How Music Industry Greed, Not MP3 or Piracy, Killed the Music CD

Before MP3, there was the music CD. (Note to younger Neatorama readers: ask your parents about it. It's those shiny round discs that look just like DVDs.)

Remember those? And remember why you don't buy them anymore? Well, the music industry would like to attribute demise of the music CD sales to the rise of digital music format and so on, but what is the real reason?

This interesting report over at NPR All Things Considered explains the rise and fall of the music CD. Turns out, it's all about greed:

... At first, executives at the major record labels didn't like the new format. But they started to come around — thanks in large part to Jac Holzman, [...]

"The CD was sexy. And it would bring higher prices — from about 8 dollars for cassettes or LPs at the end of the '70s, to about $15 in the early '80s," Holzman says. "You could resell your best catalogue again. CDs were lighter and cheaper to ship, which is a big consideration."

All of that meant giant profits for the music industry in the 1980s and '90s. "The CD sold so well. And it created this gigantic boom in the industry," says Steve Knopper, the author of Appetite for Self-Destruction: The Spectacular Crash of the Record Industry in the Digital Age. "And everybody got rich. And people just got incredibly accustomed to this. To the point where in the late '90s, the only way that you could get the one song that you liked was to buy the 15 to 18 dollar CD at the Tower Records."

At first, Knopper says, people didn't mind paying a lot for the new format. "You didn't hear the outcry at the time of, 'Hey, we're getting price-gouged.' Instead the public was going, 'this is much better sound.'"

The record labels promised that the price of CDs would come down eventually. And the discs did get cheaper — to make. But the labels kept retail prices - and profits - high. Jac Holzman says that was a mistake.

"It's fine to keep that up for two or three years. But the labels kept it up far too long. And I think it was a fraud on the public, and on the artists."

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It's so true. I bought my last music CD in 1999, the year that Napster came out. I think it cost $18.00 and I remember thinking to myself at the time that the technology was so common that prices should have dropped to no more than $8 for a CD.
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No kidding. I last bought a CD in 2004. As soon as DRM free downloads were legally available at Amazon, I jumped on that bandwagon, while making it a point to (usually) buy more obscure, less expensive music. Not because I'm a fan of "indie" music, but because the big labels have pissed me off time and time again, so hey, why not spend my music budget elsewhere? I don't pirate, but they still don't get much of my money.

Take a note of what the article said an LP cost; if he's right, they essentially doubled what they were trying to get and it just couldn't hold up forever. People don't like getting boned. And now there's alternatives that are viable, so people pursue them.

There's also the ease of use factor; I have 30ish gigs of music on my PC, with a decent soundcard and speakers. I can just let her start playing and not have to change disc. I can rip it to my MP3 player, and take the whole collection when I go on a trip. No searching through hundreds of disc to find what I want or anything. It's wonderful.

Also, this article made me feel old :p
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@Alex - It's likely that digital downloads were going to significantly offset CD sales anyway (let's face it... mp3's are more convenient to acquire as well as use and it's not only more cost effective for consumers but also for producers/distributors) so it appears that the record companies did an excellent job of maximizing profits on that older medium right up to their so stated demise. Customers were willing to pay the premium so that pony was ridden hard right until it dropped.

My impression was that the article was pure speculation as the author wasn't present in any of the record company board rooms to know what decisions were being made and certainly didn't present any numbers that back up his particular claim. If I were to make a WAG it would be that apprehension about emerging tech, new mediums and the business models needed to support them were also integral in keeping their bread'n'butter CD market pricing high as they were probably unsure of what resources they'd need to make the transition and remain profitable.

Anyway, it was inevitable for the CD to be replaced by other mediums and looking at this in hindsight shows that aggressive pricing for that mearket most likely brought in more revenue than if they had lowered the pricing sooner.
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