Why do Music CDs Fail to Compete on Price?

Some recent industry stats, courtesy of a music insider:

1. Only 10% of consumers spend more than $100 per year on recorded music. Those
consumers account for 40% of all recorded music sales.
 
2. The "average" consumer purchases 2 CDs per year.  Most people can’t
remember the name of the last album they bought.
 
3. Mass merchants (essentially Wal-Mart, Target and Best Buy) account for
close to 70% of all recorded music sales. On country titles, Wal-Mart alone can
be 40-50% of all sales.

4.  Most CD buyers are either under 12 or over
40.

5. CDs still
represent 94% of the domestic business.

Given this data, you can understand 2 key aspects of the industry: One, they are teribly dependent upon sales of polycarbonate discs (i.e., CDs) and two, we continue to see data about how the recording industry has failed to compete economically versus other forms of entertainment.

By economically, I mean on price. So it was nice to find Amazon (or any another retailer) puts older but A list stuff on sale for what I believe is the sweet spot price-wise: Under $10. This week, I will be highlighting different CD’s Amazon is offering for sale (at that price).

Let’s start with the Who, since that is the most recent show I went to. If you have not completely gone digital, or if you are one of those audiophile types that sound quality matters to, then these are essential Who recordings at reasonable prices, in my own modest priority order.

  • : Quadrophenia

    Quadrophenia (OK, its $14.99, but its a double CD, and you can get it used for under $10)

You can argue amongst yourselves as to whether Who’s Next should come before Tommy . . .

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Discussions found on the web:
  1. Robert Cote commented on Sep 18

    Mr. R,

    No offense. Seriously, hear me out. How much did you pay for those 9 Album covers you show on your blog? I hope notihng. Okay, now that we are on the same page… For the music? Okay, a difference. Why? What if you blogged 2kx2k Album cover images? Okay. Let’s keep on this track. Sorry, bad pun. Keep this topical.

    Content is nearly worthless. Sad but true. Ask why. Not because the content is worthless, iTunes says as much in a market overwhelmed by free. No, content is only overcorrecting in a reversion to mean. Held too high for too long it is inevitable that the correction overshoot.

    I don’t have an answer but I do know the music business is only reaping what it sowed.

  2. Barry Ritholtz commented on Sep 18

    It has a value to me — but then again, I have owned over 2500 CDs in my life (I’ve culled it down to about 1300 now) and of course, they have all been ripped to HD.

    It depends on whether you find AAC or MP3 worth listening to thru good equipment. If Mrs. Big Picture would let me, I’d buy these $15,000 pair of Kef Reference Speakers I really like. (No MP3s for them!)

    Of course, then I’d have to upgrade the electronics, and $75,000 later, I’d wonder if I’d have been better off with a used 348 . . .

  3. tw commented on Sep 18

    Barry,

    I think the iPoD/iTunes is adding some rationality to CD pricing. I use the buck a song rule for all CD’s, and I notice that many of them hang around there, particularly if they are newer editions. It is the older ones that are priced like limited edition numbered pressings.

    I think CD still rules if you want top quality reproduction (although there are those who prefer vinyl).

    btw, Kef is good, but if you plan to spend that kind of $, you should dem some Naim equipment.

    tw

  4. Coruscation commented on Sep 18

    If you’re such a Who fan, did you enjoy
    Spike Lee’s period (1977) piece, Summer of Sam ?

    Baba O’Riley as pre-punk.

  5. Leisa commented on Sep 18

    JA…thank you for mentioning The Doors LA Woman. My brother owned every single Door’s album–I know the words to every song. I also remember my brother wrestling me down and farting on my face. !^$#@%^^%#$ brothers…I extracted my revenge my taking a knife to one of his Steppenwolf albums. Oh…the days of our youth!

  6. whipsaw commented on Sep 18

    Why do Music CDs Fail to Compete on Price?

