States settle CD price-fixing case

[boogieordie]

States settle CD price-fixing case

By David Lieberman, USA TODAY

NEW YORK — The five largest music companies and three of the USA's largest music retailers agreed Monday to pay $67.4 million and distribute $75.7 million in CDs to public and non-profit groups to settle a lawsuit led by New York and Florida over alleged price-fixing in the late 1990s.

Attorneys general in the two states, who were joined in the lawsuit by 39 other states, said that the industry kept consumer CD prices artificially high between 1995 and 2000 with a practice known as "minimum-advertised pricing" (MAP).

The settlement will go to all 50 states, based on population. Consumers may be able to seek compensation.

Under MAP, the record companies subsidized ads by retailers in return for agreement by the stores to sell CDs at or above a certain price.

"This is a landmark settlement to address years of illegal price-fixing," New York Attorney General Eliot Spitzer said in a statement. "Our agreement will provide consumers with substantial refunds and result in the distribution of a wide variety of recordings for use in our schools and communities."

The companies, including Universal Music, Sony Music, Warner Music, Bertelsmann's BMG Music and EMI Group, plus retailers Musicland Stores, Trans World Entertainment and Tower Records, admitted no wrongdoing.

The companies have not practiced the pricing agreement since 2000. At that time, they agreed in settling a complaint by the Federal Trade Commission that they would refrain from MAP pricing for seven years.

Former FTC chairman Robert Pitofsky said at the time that consumers had been overcharged by $480 million since 1997 and that CD prices would soon drop by as much as $5 a CD as a result.

In settling the lawsuit, Universal BMG and Warner said they simply wanted to avoid court costs and defended the practice.

"We believe our policies were pro-competitive and geared toward keeping more retailers, large and small, in business," Universal said in a statement.

Previously, the companies said that MAP was needed to protect independent music retailers from rising competition from discount chains such as Wal-Mart, Circuit City and Best Buy. They had slashed CD prices, below cost in some cases, in the hope that once consumers were in their stores they would buy other, more expensive products.

The music companies said that MAP did not directly help them because it didn't affect wholesale prices. Retailers added that they needed support to keep prices up because their rents, particularly for stores in malls, were higher than the discount chains.

Lately, several record companies have cut prices on some CDs, particularly for new acts, to counter the continuing industry slump. Album sales are off nearly 11% this year compared with the same period in 2001, according to Nielsen SoundScan.

http://www.usatoday.com/life/music/n...ttlement_x.htm
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And they wonder why CD sells are down... hmmmm...

Definately got to do with more than just online sharing.

They'll probably see an increase once the price drops to something reasonable.

Ashley

[Peruvian_Sky]

Most of the major chains do fix their prices. Especially Sam Goody. That's why I always stick to independently owned music stores. I never pay more than $12.00 for a new CD. Unless of course I order through yesasia or somewhere to import CDs.

[isaac hiew]

Gee, Malaysia government recently reached a deal with the local CD distributors that the government won't impose any mandatory price control acts if they self-willingly reduce their CD prices to a accepted degree.

The CD prices are now dropping by some degree now, although it is still considered unacceptable in some people's views, but to me it's still a good news.

But then, this means that no more pirated games for me...... duh.....

We haven't reacted towards music file sharing at here yet, so I guess that Malaysians are still safe.

[destiny_ayu]

Singapore here still sell pirated games.. my cousin usually buy pirated games... compare to singapore with indonesia... indonesia has loads

[chsf]

sick
over here it's kind of opposite, record stores and others aren't allowed to import CDs etc. from abroad because they are too cheap

kind of like the Japanese situation with Japanese vs overseas versions.

[chsf]

Originally posted by destiny_ayu
Singapore here still sell pirated games.. my cousin usually buy pirated games... compare to singapore with indonesia... indonesia has loads

Situation was the same in Malaysia when we were there, stores sold pirate games and other kinds of software over the counter. Didn't buy anything myself, but my father did

[Piccolo]

Interesting article. Thanks for sharing Ashely.

[squarenuts]

very interesting- i always knew they were overpriced, especially since the cost to make a cd is a lot cheaper than a tape- and yet tapes are loads cheaper- just an example of CD companies trying to screw us over- i've always thought about making a website where underground bands could post their music, and have it downloaded by people for a price (kinda like the original concept behind napster- minus the price part)- basically, a cheaper form of what apple is doing, with the bands getting most of the royalties since there is no middleman- only i'm too lazy to program it either way, hooray, CD prices are dropping

[Unimatrix Prime™]

Originally posted by squarenuts
very interesting- i always knew they were overpriced, especially since the cost to make a cd is a lot cheaper than a tape- and yet tapes are loads cheaper- just an example of CD companies trying to screw us over...

