New analysis: Did downloads really kill the record labels? (1 Viewer)

Lee Scoggins · Sep 16, 2002

Dan Bricklin, sharp inventor of the first spreadsheet VisiCalc has done a fascinating study of the recent weak RIAA records sales numbers.
Read this for some interesting analysis:
http://www.bricklin.com/recordsales.htm
So perhaps the unprecedented price increase killed off some sales and not downloads?
This is great analysis with another perspective on the whole thing.
I think the industry should embrace digital downloads because it will happen anyway.
Why should consumers buy a CD for $18 and find out only two songs are good?
Bottom line: the customer is always right.

What do you think?

David-S · Sep 16, 2002

Cool read, thanks!

I have honestly found myself buying fewer CD's as the prices go up... Now that i can rarely buy 2 for $25, it just gets harder to justify, especially while trying to build a DVD collection....

Lee Scoggins · Sep 16, 2002

Me too. It is hard to spend $18 on a CD when you know it costs less than a $1 to manufacture.

And the recent pop CDs I have bought, there are maybe two songs out of 16 that are worth listening to.

The whole idea on compilation is interesting as well.

Why don't labels allows us to download individual songs from everything they have to create mix CDs?

The proverbial "road tape" is a good thing to have on trips.

Jeff Ulmer · Sep 16, 2002

It is hard to spend $18 on a CD when you know it costs less than a $1 to manufacture.

It does not cost less than a buck to manufacture a CD, and never has. You are ignoring the cost of recording, mastering and package design, all of which are part of the cost of making a record. You are also ignoring all the development costs - these songs don't just write themselves, someone had to work to create them. Replication costs aren't huge, but without the material to put on the CDs you'd have a whole lot of dead air.

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BrianB · Sep 16, 2002

Me too. It is hard to spend $18 on a CD when you know it costs less than a $1 to manufacture.

Lots of things cost more than they cost to manufacture. You're not paying for the physical CD - you're paying for what's /on/ the CD. Do you complain to restaurants that they charge you way more than the ingredients cost to buy?

I've seen that same argument about videogame piracy - "The CDs only cost a dollar to make!! How can they charge $50!!". They charge that because it costs way way more than a dollar a copy to make a videogame these days.

Argue that the big labels are overcharging all you like - a list price of $18 *is* too expensive to a lot of people - just please do NOT bring the physical media price argument into it.

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Carlo_M · Sep 16, 2002

I think the focus on "Disposable Pop" also hurts CD sales. There isn't a feeling of band loyalty like I used to feel with Zeppelin, Beatles, etc. Those were great albums with songs that struck a meaningful chord with me as a listener. I wanted the official album, not something taped off of a vinyl. Today I still want to buy the artists that I love (John Mayer, Dave Matthews, Pete Yorn, Pearl Jam, etc.) and am not content with just burning their products.

But at the same time, most people who just want Britney's or N'Sync's latest hit probably feel no real connection to the artist and have no scruples downloading the latest MP3 of it...

Benson R · Sep 16, 2002

Everybody knows that, but it doesn't justify the fact that cds are way overpriced. The record companies may technically be correct that downloading a song you don't have a cd copy of is illegal but it was the best promotional tool with zero cost to them that they ever killed. I am still an undergraduate and know all these kids that are hardcore downloaders that the record company says are killing their business. Trust me these people that download whole albums just are into getting something for nothing. They never bought a lot of cds to begin with but they still buy ones from their favorite artists. I used to occasionally download a song to checkout an artist. With the demise of Napster I still buy a lot of cds but not nearly as many as I used too. I think it allowed me to discover artists I had heard about through friends. If I enjoyed a song I always went to go get the album. Since I'm not in my car much I don't hear much radio, so if I hear a song from an album I don't own I heard it on mtv. Since mtv hardly plays music anymore you can imagine how many new artists I get to hear on a regular basis.