    Pretty simple. The music industry is run by antitrust crooks who sell to other antitrust crooks further down the line. I probably still have a check around here somewhere for about $10 that represented my share of a class action settlement of a lawsuit against these pricefixing bastards. That should not have been settled at all, but as usual, the lawyers sold out the class to make a few million bucks in fees without risking trial (I was a trial lawyer for 15 years and did a little antitrust plaintiff’s work, so I know how that goes folks).

    The “music industry” as such is already a relic. What is left is a marketing machine that pumps up largely untalented people as images, then sells some CDs to 14 year old girls, but hopes to cash in on tour paraphenalia and other distinctly unartistic avenues to revenue. Oh, well, it also depends heavily on IP litigation to survive, which should tell you that the industry is dead without any further comment.

  7. alexd commented on Sep 18

    “Led Zepplin at the BBC” is very very good.
    “Stages” live J hendrix performances are great but out of print.

    Sound. I purchased an audiophile headphone amplifier from a person on ebay . Two capacitators big as the last joint of your thumb. It comes in an Altoid tin (you get to choose the flavor!) It brings out sound that most amps just do not bring out. I use them with Beyer 950 Headphones (which have not changed in 15 years because they are good. But if you really want to do it right look up Lamda, ok hang on I will do it
    http://www.needledoctor.com/s.nl/sc.2/category.1240/.fs They are going to run you at leat 675-975 minimum.
    They sound incredible. Easily as good as the best speakers but of course it is a solo thing. These with a tube headphone amp would be super sweet. They do not sound like headphones. Utterly transparent.

    But the Beyers with a line output from a good portable cd player to the amp to the headphones is great for the money.

    If you decide to get the Stax electrostatics, feel free to get me a set as a gift! I promise not to embarass you by refusing them.

    The problem with the record companies are the record companies. As the cost/ size relationship changes, There will likely be less reason to buy a cd since you will be able to download and back up your music collection in better than cd quality on a small storage device. So why have all those cds? Believe me The Who would be glad to get rid of the record companies sellyou their music for less than what we pay now and increase their margins in the process. The record companies are a bit like luddites. There is a price point where people are less inclined (as a group) to swipe. I am dated but somehow I remember being in high school getting great seats at the Fillmore East for under eight bucks and seeing Otis Redding playing before The Who. This was before the record music industry took the Ocam’s razor approach to music pricing.

  8. Franco commented on Sep 19

    I second the fact that Who’s Next is easily #1.

  9. Max commented on Sep 19

    I think CDs are expensive because of a different mode of risk – they (recording labels) are most afraid of unauthorized copying and price this risk into the price of end-user CDs, while the iTunes-type industry makes the copies so cheap from the start that the fear of unauthorized copying is not there anymore.

    Something similar exists in the software industry, where alot of software that could sell en masse if priced right without unauthorized copying, is instead priced quite high due to copy risks, that leads precisely to copying.

    I don’t know any industry besides IP where such pricing paradoxes are so evident.

  10. rick commented on Sep 19

    come on guys,,,, CDs are expensive ??
    Give me a break,,,,, I’m almost 50, and recorded music has always been more expensive than today.

    The computer put the nail in the coffin of the business model of the music industry. Ever since it became easier to make quality copies of music at home with
    the CD, alot of the potential purchasers turned into
    pirates.

    I remember years ago,,, even if you wanted to copy music,,, say off an album, or off air, you had very little opportunities to do so (with your choices being cassett tape, 8 track, or even the state of the art reel to reel)
    with the technology and the prohibitive cost for the average joe.

    The musicians are being ripped off today, in my opinion,
    By the music industry and the avg joe pirates.
    Now, If only Beethoven could get a penny for every time some one played his music in a public forum or
    recorded his music or printed his sheet music,,, he’d be a very happy man indeed if he were alive today.

  11. Craig commented on Sep 19

    BR my friend, the laws of physics have not changed. There is no need for $15,000 speakers. The only speaker capable of a standing 30 cycle wave (in our living rooms) is a folded exponential horn……the Klipschhorn. They are corner placed to use the corner of the room as the final fold of the horn.

