Submit your own Neatorama post and vote for others' posts to earn NeatoPoints that you can redeem for T-shirts, hoodies and more over at the NeatoShop!

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."

That could be part of it. The ability to pay 99 cents for a digital copy of a song you like is more appealing than having to pay 15 bucks or so for a whole CD by the artist. You might still want to do that for an artist you already know and are a real fan of, but for a new artist, it's a lot more money to take a chance on.

But I think part of it,too,is the whole outlook on ownership is changing. We're becoming less accustomed to owning things physically and permanently. We don't feel compelled to have racks and racks of physical CDs or tapes or records or books or movies in our living rooms. We're becoming used to paying to use them and used to having things digitally and streaming. I don't have to have a box full of tapes to watch my favorite movie anymore or a CD I can put in my walkman to be able to hear my favorite band while I'm jogging.

I bet the little one's of today's kid's will laugh at the idea of how Grandma and Grandpa actually had boxes and racks and cases of media sitting around the house or had to get in a car and drive down to a store to purchase media instead of just streaming their media on demand.
Abusive comment hidden. (Show it anyway.)
I do agree it was the labels that killed it off. I think MP3's had a bit to do with it but I agree that it's not as much as most people think. Really, CD's never DID come down in price comparatively. Factor in that there are what are called "points" (profit percentages) on any album (CD) sold and it will show you even more that the labels were making a killing.

I remember hearing that of the eight or so points on a album, three or four went to the record company, the artist got maybe two and the others were divvied up between companies like Sony DADC (which makes the disks themselves.)

Once, I took a tour of the Sony DADC plant in Indiana. The PR/Tour Guide said "Well we can't tell you how much it costs to make a disk but it's less than a dollar."

Now, figure that against a $15 CD, which costs fifty cents to make and the label is getting HALF of the profits and the artist is the one really getting screwed in the deal.

The bands that were initially successful in the Napster vs Metallica ordeal (downloads vs artists) were artists who realized they were getting screwed by labels and either started their own (in the case of MANY punk rocks groups) or put their music out for the public to get and made their money on touring.
Abusive comment hidden. (Show it anyway.)
Melissa: Yeah the ease of storage and "download this NOW" options also are very appealing. Though, I think I will stick to buying LPs still. :)
Abusive comment hidden. (Show it anyway.)
@nihil: It's worse than that. There are a few articles around on it by either Butch Vig or Steve Albini and (strangely enough) Courtney Love.

Artists still get charged "breakage", they don't own the publishing rights to their catalogues, the guy who made basically all the money from "Dream on", by Aerosmith is a lawyer, etc.

The only people not making money on album sales are the artists.
Abusive comment hidden. (Show it anyway.)
It all goes through cycles. First the media companies fight the new technology, then they finally see the obvious way to make money off it followed by the way to greedy time period which then leads to the next technology and it all starts over again.

I remember reading in the late 90s when mp3 was just starting to appear about how it was going to kill the CD. The article quoted music exces saying that the price of CDs were justified because of the cost to make the CD (~$2), burn the CD (~$3) and ship it. The exec actually said it cost them nearly $4 to ship a single CD. At the time you could buy a 50 pack of CD-rs with cases for ~$25 and USPS media mail was $2.65. I though I could do well just by heading over to CompUSA to pick up the blank CDs and sell them to the labels or take over their shipping by just using USPS.
Abusive comment hidden. (Show it anyway.)
I know I'm old-fashioned, but I really like owning CDs, because they often have a lot of information about the music, musicians and even the lyrics, that you don't get from online purchases. Also I like looking though my CDs, to figure out what I am in the mood for. I guess I'm a visual person.
Abusive comment hidden. (Show it anyway.)
Another reason that has not been mentioned is the simple fact that music these days sounds like crap.

Loudness war:
Abusive comment hidden. (Show it anyway.)
Another reason that has not been mentioned is the simple fact that music these days sounds like crap.

Google: loudness war (and check the article from NPR)
Abusive comment hidden. (Show it anyway.)
$15+ music CD's cost less than $2 to make. Artists don't see much of the profits. Record companies do.

I'm gonna go rip all the CD's I can find at my local pubilc library. Screw the record guys.
Abusive comment hidden. (Show it anyway.)
I'm so glad that much of the music I listen to now is available on LP...yeah, those 12" black circles. I buy the LP and the CD....I love my CDs and have never bought anything from itunes or any other 'digital media' store. I finally bought an ipod last year, and have been ripping CDs to the computer to the ipod. I like looking at the artwork in the CDs, seeing what the band looks like, reading the lyrics. Music for me is more than something to listen's something that you 'feel'. Library of Congress only archives material on vinyl...not digital, not CDs...vinyl.
Abusive comment hidden. (Show it anyway.)
@DaveL - not, not fraud, but they probably hastened the demise of the music CD (the article described how used CD sales are actually still healthy - it's just the new CD sales that had pretty much died).
Abusive comment hidden. (Show it anyway.)
Let's hope the cellphone market shares the same end soon too, cellular communications giants (at least in canada) gouge the customer so much by the end of three years you'll wonder just how many of these shitty phones you could have purchased with that much money over three years. The proof lies in the phones themselves, I could sell you a $49.99 pay and talk phone, or grab the post paid phone (exact same model), and charge you $320.00.
Abusive comment hidden. (Show it anyway.)
@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.
Abusive comment hidden. (Show it anyway.)
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
Abusive comment hidden. (Show it anyway.)
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.
Abusive comment hidden. (Show it anyway.)
Login to comment.
Click here to access all of this post's 19 comments
Email This Post to a Friend
"How Music Industry Greed, Not MP3 or Piracy, Killed the Music CD"

Separate multiple emails with a comma. Limit 5.


Success! Your email has been sent!

close window

This website uses cookies.

This website uses cookies to improve user experience. By using this website you consent to all cookies in accordance with our Privacy Policy.

I agree
Learn More