But think about the difference between CDs and cassettes. Who'd want to spend $15 on an outdated, bad quality, high maintence device with no way to skip to other tracks without fast forwarding? Since CDs started becoming popular, very few people these days see cassettes as a viable option, and I'd imagine them to disappear within the decade...

Now.. about this topic... it's nice to know how record labels have been making money by charging crazy prices, and of course, that's "ok", but when they begin to loose money, the blame-pointing game becomes a factor. "Little Jimmy's not paying for out highly-priced CD with 2 songs he likes! Let's arrest him!" ... the logic behind the RIAA and other companies is just plain sickening. Sure... I can see the business model that companies need money, but at the expense of whom? To charge people $20 for certain CDs, and expect people to keep paying that much for 10-track CDs, or CDs which have few songs which the consumers want to hear... like so many things in life, the RIAA "empire" needs a serious makeover in order to continue to succeed. Lowering prices is a start, but quite a bit too late. And now that their strategies are failing, they're looking for a quick buck to make "examples' out of file traders...

Former FTC chairman Robert Pitofsky said at the time that consumers had been overcharged by $480 million since 1997 and that CD prices would soon drop by as much as $5 a CD as a result.

Oooh! $5 less for a CD which is still bad! Like I said, it seems a bit late to convince people that buying CDs is the way to go, since p2p networks have long established themselves as places where people can find the songs they like, rather than paying $15 for 2 "good" songs. I'm getting tired of this issue, and I hope the RIAA can grow up and stop these games of blaming people. Sorry for seeming to go a bit OT, but I'm quite sick of it all already....

[boogieordie]

But think about the difference between CDs and cassettes. Who'd want to spend $15 on an outdated, bad quality, high maintence device with no way to skip to other tracks without fast forwarding? Since CDs started becoming popular, very few people these days see cassettes as a viable option, and I'd imagine them to disappear within the decade...

CDs were supposed to become cheaper than casettes, it was one of the advantages to switching from tapedecks to cd players. In fact, the RIAA promised that CDs would become very cheap once the disc became the primary media for music.

Here's a quote from the article where I found the info about the RIAA -

If CD prices were more affordable, piracy may evolve into a non issue. True the margins would be smaller, but didn't the RIAA tell consumers in the early 1980s that CD prices would ultimately drop as adoption of the media gained traction, too?

http://www.servicenetworks.com/SNEdi...p?cat=4&ID=107

Yet here we are today, the CD the primary media for music, and the price is so much more than that of the casette. The CD costs significantly less to produce, and while the quality is better that shouldn't matter because it's now the primary media.

Here is a VERY great article on the subject of casette and CD prices (which I found after writing the above)

Napster part of music history
In all the debate about Napster, one critical angle of the story is being left out: This is not an issue of copyright infringement. It's about money.
Here's a quick lesson in music history. When record albums first appeared for sale on the market in the early 20th century, recording artists did not make much profit from them. The real income for performers of the early Blues and Jazz Age was in concert ticket sales. The sale of records to at-home listeners was a device to promote the music so that when the band played on tour, listeners paid to attend concerts. Money generated from shows was far greater than money generated by selling records.

Then, near mid-century, one revolutionary group of youths from Liverpool changed all that. Selling millions of records worldwide, The Beatles were the first music group in history to generate more money through record sales than concert tours. This has been the way of the music industry ever since. Instead of bands selling records to promote concert ticket sales, bands go on tour to promote the sale of their records. The money today is in the records, tapes and compact discs listeners like you and I buy.

Let's jump to the present day. In the 1980s, when CDs first came out, the average cassette tape cost $8. CD marketers said that the initial price of CDs, which was about $12 then, would soon drop to the point where CDs would be much cheaper to buy than tapes. The high price of $12 was temporary. It only cost the manufacturers about $2 to make CDs (packaging and all), but because CDs were such a new thing, the prices had to be kept high until it had safely caught on. The people bought it, and to this day, we are still waiting for CD prices to fall.

Take a look at your CD rack. How much did you pay for that last Eminem CD you bought? $15? Was it worth it? Or maybe you didn't pay for that CD at all. Maybe you went to Napster.com, downloaded the best songs and burned your own CD with that nifty CD-R drive you got last Christmas. Sure, it was a lot of work to make it, but you saved $15.

If the record industries insist on keeping CD prices artificially high, listeners will find ways to save money. Napster has arisen out of this necessity. Although statistics are against them, some say that people will stop buying CDs altogether and get their music free off the Web. Perhaps we are at the dawn of an age when musicians and performers will once again make more money from concert tickets than record sales. Ah, the good ol' days.

