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It’s Called Competition: CD Prices Falling

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And we’re not just talking about online competition, DVDs make CDs look like a bad deal:

    Most of the major music companies are starting to offer retailers limited-time rebates on some releases. As a result, many consumers paid just $10 for new albums by young performers including Ashanti and Vanessa Carlton, as well as veterans Sean ”P. Diddy” Combs and Bruce Springsteen.

    That’s a big deal in an industry that consistently raised CD prices since 1996. Consumers now pay about $14.70 for CDs, although most new releases list for $19 or more.

    ….”There’s a good deal of panic in the recorded music business,” says investor Strauss Zelnick, who used to run Bertelsmann’s BMG music arm.

    Sales of albums and singles are off 11% this year following a drop of 10% in 2001 and 7% in 2000. Only 21 albums sold more than 1 million units in the first half of this year vs. 37 albums during the period in 2001.

    Lower prices may at least stop the bleeding.

    ….A lot of that skepticism is natural as people discover that it costs them just about as much for an hour-long stereo CD as it does for a DVD, which offers a two hour-movie and six channels of sound.

    Music executives counter that the CD is meant to be played over and over, while people usually just watch a movie once.

    But that’s not true anymore. Consider Monsters, Inc.

    The coming-soon, two-disc DVD, priced on Amazon.com at $18, will have two short features, outtakes, games, a music video, a sound-effects only track, storyboards and a look at how computer animation is done, in addition to the movie.

    That looks like a heck of a bargain next to the one-disc CD soundtrack of the movie with Randy Newman’s songs and score. It’s just $3 less on Amazon.

    And it’s not a given that CD buyers will play popular albums over and over. Most know what it’s like to buy a CD based on a hit song, only to find that the remaining tracks are mediocre filler.

That’s why the next phase is going to be primarily based upon songs, not albums: relatively few albums are consistent enough to justify the time or the expense.

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About Eric Olsen

  • http://www.well.com/~srhodes Steve Rhodes

    I’ve been making the comparison between CD and DVD prices for a while.

    I bought the Hedwig DVD on sale at Tower for $20. The soundtrack was $19. So for a buck, I got the movie, commentary, deleted scenes, and a feature length documentary. And the DVD had a function that played all of the scenes with songs which made it the equivalent of the a CD.

    Similar with Moulin Rougue. It was on sale for $21 for a 2 DVD set at Tower. The CD was $19.

    And DVD sites like netflix and greencine have a good subscription model.

  • http://www.theamericanmind.com Sean Hackbarth

    I’ve wondered why price competition hasn’t been in play much in the music business. I wonder if any economists have done studies (that normal people can read) to explain that.