From: bill@bilver.uucp (Bill Vermillion)
Subject: Re: CD pricing
Organization: W. J. Vermillion - Winter Park, FL
Date: Sun, 13 Sep 1992 15:21:31 GMT

In article <1992Sep12.155438.22507@magnus.acs.ohio-state.edu> carlwu@magnus.acs.ohio-state.edu (Carleton Wu) writes:

>Does anyone know why the cost of Compact Discs are still so high?

They have fallen condiserably - particularly if you take inflation into
account. 

>     Back in 1987 when I first bought my CD player, the cost of a CD was $15
>US.  I predicted then that as more people bought into the format and the cost
>of production decreased, that the price would dip below $10 in a few years.

Well I don't know what you are basing your predictions on - you just
can't pull figures out of the blue.

My experience has been that the prices have fallen considerably. When I
bought my CD player prices were typically $23 to $25, then they slowly
started to fall.  I was glad to see them below $20.    And while many
of the new disks are still in the $15 range there are many discs that
now have a list price of under $10.

Based on my experience, the new price is about 1/2 of what it was when
I bought my CD player in 1984 - taking inflation into account.  I was
just going over some notes I had written to someone in 1984 saying that
I had just bought a CD.  The total sales of CD players in the first 4
months of '84 exceeded all of 1983, which was much larger than 1982 -
first year out.

The production was extremely limited at first because there just
weren't enough production plants.


One big items is artist's royalites.   The amount musicians get from
all areas has increased considerably in the past 15 years.

>It has been 5 years now and I'm still paying an average of $13.50 per disc?
>What gives?  Who is cashing in--the recording industry?  The artists?  I read
>somewhere that a CD costs about a dollar to manufacture in large quatities.

Manufacturing costs are the least part of picture.   I agree that
prices are still too high.  Historically prices for competitive media -
that is when CDs and Cassettes sell in the same unit percentages - the
prices will be on an equal basis.   However, history has also shown
that the lower priced items rises more while the higher priced item
falls less - so don't expect exceptionally cheaper CDs, but expect
higher priced cassettes.

You will see the rationalization for raising prices with a statement
that will go something like this "because we are now making fewer than
we used to, the economies of volume production have gone down and we
therefore must raise the prices accordingly".

Market drives it.    CD's are a phenomenon.   Nothing has ever grown so
fast  in the entertainment industry.    The only thing that will drive
the prices down is the consumer.

If the consumers will only spend $X billion dollars per year -  it
makes more sense for a manufacturer to get as much of that money for
each item.

In other words - if 100 million CDs at $10 each - brought in $1 billion
dollars, the manufacturer would not make as much if he sold 200 million
at $5 each to bring in $1billion.

The prices will fall only if the price decrease causes enough sales
increase to offset the lower retail.

So it boils down to this.   (all figures above and below are
hypothetical and are used for convenience).

If you spend $100 per month on CDs, how far does the price have to drop
to make you spend more than $100 per month?  Actually you'd like to pay
less, I suspect.

Entertainment costs more than it ever did before.   Bought any concert
tickets lately?

Concert tickets used to be 1 to 2 time the price of an LP twenty years
ago.  Right now they are 1 to 2 time the price of a CD.  So if you want
to use that as part of a barometer, I'd say the prices aren't going to
get much lower.

>     What will be the impact of MD and DCC on CD pricing?  Wouldn't competition
>among formats foster price drops?  I predict it will.  But, alas, I'm 0 for 1
>on predictions!

The only thing that will make the price drop is if the net profits will
increase if the decrease will increase unit sales enough.

MD & DCC won't affect the pricing at all for the first couple of years.
And then if the hardware sales of the MD or DCC reach the same point of
the number of CD players, pricing of the media could affect hardware
sales, and could lead to media competitive pricing.

But DON"T bet on that.   Who stands to benefit from CD hardware sales.
Why the very same people who will benefit from MC or DCC hardware
sales. 

And Sony will be one of the larger companies who benefits no matter
what you buy.   CD, LP, Cassette, MD, Film, Video, VCRs, LD Player,
etc.

And Time/Warner (or whatever their name is this week) benefits the same
way but crosses over into books too.

We no longer have film companies, record companies, recorder
manufactures.

We have enteraintment companies that have their hands in all aspects of
entertainment.

We used to have 15 to 20 large record companies in the the US with
several hundred small independant labels.  That fostered competition.

With the mergers and aquistions in the entertainment industry we are
down to 4 major corporations in the US that control the majority of the
product.   That doesn't bode well for future price reductions does it.

Have you looked around the record store at anything other than CDs.
Have you seen 45rpm at over $2.00!

I don't expect to see CD prices come down to $10 for a new release -
EVER!  
Today we are down to 4 major corporations, who interesting enough 

-- 
Bill Vermillion - bill@bilver.oau.org  bill.vermillion@oau.org
                - bill@bilver.uucp 
                - ..!{peora|ge-dab|tous|tarpit}!bilver!bill

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