Realistically, this won't happen. But what sites like Napster have done, along with the people who use them, is send a message out to the greedy record industries: You charge too much for CDs. You've been ripping us off long enough. Until CD prices go down to their true value, about $3 - $5 with retail markup, listeners will turn to the Web for music. Napster is an inevitable product of history.

Eva Talmadge is a liberal arts and sciences junior.

http://www.alligator.org/edit/issues...02column15.htm

How many of us would go out and buy basically any CD we wanted if the price was that low? I certainly would.. too bad I probably wouldn't want what they're selling. My point however is that CD sales would skyrocket if the price of CDs were that low.

Take a look at these numbers -

The price of music
yesterday and today
These are typical list prices for albums or CDs at each decade's midpoint, and the prices in 2002 dollars
Decade Cost 2002 value
1960s $4.98 $27.22
1970s $7.98 $19.47
1980s $12.98 $20.97
1990s $15.98 $18.04
Today $18.98 $18.98

http://www.usatoday.com/life/music/2...usicprices.htm

Ashley

[Unimatrix Prime™]

Let's see if I can add a bit more to this issue:

Let's jump to the present day. In the 1980s, when CDs first came out, the average cassette tape cost $8. CD marketers said that the initial price of CDs, which was about $12 then, would soon drop to the point where CDs would be much cheaper to buy than tapes. The high price of $12 was temporary. It only cost the manufacturers about $2 to make CDs (packaging and all), but because CDs were such a new thing, the prices had to be kept high until it had safely caught on. The people bought it, and to this day, we are still waiting for CD prices to fall.

Ashley was right about them saying that CD prices would drop. Realistically... how much does it cost to make a CD? And not just one CD, either... thousands, if not millions of CDs are made for artists, and I quite doubt that it costs record companies more per CD-R than it does for us. Sure... back when CDs were first made, CD costs were a bit much, and like all new technology, prices are high at first, but just like old game systems, $299 becomes $199, then $99, then $49, and soon, you'll find that same "hi-tech" technology in bargain bins. CD technology, on the other hand, hasn't seen such a decline. Certain older CDs which I've seen in stores still sell for the same original price as they did several years ago, and to me, that makes no sense at all. Why pay $20 for a CD, when you can go buy a pack of 100 CDs for about $20, 100 blank cases for $10, and case inserts for about $5. Then, with a good printer, you can make your own mixes, add whatever songs you'd like, and the total CD cost is about $1 to make. Now... for the RIAA to say that the cost of making CDs to justify the "high cost" of shipping out, or whatever they may say, is total BS to me.

Realistically, this won't happen. But what sites like Napster have done, along with the people who use them, is send a message out to the greedy record industries: You charge too much for CDs. You've been ripping us off long enough. Until CD prices go down to their true value, about $3 - $5 with retail markup, listeners will turn to the Web for music. Napster is an inevitable product of history.

Again, a very true statement. Now... I'm not about "let's never pay the artists a dime!", since they really do deserve money for what they do, but again, it's the prices of CDs that force some people to DL songs... songs which they want to here, not what's on a CD. To add extra money to become greedy, self-righteous, arrogant (sorry for getting carried away..) people, and then want more money by going after "little Jimmy" is once again wrong. So you guys want more money? Then make CD prices more reasonable! It's not hard to mark down CDs, since certain CD players cost less than CDs nowadays!

How many of us would go out and buy basically any CD we wanted if the price was that low? I certainly would.. too bad I probably wouldn't want what they're selling. My point however is that CD sales would skyrocket if the price of CDs were that low.

Exactly... I'd be more than glad to go to a store and take home about 5-10 CDs and pay $30-50, vs. going to a a store and buying 2 CDs for that much. If the record industry is that "desperate" for money (like they're going broke...), they can lower the prices and see an immediate rise in CD sales and won't have to worry as much about pirating and going after "little jimmy with his 5 mp3s"

So once again, my original view stands that the RIAA is corrupt, and something must be done to end this issue so both we, as the consumers, and the RIAA, who "need" money, can reach an agreement without sending kids to "jail" for commiting such horrible "crimes" ...

[Peruvian_Sky]

Where are you guys the buy CDs buying them? I never pay more than about 12 or 13 bucks most of the time less for CDs. And I buy a lot of CDs. My collection is nearing 3,000 and I have never once paid anywhere near $20 for even one of them.

[boogieordie]

Yeah, it does really depend on where you shop. IF I buy a CD, I go to Media Play or Best Buy and pay $13 for it, even that is too much for what you get. I generally don't listen to American music though, so I don't worry about. Save my money for Ayu stuff. The average price is around $19 for a CD.

Ashley