    Not only that, but they are far more efficient than other premium speakers producing over 90db with one watt.
    Run perfectly on a three watt tube amp.

    You can purchase 80% of a klipschhorn for half the price in the Klipsch Cornwall or a bit more for the La Scala which uses the folded exponential horn without corner placement. The Cornwall is a ported enclosure with a 15′ woofer. Do you like your organs to feel music? Shake the house power? Air, seperation, stage and placement? You are *there* in live recordings. Klipsch provides.

    Read any review. I’ve owned my Cornwalls for over 20 years and they’re the best investment I ever made.

    I will mention, Mrs. R probably won’t like the size.

  12. alexd commented on Sep 19

    See Craig proves what Mrs. BR has known all along:

    Size does matter!

    Be well.

  13. Craig commented on Sep 19

    For speakers!

    You can ask my wife…….

    I have a very small wallet.

  14. Dean commented on Sep 19

    All of the albums listed can be bought at half.com for $5-6. I don’t care much about album art or inserts, all of the CD’s i’ve received have been in good condition except for a couple that had minor scratches that easily polished out. I think I’m better off than any subscription service I’ve seen. I retain the original source, make high-quality rips for everyday listening and can still play the CD through a reference system. $10-12 a month gets me 3 CD’s.

    Other examples:

    The Police, Message in a Box, bought for $11.
    The Very Best of Elvis Costello and the Attractions, $4
    Ben Harper Box Set, $8

    With a little patience and my half.com wish list, I’m developing a pretty good collection.

  15. Jim Bergsten commented on Sep 19

    You’ll find that no “consumer” speakers regardless of price are used in professional music studios (well, with one exception, see below).

    So, one might ask, who needs speakers that are “better” and certainly more expensive than those used to record and mix the music in the first place?

    So, before you drop five/six figures on a “system,” go visit your local pro recording shop.

    p.s. The one exception is really CHEAP, crummy speakers used to see how a mix sounds on the typical car stereo or home stereo. This is why you sometimes see a “boom-box” sitting on the million dollar recording console between the minivan sized speakers.

    p.p.s.s. With the money you save buying “pro” speakers you can outfit yourself with 5.1 or 7.1 surround sound.

    p3.s3. If the room acoustics suck, it doesn’t matter what speakers you have. This isn’t hard or even necessarily expensive to “fix,” but the wife won’t like it.

  16. Estragon commented on Sep 19

    Barry, why focus on price? You assert that the recording industry fails to compete on price with other forms of entertainment, but where’s the evidence? Nominal pricing has probably dropped overall in the last 20 years, and it’s definitely lower in real terms.

    I’d argue that the industry has failed more in other areas of marketing than on price. For example, after the demise of LP’s, the industry utterly failed to use the packaging to differentiate the value proposition of the physical product from the IP alone.

    I quit the industry (retail) about 8 years ago, so maybe I’m biased. Still, having seen how rudementary the upstream was (and apparently still is) up close, I think I can safely say pricing is among the least of their problems.

  17. Craig commented on Sep 19

    Surely some of it is the tripe they market.

    I’m old, so I remember the hype months and weeks before the next Beatles release. They had a top product and knew how to market it. They created demand.

    Barry, remember how they marketed “I can see for Miles”? Back then you couldn’t escape good music if you wanted to.

    WHAT do they have to sell NOW?
    Even if they have a decent product, they record it poorly, flatly without stage and presence and they don’t promote it. CD’s are supposed to be able to reveal actual input, and they do. BUT if the input is junk, then so will the outcome be junk. It used to be these products were designed for hi-fi, and the sources were of a quality that high end users got what they wanted and teenagers got what they wanted. Not anymore.

    So the customer is those who can’t hear this poor quality……..downloaders, IPOD’ers, and the mass market $300 surround sound system listeners that have no idea what they are missing without A/B comparisons with examples of high fidelity and quality recordings of the past.

  18. Craig commented on Sep 19

    And just one more thing……

    Where the H is “Meaty, Beaty, Big and bouncy” on this list of WHO releases? How can a person get along without Happy Jack and Boris the spider?

