Are CD Prices Too High?
Increasingly of late, however, the catchment area for outstanding music releases seems to be shrinking. We dip our nets daily, but much of the time they come up empty. Yes, there's no doubt that January's selection of Morimur (ECM 1765) was superbly worthy of recommendation, as was March's Swing Live (Chesky JD218/SACD223) and April's Words of the Angel (ECM 1753). But it starts to get a bit sweaty in the editorial office when we're fast approaching the date the magazine needs to be shipped to the printer (I still say "shipped," but the process is actually an FTP transfer) and music editor Baird has not yet come up with any contenders for me to audition.
Fortunately this month, RB rushed into my office at the eleventh hour waving Are You Passionate?, the new Neil Young album (Reprise 48111-2). "Who'd have thought the old geezer still had it in him?" I mused as the '60s soul-groove arrangements, superbly captured on CD, rolled out of the speakers, surged across the floor, and set my toes a-tapping.
The current dearth of good recorded music takes me back a few months, when I was filling in my ballot for the 44th Grammy Awards. Yes, ECM's Manfred Eicher was a strong contender for Classical Producer of the Year for, among other recordings, Morimur, though he was up against Harmonia Mundi's Robina Young, with her excellent track record, and veteran James Mallinson (who was the eventual classical album Grammy winner, with the Colin Davis/LSO La Damnation de Faust on the LSO Live label). Keith Johnson's Minnesota Respighi album on Reference Recordings was a well-deserved nominee in the classical engineering field. Yes, our November 2001 "Recording of the Month," Bob Dylan's "Love and Theft", was one of the Album of the Year nominees. And who could object to the eventual winner, the wonderful O Brother, Where Art Thou? soundtrack?
But so many of the nominees, to me at least, were veterans marking time, new artists elevated above their station, or choices that didn't seem to be selected on musical merit. Supporting this notion was the fact that viewership of this year's Grammys was a six-year low. I mean, who bothers to watch musicians you don't care about win awards for recordings that haven't stirred your soul?
So when NARAS's Michael Greene came down heavily at the Grammys on the MP3 phenomenon as being to blame for the current shrinkage in the record industry's fortunes (see Barry Willis' report on p.19) (footnote 2), I couldn't help but wonder if he had even considered that a more fundamental problem was the poor quality of the music, let alone compromised technical quality (which I wrote about in this space in January and February).
Print magazines can ponder but the Web can offer answers. Jon Iverson, Stereophile.com's webmaster, ran a poll on our site on March 3 asking readers what they attributed the slump in CD sales to. The results were, er, interesting. Yes, 37% of the respondents agreed with me that "bad music" was to blame. Just 2% named "piracy," and 4% "downloads." But a whopping 41% felt that "high CD prices" was the root cause.
Of course, it could be argued that if someone says that a CD is too expensive, what they're really saying is that the music is not worth the asking price; ie, these are also votes for "bad music." But I suspect that that is not the case; that these respondents really do feel that the list prices of CDs are too high.
I have a problem with this. As the producer of recordings released on a small independent record label—the Stereophile CDs—my experience has been that, at the typical sales level for one of our titles, a retail price of $15.95 leaves very little room for profit when the CD is sold over the counter. Yes, the cost of the disc itself is now less than $1 at even quite small production volumes. But when you factor in copyright fees, artist royalties, amortization of the project's upfront cost over the expected sales volume, and marketing and promotion costs, the manufacturing cost of the disc is basically insignificant.
Some respondents to our website poll did acknowledge the existence of some hidden costs. "They should cut CD prices to $4.99 and manage production and marketing costs so that they can break even at sales of 300,000," wrote Mark B. James. R. Whitney commented that "If the record industry reduced the average retail price to $10 or less, [CDs] would fly off the shelves," and that "Piracy would come to a screeching halt."
Yes, the economic picture changes significantly when the sales of a CD exceed 300,000 or so, because at that point the upfront costs and the marketing costs can be spread over so many discs that the per-disc cost drops to very little and the profit per disc rises in proportion, meaning that the most popular titles could be sold for very much less than 16 bucks. The problem is that very few of the tens of thousands of CDs released every year sell as many as 300,000. Most classical CDs sell less than 3000.
So if the retail price of CDs dropped precipitously, the Big Five media companies would no longer make obscene profits on Britney Spears and the Back Street Boys. But the Law of Unintended Consequences would kick in big time, and the indies who provide so much of the "deep catalog" that enriches our musical lives and whose offerings are often featured in our "Recording of the Month" feature would go down for the count.
Footnote 1: Holt's Laws, as defined by Stereophile's founder J. Gordon Holt in the 1970s, are: 1) "The better the recording, the worse the performance, and vice versa." 2) "The shriller the advertisement, the worse the product." 3) "Every component is imperfect, and every imperfection is audible."
Footnote 2: BW reports Mr. Greene trotting out three typical college students who, he claimed, in two days had downloaded approximately 6000 music files "from easily accessible websites." It turns out that the villains weren't all college students, they had actually taken three days, and the majority of the downloads were not downloads but peer-to-peer transfers of MP3s that could well have been legitimately ripped from a CD that had been purchased. (See Neil Strauss's "Downloading Files and Storms" in the March 7 New York Time.)