TheLongshot · Sep 16, 2002

The industry doesn't like factors that they can't control or make money off of. So, therefore, they fear it.

One thing that they lightly touched on in the article is the death of the single. It used to be, when I was younger, you could go out and buy a 45 of just about any song that got regular airplay for a dollar. Hell, you could get older singles that were still popular. Then, cassette singles started replacing 45s, costing more ($2.99) and with less variety. Then, CD singles took over, going for about $5.99, and getting more and more tough to find.

For example, I'd like a copy of Alien Ant Farm's "Smooth Criminal". Problem is, I don't think I'll like the band and most of the songs on their album. Can I get a single? No, not as far as I can tell. It isn't even on the American Pie 2 soundtrack, where it was most prominently played. This will mean buying a CD for one song. 15.99-18.99 for one song? I don't think so.

Digital music is so ripe for singles. No overhead in the stores to carry them, and filling a need that customers want. The big fear, of course, is that people will just copy the song over and over and not many will buy. The thing is, noone is buying now, since they aren't selling. Silly.

Jason

Benson R · Sep 16, 2002

One other thing. Some people here are complaining that the cost of media should not be discussed. I think everyone knows the majority of the cost in a cd is whats on it not the cd itself. But this argument stems from what record companies themselves have said. When cds started to become mainstream they still cost significantly more than a cassette. Everybody relized that cds cost less to make. The record companies said that this was because they were not being produced on the same mass scale as cassettes. They claimed prices would eventually come down to the level of a cassette as they gained market acceptance. Obviously they were full of shit and were just getting the consumer used to paying significantly more in a very short time frame. And as a previous poster mentioned a lot of this is the record companies fault for not creating a viable singles market on the cd. There is no reason the record companies couldn't sell a single with a b side on a cd in a cardboard sleeve packaging for under three dollars.

Carl Johnson · Sep 16, 2002

Are you suggesting that the demise of Napster led you to buy fewer CDs? That's kinda hard to believe. First off the recording industry vs Napster was but a pothole on the information superhighway, free music online is bigger now than it has ever been. Secondly I've heard the argument made that file sharing = free advertisement which leads to CD sales but that's just not realistic. For every person that buys the stuff that they download there are many more who live off of free music without ever setting foot in a record store. Hell, there's even a rather large market for selling bootleg music, movies, and videogames.

Benson R · Sep 16, 2002

Its not a ridiculous statement if its true. Online music is not bigger then it ever was. All the latest file sharing programs are not nearly as easy to use as napster was. Ninety percent of whats available are incomplete files or questionable in quality. And its not nearly as easy to find up and coming artists. Sure you can download 10,000 copies of a Britney Spears song but I'm more interested in newer rock groups who are just starting to find a mainstream audience. I remember a couple years ago someone could recomend an artist to me I would download a song and if it made an impression on me I would buy it. I don't think anyone has been hurt by online music. The record companies see every download as a lost sale. But is it a lost sale when I dowload 5 songs that I already have on other albums because I'm to lazy to rip my own copy? There are very few people who are not buying albums because they downloaded them. Remember few people have broadband and it takes a lot of time an effort to download a whole album over dialup. I'm part of the biggest broadband audience there is, college, and I'm telling you if these kids aren't buying as many albums its because they aren't finding any worth purchasing. They have no problem paying to see a show and you would be surprised at the number of people who will pick up the cd right there if they like what they hear.

