Posts
CD-ow: Massive fine for trying to save us money
CD-Wow, the online retailer, has been hit with a £41million fine for selling CDs sourced in Hong Kong, a breaking of an undertaking it made in 2004.
The cash will go to the BPI, effectively meaning that record companies are being rewarded for ripping off people by enforcing artificially high CD prices in the UK. It'll help offset falling CD sales, which are falling, in part, because people are tired of being asked to pay ridiculous sums of money for pieces of plastic that are sold cheaper elsewhere in the world.
Not, of course, that that's how the BPI sees it:
"CD-Wow is no consumer champion," countered the BPI's chief executive, Geoff Taylor, who said the company had undermined "the legitimate businesses of UK retailers and record companies".
"The vibrancy of British music depends on a fair return on the investments that allow British talent to shine.
"This decision is an important step in ensuring that British music has a bright future."
"The vibrancy of British music depends on a fair return on the investments that allow British talent to shine.
"This decision is an important step in ensuring that British music has a bright future."
Yes. How was that again, sorry? Is the implication that British artist's music is sold at a loss in Hong Kong? But that can't be the case, can it? These are legal recordings, and money from a CD goes back to the labels whether the CD is wholesaled in Hong Kong for eventual sale in Leytonstone or Wan Chai.
If the UK record labels have cut poor deals which mean they're not getting a fair return for their investment when tracks are sold abroad, that's hardly the fault of the UK consumer - and why should the UK consumer be forced to pay over the odds to compensate their losses?
If the UK record labels have cut good deals which mean they are getting a fair return on their investment when tracks are sold abroad, there's no problem anyway.
And the consumer could ask "why am I being forced to pay more to cover bad investment decisions by companies?" The BPI often runs out its justification for charging high prices in the UK as saying that it needs to cover the costs of its flops, but why should someone have to pay an extra two quid to buy a record by a band they like because some idiot in an office somewhere decided to pour their company's money into an absolute turkey?
Why don't they ask consumers if that's the way they think it should be? Perhaps they could offer, say, purchasers of a Jackson Browne album the chance to pay a couple of extra quid in order to offset the losses on the Paris Hilton album. If the record labels are convinced that their way of doing things works in the consumer interest, why not put that to test?
8 comments:
Labels (like many other industries) have always had strictly territorial sales agreements. This is far more enforceable in music though, as you are buying a license when you buy a cd. The label's job is to maximise earnings for the artist after all.
The label's job is to maximise earnings for the artist after all.
But that's not what the labels are trying to do here.
Anonymous #1: It's not "the label's job to maximise earnings for the artist" - that's just a lie the labels like to propagate. The labels are profit-maximising industries, and like all other profit-maximising industries, seek to increase their margins at the expense of their suppliers. The labels are no more interested in maximising artists earnings than supermarkets are in maximising farmers' incomes.
Simon, of course that's true and I was playing devil's advocate to a degree. But the point remains that the labels' role is to make money from music. Do you really think that automated distribution tools provided by companies like itunes/cdbaby and myspace/snocap will replace that function? Will social networking replace big-budget marketing? And even if that were to be the case, wouldn't these types of companies just become another incarnation of the big four?
It's a very different proposition from "the labels maximise earnings for the artist" to "the labels maximise earnings for themselves".
You're right, of course, that there's the inherent risk that any new means of distribution will become as bloated and greedy as the big four are now, but that's hardly an excuse for inaction.
As far as I can see it, the argument is running that CDs are more expensive in Britain than elsewhere because the market can be kept cut off from cheaper sources of supply. Which is artificially inflating prices, isn't it? Which is ripping off the British consumer. The labels have got away with it so far because it's been hard for consumers to circumvent the barriers, and now they can, the legal argument seems to be the barriers have to remain because they've always been there.
It's odd that copyright law has to change, the BPI tells us, because the world has changed; but CD pricing must be protected because the world has changed.
> It's a very different proposition from "the labels maximise earnings for the artist" to "the labels maximise earnings for themselves".
I don't think that's really substantive - the label role is to maximise earnings with the split being a matter of business negotiation between the artist and label. To put it another way, the artist is always going to have to deal with someone even if they are selling direct to punters. Regardless of increased pricing transparency in an open automated distro system, artists won't have any muscle with the big aggregators and gateways like itunes and paypal. In that scenario, they may even be better off being collectively represented. The long tail could turn out to be bad news for the smaller players.
