E-Commerce Times Talkback
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A combination of factors that includes the rise of music downloading over the Internet, the proliferation of CD copying and new competition from nonmusic retailers has reduced sales significantly at independent music stores throughout the United States. "The weak will get swept away," said Don VanCleave, president of the Birmingham, Alabama-based Coalition of Independent Music Stores. "We're all competing with free. That's very difficult to do."
"The difference between a music cassette that cost $7.98 and a blank tape that may have cost $4.98 was not that big a deal," he said. "Now, you're talking about CDs that cost $18.98 versus maybe 49 cents for a blank. The price differential is such a huge thing."
Not that i am an advocate of piracy, but as a business consultant, this sentence shocked me!
I just realised why the music industry is doing so bad.
The music industry are making markup from just 3$ up to to 18.40$. How can they expect teenagers and college students -- who are flipping burgers at 5$ an hour -- to buy it?
This why it don't sale, share the benefit of your lower cost of production. Price it at an "affordable" price. Add some value to the product. Mp3 can not provide the same feel as the actual CD with a original cover.
The main component of CD markup is for the retailer - $5 or more. We must find some way to steer more of this to the artist, or creativity will most certainly not flourish.
The record industry, by the RIAA's own undisputed figures, has released 20% fewer titles over the last few years. Over the last few years, sales have gone down 12-15%...
It is just plain bad thinking to equate one file trade to one CD sale lost; that just does not connect. It's not the RIAA's job to spend our (consumers') money on lawsuits as they try to shore up their bad business model with bad law and bad politics.
As a former record store owner (in the heyday of cassettes and LPs), I can say that it never was a license to print money, but it was easier then as a mom 'n pop store to compete with the big chains, but now WalMart and Best Buy can make two or three dollars profit on the CD and still stay in business while the small stores who don't branch out to other areas (video, which is way up due to DVD, or musical instruments, which is up 15-20% in that same time frame).
Industry numbers point out that the average song commercially released sells about 25,000 copies (the average from 0 to millions), costs about $0.15, so at a five x multiplier, retail price should be about $0.79 for a download, profit going to marketing expense, royalties, etc., but the record industry is based on voodoo, with the profits instead going to the record companies through artist contracts that read more like sharecropper deals.
There will be a shakeup in this industry, make no mistake about that.