Jeff Ulmer · Sep 16, 2002

I used to be able to go to a movie for $2, now it costs $10. I could buy a meal at McDonalds for under $3, now its just under $7, I used to be able to buy name brand runners for $20, now they're $150. I used to ride the bus for 10¢, now it's $2. I used to be able to buy a car for $7,000, now they're $30,000. I used to be ab;e to buy a house for $20,000, now they're $450,000.
I used to be able to buy a CD for $15, now they're $15. :rolleyes
Are CDs too expensive? That depends on how much you value music. If you want to be indiscriminately buying discs, then yes, perhaps they are expensive - just like everything else. If not, then you can either find albums severely discounted (I have yet to pay more than $9US for a new, popular CD) or, for rarer catalogue, which has more value to me personally, I don't mind paying a bit more. If you really want cheap, buy used.
People act as if $18 is the end of the world, yet those same people won't think twice about blowing $50 for a night out at a bar with nothing to show for it but a hangover.
Online distribution as a promotional tool is not a bad thing. What IS a bad thing is every Joe with a MP3 ripper distributing entire albums. What's worse are those who not only steal music off the net, but then turn around and sell the bootlegs to their friends. Being parasites is not the way to sustain any kind of creative community. If you wonder why none of those great smaller bands aren't around any more, perhaps it is because they simply couldn't make a living with everyone taking their work for free.

Benson R · Sep 16, 2002

I used to be able to buy a CD for $15, now they're $15

You mean you used to able to buy a cd at a chain record store for 15 and now you can buy it at best buy for 15 because its 20 at the record store and it use to be 12 at the large chain discount stores. As far as people selling bootlegs that has always been around. People used to buy the album and make copies. Whats the difference? It was illegal then and illegal now. I know you take these threads personally because you work in the music business. But would you rather nobody hear your work and nobody buy it, or would you rather have people listen too it and some people decide to compensate you by buying the cd? MP3 is no subsitute for a physical album. Most of the bands I go see are on independent labels. And most of those bands if you talk to them feel that mp3 is a great promotional tool. Even if people just download a couple songs but don't get the album many of them are happy it got people to come to the shows. And before you accuse me of being a thief I hardly ever download anymore and even when I did it was infrequent and whatever I listened too I went out and bought or discarded.

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Benson R · Sep 16, 2002

One other thing Jeff. I keep a rip of the entire GNR catalog on my hard drive. I kept this posted on my network when I was in University housing though not over the file sharing networks. My all time favorite band is GNR and I did this because I wanted to spread my love for GNR. Sure some people might copy the whole album but others might rediscover a band they forgot about and perhaps they would go out and buy the cd. I don't think their is anything immoral about this, maybe technically illegal though I disagree with recent court rulings. If anybody ever complained to me I would remove it in a heartbeat but I feel it is a great tribute to my favorite artist. I don't have anything personal against you but I think you are mistaken on the impact this has on yourself and others in the business.

NickSo · Sep 16, 2002

I used to be able to buy a CD for $15, now they're $15.

I see what you're getting at. Your examples however are not examples for ALL the stuff we can buy. The prices of those have gone up do to inflation, but also some of them have gotten better in quality and value and features.

Computers on the other hand, are the exact opposite. With each generation of processors and technologies, the components get cheaper and you get more for your money. A decent PC used to cost what, $2000, $3000? Now i have an AMD Athlon 1.3GHz that i built for about $400 USD ($600 canadian).

Technology today is expected to get better, and along with the growth the older technology should become cheaper.

CDs however are not following this trend. They haven't gotten better in sound, the music definitely hasn't gotten any better (well most), and franlky, about 90% of the population doesnt care about the sound quality (hell, my friends got a 32MB MP3 player and they convert songs to 64KBPS just to fit more on the card), they want value for their money.

To be honest, i have bought more CDs with the growth of KaZaA and napster and other technologies, BUT i have downloaded WAY more than i have purchased. What made me purchase the CDs that i did? Price, and Loyalty. Most of my CDs i bought were less than $15 CAD ($10 USD), or they were of my favourite bands/type of music. If all CDs were about $10-$15 CAD, i'd definitely buy more. But $22 CAD for a CD? I can go to a live concert for that almost (Nickelback tickets start at $25).

If i found an artist i like, and their CD was about $10 CAD, i'd go out and buy it right away (I did when I saw the NOT BY CHOICE CD was on sale for $9.99 at futureshop).