Regarding CD pricing, it is an absolutely hyped issue. If you don't like the price of CDs in UK shops, you need to address the costs and margins of the whole supply chain. If wages go up and transport costs more, it's pretty obvious that so will CDs. Labels make a small fraction of retail and when they sell for less abroad, it's usually a condition of the distributor. It's also the distributors/wholesalers who demand territorial exclusivity - that's what this is about.
I'm sure we can buy most things cheaper abroad - why reserve your ire for music? And why attack the producers for their cut but not the retailers?
anonymous #1 - I can see where you're coming from, but I can't agree with you on the idea that the label will maximise earnings for artist. True, it's up to the artist to negotiate the best deal, but since many of the deals are negotiated from positions of extreme weakness, and the four major labels control so much of the industry, it's hardly a fair negotiation. If you can point to an instance of a single occasion when a major label has willingly given an artist a larger share, I'd be very surprised. I was going to offer a hostage to fortune, such as "I will dance naked down the street", but...
This isn't a criticism, as such, of the record labels. They're set up, like all major businesses, to charge as much as they can, and to pay their suppliers as little as they can get away with. To criticise that is like criticising a lion for killing a zebra.
You might, however, ponder if you'd like a lion to be in charge of your zebra zoo.
Leaving that aside, though, I think you're right that there is a very real risk of artists finding themselves shut out of the places where music will be sold in the future - I disagree that the obvious answer is then for them to continue paying large chunks of the money their work makes to the big four; there's room for a new sort of label which does little more than deal with the licensing and takes a very small cut.
Regarding CD pricing, it is an absolutely hyped issue. If you don't like the price of CDs in UK shops, you need to address the costs and margins of the whole supply chain. If wages go up and transport costs more, it's pretty obvious that so will CDs. Labels make a small fraction of retail and when they sell for less abroad, it's usually a condition of the distributor. It's also the distributors/wholesalers who demand territorial exclusivity - that's what this is about.
I don't think "it's a hyped issue" means anything, does it? People are talking about it only because people are talking about it, in other words.
I'm certainly hacked off that I have to pay more for the same product here than I do when I shop at Best Buy or Twist and Shout when I'm off visiting relatives, and I hear all this talk about suppliers and wages and distribution chains and it simply doesn't explain why a track on iTunes costs 79p in the UK, whereas the same track costs 79c in the US. Because truckers charge more in the UK?
Your defence of the record companies would be slightly more honorable if the labels hadn't been caught artificially inflating prices in the US as part of a cartel - why should I cut them the benefit of the doubt that their prices here are fair?
And if it is the distributors and wholesalers who demand exclusivity, why is it the labels who are being recompensed by CD Wow? And wouldn't Tesco rather source their CDs from overseas and sell them more cheaply if they were allowed to?
I'm sure we can buy most things cheaper abroad - why reserve your ire for music?
Well, partly because this is a music blog, and because after food and housing and other essentials, it's what I spend most of my money on - if this was a racketball website, I imagine it'd be the differential in, um, balls which exercised me. Although I do get annoyed by the difference in clothes, to be fair - but I can buy all the clothes I need in the US as I know that I'm going to need a certain number of pairs of jeans and one pair of boots before my next transatlantic trip. Unfortunately, I can't purchase six months worth of new albums in advance.
Added to which, it's very easy to ship music from overseas to the UK - which is why the record labels are fighting so hard to stop people doing it. I imagine if American toasters were smaller to ship, wouldn't attract duty payments, and had plugs that worked in the UK, we'd be seeing a similar battle by toaster manufacturers to keep their prices artificially high.
And why attack the producers for their cut but not the retailers?
Because, the retailers are trying to do what they can to keep prices down to a sensible level - CD Wow, are, after all, a retailer.
I don't want to defend labels (they surely don't deserve too much) but (in the indie sector at least) it is the distributors who require territorial exclusivity and set differential pricing. If a label is considered to have allowed that exclusivity to be broken (even by accident) they will often lose their distribution.
Not forgetting that labels do legally hold these distribution rights, in many cases, flat pricing would be much easier for them but it simply isn't available. Itunes are an example of that. The labels don't have any say whatsoever on itunes prices.
Nearly all of a CD retail price is down to distribution and retail markups - that's precisely why cdwow can undercut effectively. Bashing the labels is simply lazy thinking in this example and is hyped in much the same way as the ebay ticket tout issue. (Talking of fair prices, you'll notice that artists have always complained that labels sell their music too cheaply to record clubs or on cover discs.)
Post a Comment
As a general rule, posts will only be deleted if they reek of spam.