Must A CD Cost $15.99?
Despite your opinion of Wal-Mart, they are doing some things that we all can benefit from. Wal-Mart has become the number one seller of music accounting for around 20% of the market so they can go to the music industry and demand certain prices. According to an article on Rolling Stone, Wal-Mart has been willing to sell CDs at a loss but lately have been pushing to get the prices lower. I’ll let you read the article for the full details. What I found interesting though was a breakdown of the cost of a CD as it is today.
$0.17 Musicians’ unions
$0.80 Packaging/manufacturing
$0.82 Publishing royalties
$0.80 Retail profit
$0.90 Distribution
$1.60 Artists’ royalties
$1.70 Label profit
$2.40 Marketing/promotion
$2.91 Label overhead
$3.89 Retail overhead
Lets break this down a bit. The union fees, packaging, distribution and publishing royalties I have no problems with these are things you really can’t change much. Overhead you can’t change much either, that is the cost of administrative staff, building costs, equipment costs, and anything else that you really need to run a business.
So now are are down to profits and marketing. I am not against making money, but the Label should not be making more than the artist. They could cut this in half and get better artists on the label so they don’t have to rely on one person to make up for 10 or more failures. Marketing and promotion could be cut by getting more creative in how you market a new artist. Put them on the PMN, do some sort of social marketing, or better yet, have the artist cut a single song and submit that to radio. If the the demand comes in for a CD, cut a CD. I know this may be a backwards way to do it, but create the demand, and people will want it more (just look a the Wii).
I think if the labels could get a bit more creative to trim off some of the fat, and get better artists off the bat. They may be able to cut that cost down.
Tags: CD, costs, music labels