  19. Jefe commented on Sep 19

    Happy Jack is on the Live At Leeds re-issue, Boris is on “The Very Best of” Compilation

  20. Max commented on Sep 19

    You’ll find that no “consumer” speakers regardless of price are used in professional music studios (well, with one exception, see below).

    You know why are studio monitors never of consumer quality? The surprising answer is that high-end consumer speakers are of much superior sound quality/fidelity.

    The reason is that the sound professionals want to make the records sound good on poorer quality systems (car and other low-fi stereos, low-fi headphones/earbuds), so the studio monitors fullfill the role of emulating mediocre equipment.

  21. Jim Bergsten commented on Sep 19

    Max: My point exactly (though I’d put SOME of the pro stuff up against any of the consumer stuff).

    Which is why it’s somewhat imprudent to spend the huge bucks to try to make something sound better than it was recorded in the first place (yeah, I KNOW there’s audiophile recordings too).

    To misqoute Billy Joel, “You’ll get more mileage from a good pair of sneakers.” (It’s Still Rock and Roll to Me)

  22. HT commented on Sep 20

    The change that is coming is the “long tail” effect– yes, whipsaw is right the industry is producing artificial ‘bots’ that perform to computerized generated garbage–audio and video– to create markets that 14 year olds must have.[see my other post under sinatra section]

    But, soon, people will routinely search out music from unsigned artists [who create music–because they HAVE to create–not becasue its a job]–these will be on web sites that, thanks to new tagging search technology and not so new case based reasoning AI [that will suggest music they might like], will allow people to find stuff they like and musicians to cheaply distribute their music without a label.

    If garageband.com would slap an e-commerce engine on their site right now [bet they will by end of year], then folks could listen to streaming audio of unknown talent and if they want, buy the song for $.99 cents. All in all, it’s a great time to be a musician i would say, unbeholden to A and R men, and have your creations heard.

    [yeah–i’m also a musician]

  23. Craig commented on Sep 21

    Okay musician, now look into how much compression steals from your music, how much we will hear of a download on decent equipment, and if it will sound like your music after half of the data is thrown out in the process. .99 cents for an ipod download, fine. We won’t miss the data, but I’ll buy the disc and buy ALL of the music.

    We’re not quite to the promised land….

  24. HT commented on Sep 21

    Craig–

    that may just be the point. the ability to reach the market place with an admitedly inferior musical delivery tool [MP3], can drive 1. new talent being discovered and then delivered in the old fashion way, and 2. who knows, spawn an industry of on demand high quality CD production of ‘unsigned artists’ [free of all the IP rights issues the major labels have] –similar to on demand publishing is starting to do with books [see lulu.com].

    promised land yet–no, but disruptive technology–yes

  25. AlanG commented on Sep 24

    1) A very close friend (and his parents) owned one of the largest record stores in D.C. from 1948-1997 — The Disc Shop. After the advent of CD’s they used to tell me what the industry’s cost was to bring a CD from the factory to the retail racks…I think it was around three dollars, maybe 3.50. I think buyers finally got sick of being gouged for at least 15 years.

    2) Also, buyers might not mind paying $10-12+ if CD’s had more good tracks on them. During the ’60’s and early ’70’s it was hard to find a record with more than one or two lousy songs on it. Now it’s usually just the opposite.

    3) Thanks to the used section on Amazon, I don’t think I’ve paid more than 5 or 6 bucks for a CD for several years now.

  26. Jim commented on Sep 25

    Just so you know, there is a small but real market of classical CDs out there. The number of CDs available are in the hundreds of thousands, and most of the music is not available as files. Beyond that, until some site is clever enough to market FLAC-formatted files (lossless), I (and I’m sure there are many like me) will not buy them.

    And classical CDs are often north of $15. But they keep being made, seemingly more than ever, so this must be a profitable niche. I, myself, spend hundred of dollars a year, my one self-indulgence in life. The realm is so vast, though, that you feel that even if you spent tens of thousands, you could never do anything but scratch the surface.

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