The State Of The Music Industry in 2004

Part One: What’s happened to CD-Wow?

If you’re an eagle eyed consumer, you’ll no doubt have read our article about CD-Wow and their agreement with the BPI, an agreement which will mean a rise of £2 per CD for each disc sold by the Hong Kong based firm, bringing them into line with UK retail prices. According to The Register an industry insider suggested that “It is not the consumer that will suffer, just CD Wow's profit margins. They made a lot of money out of cheap CDs”. Let’s take a moment to re-read that sentence. What they are saying here is “By raising the price of CDs to the consumer by two pounds, it is not the consumer that will suffer.” That sounds pretty ridiculous to me. What it means to a CD consumer is that for every five CDs they buy, they could previously have bought an extra one had CD-Wow’s prices remained the same.

It is true that the UK is in a difficult position at the moment. Grey imports are cheaper than UK distributed CDs. However, it is not a unique position. Quite the opposite – Japan has had similar circumstances for some time, and responded by allowing both import and domestic products to be sold in stores, while going out of their way to make their domestic product more saleable to consumers by adding extra tracks, different sleeve artwork and in some cases, totally exclusive releases. The upshot is that Japanese CDs are sought by collectors worldwide, despite their high price tag. This indicates that imports and domestic products can co-exist in a harmonious yet profitable manner.

In the US, declining CD sales were combated by Universal taking the step of actually reducing their margins to sell more product – faced with such tough choices as improving the product or reducing their margins, to compete as in most cases where a free market is operating, the BPI decided to take CD-Wow to court – effectively for beating them at their own game.

I can hear the counter-argument almost instinctively now – what about the artist? You’re not just screwing the record company by importing, you’re damaging the artist. Take a moment to look at Courtney Love’s article about the industry written at the time of Napster. You won’t be too surprised to learn that very little has changed.

You might also be wondering what relevance major labels as we have always known them (and due to mergers they are increasing in number, thus decreasing the level competition, with a merger between BMG and Sony being mooted) have in the current marketplace, and indeed we see some smaller independent music stores (CD Baby being an excellent example) who take just $4 per CD sold, giving the artist a 60% share of the price on a $10 CD. This means that I can buy the Gary Jules album and be certain that he will see $10 out of a $14 sale price. I feel good about that. I like the fact that the artist is getting the lion’s share of the money, because that’s the way it should be. You don’t have to sell as many records if you’re being paid more per record sold and it means more musicians are able to make a living out of doing something that they love.

Then there’s artists like Thea Gilmore who has always been fiercely independent, and yet in 2003 was still able to score a Top 40 hit. There’s an assumption that the major labels are always there, and are in some way necessary. I’d argue that it’s no longer necessarily the case.

Let’s remember now that we are not in a climate of declining music sales. CD sales in the UK increased this year, and the introduction of iTunes and similar in the US have meant that it’s been the biggest 12 months yet for the sale of legitimate downloaded music.

It’s still fair to say that we’re in a time of flux for the music industry. Napster caught them with their guard down, and now the economy has delivered them another surprise. Considering how well they coped with piracy (copy protected CDs?) it’s no surprise that they’ve decided to take the unpopular route when dealing with what they perceive as over-competitive pricing, but it would seem that the consumer has never been their priority. Just as copy protection didn’t hurt people with pirate copies at all, so the increased price of legitimate music once again only hurts legitimate consumers – you know, the ones who aren’t downloading it for free.

The BPI have always stressed that Hong Kong is a special case and that pricing is cheap there for a reason. However, places like Canada, America and Australia all sport online retailers that can undercut a UK store despite having to ship the product half way round the globe.

As such CD Times is happy to present this cut out and keep guide to maximising your value for money when shopping online for records.

On to... Let's go shopping...

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