The record lables have got to be so stubborn, and get with the trend, lower their prices or give better quality/features. MP3s is an effective promotional tool, but if used incorrectly, it can work against you all the same.

Its like gas stations. You have like two on one street corner. If one lowers their price down to 69.9c/l (im canadian here remember that), the other places have got to lower it too, or else they wont get the sales. If they do lower it to the same price, consumers have a choice of which to go to. That way the gas station that followed the price change would get half of the customers that would've gone to the other gas station.

I cant explain very well, but yeah... :p)

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Benson R · Sep 16, 2002

Isn't it odd that the record industry could only show their sales going down until we went into a recession and they finally started to put a dent in filesharing?

john_focal · Sep 16, 2002

I can only surmise what happens from my own experience. If I go to a decent book store, and want to buy a book, I can sit down, and maybe read a few dozen pages, or whatever to decide if its something I would like.

With MP3's, I can do likewise. For example, I had never heard any music by Bjork, till seeing a clip of her on HBO's Reverb show.

I dl'ed about 20 songs of her's to check out, and liked most of what I heard. Now, one of her discs is my next purchase.

Without the trial listen, I wouldnt take a chance on the CD. So for me, MP3's lead to far more purchases, not less.

Jeff Keene · Sep 16, 2002

Without the trial listen, I wouldnt take a chance on the CD. So for me, MP3's lead to far more purchases, not less.

If I could agree with this MORE than 100% I would.
Record companies are heading in the exact wrong direction to increase their sales. I buy far less CDs than I would because I keep getting burned with crap. I read all the reviews in Stereophile, TAS, etc. But I have to read them with a grain of salt. What turns me on about music seems not to coincide with the critics. Or rather what turns them on often leaves me cold.
How cool would this be? I get my issue of The Absolute Sound. I go to TAS's web site, and have instant access to listen to each of the recordings while I read the reviews. Then I can click a single button to purchase the disk. Record companies should be making it EASIER for me to hear their stuff, NOT HARDER!
Is 15-20 bucks a high price to pay for a great album you'll listen to for years? Hell, I'd pay $30. But $5 is pretty spendy for a piece of crap. Right now I still buy a lot of CD's and am disappointed a lot. But if I buy ten now, I'd buy 20 in the future if I could know I'd like each one. Or, put another way, I'd pay twice as much for 10 if all ten met my needs. As it stands, we have to pay for our own experiments, and each loved CD costs us 40-80 bucks anyway, accounting for the crap we buy that sits on the shelf.
NP: Super Furry Animals - Rings Around The World (Worth $50 alone )

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Jeff Ulmer · Sep 16, 2002

Its like gas stations. You have like two on one street corner.

The difference is that gas is gas, while music is not a commodity that is as interchangeable. I can't get the same satisfaction from Britney Spears as I could from an old Yes album. They are not comparable.One sucks, the other doesn't.
Every major CD retailler around here allows sampling of the CDs before buying, and most of the bigger online etaillers have the same thing. It is not about being able to hear the music before buying, which I totally agree with. It is about an unregulated stream of variable quality recordings being distributed by those who have no legal right to do so.

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Jeff Keene · Sep 16, 2002

It is about an unregulated stream of variable quality recordings being distributed by those who have no legal right to do so.

Jeff , we agree with you. But the record company is going about it all wrong. Instead of spending all their money trying to stop this, which is AN IMPOSSIBLE TASK, they should be focusing on their actual customers.

Expose us to their products. Often good albums take several listens before I can decide to like it or not. I don't care, technology-wise, how you do it, but give me the ability to listen to album on a trial basis (say, a week start from my first "click". Then make it really easy while I'm playing it to click a single button and purchase the album. See if I don't listen to everything I possibly can. See if my purchases don't skyrocket.

And give me value. If my first listens are to MP3-quality streams through my PC speakers while I'm at work, when I buy give me an SACD hybrid to my door in less than a week.

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