at the rising price of fun in this strong, family-friendly
economy.” The prices of other forms of entertainment have risen,
on average, more rapidly than has music or consumer prices, with
most admission prices for other forms of entertainment having increased
more than 90% between 1983 and 1996.
By
all measures, when you consider how long people have the music and
how often they can go back and get “re-entertained” CDs
truly are an incredible value for the money.”
—–RIAA WEBSITE
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