Pet Peeves
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Feature Article
Pet Peeves

November 1, 1997
By Scott Lewis

This month I thought I would do something a little different. Let's discuss some pet peeves of mine. Maybe you have some that relate. Send me any of your pet peeves. Just keep it polite.

CDs vs. Cassettes

This is currently one of my biggest pet peeves in the technology world. Why do CDs cost more than cassettes? The basic cost to manufacture a CD, after the master has been created, is less than $1. That's right, less than a buck. In bulk, the way the record labels stamp them out, it is probably half that for each CD. I do not know how much a cassette costs to manufacture, once again assuming the master is already been made, but it certainly can't be much different than a CD.

So this begs the question... if CDs and cassettes cost about the same to manufacture, why do we pay 5 to 7 dollars more for a CD? I think that we are being ripped off on this technology.

A little history first (as I remember it, not necessarily 100% accurate). I remember getting my first CD about 12 years ago. I didn't even own a CD player yet, but thought that the title would not make it, and bought it for the future. That CD cost me $16 (not counting tax, as all prices quoted in this article). At that time CDs were fairly new. They had been around for a couple of years, maybe more, but clearly the CD sections in record stores were slim. So what we had then was a new technology with a limited audience. Hence the price was about 50% higher than an album or cassette. I understand this.

Now jump to today. I have it on very good authority that a CD costs approximately $10.71 for a store to buy it from a label or distributor. So when stores like Best Buy advertise a CD for $9.99 they are taking a loss on the product. Two reasons they would do this. 1) To get you into their store where you may buy something else at a better profit, or at least get you used to coming in to buy from them regularly. 2) To drive others store out of business, so they can raise there prices latter and make a killing. Best Buy is very good at these tactics, hence the thousands of layoffs in the industry, and "mom & pop" stores closing down.

But this doesn't take into account the fact that cassettes cost less than $10.71 retail. Lets leave out store like Best Buy for a moment. The regular prices of most CDs (we will not get into the $2.99 classical CDs, and other unusual cases) is still between $14 and $16 dollars at most music stores. This is a markup of about %50. Is the record label making a different profit for CDs than cassettes? Why? Are there "costs" different for things like advertising & royalties for CDs vs. cassettes? I do not know. I am hoping to here from my source on the cost of a cassette, and will give you a follow up when I do.

Traditionally, new technology costs more. Companies need to recoup their investments in the technology, and sales volumes need to get higher to maintain a decent profit. So why haven't CDs come down in price over the last 10+ years? Does the music industry think we should pay more for a CD just because it provides better quality, even though it costs them no more to make. If this is the case, Intel would be out of business. Using the music industry logic, Intel should still be selling 386 chips for hundreds of dollars, and selling Pentiums for thousands, and Pentium II chips for tens of thousands. But this is not the case.

Technology always filters down with market penetration and acceptance. Back to Best Buy. I usually don't like the practice of stores lowering prices drastically with the intention of driving others out of business. But in this case, shouldn't the music industry take some responsibility for Best Buy's ability to do this. After all, if the music industry lowered CD prices to the same level as cassettes then all stores would have lower, more competitive prices, and Best Buy would have a much harder time lowering the price further without giving the stuff away for free.

If anyone has inside information on the costs of making CDs and cassettes, please let me know. I am particularly interested in the contracts with artists, and whether there are difference with royalties and such for CD vs. cassette sales.

DVD vs. VCR

I am very concerned that the price of DVD discs will always be higher than VCR tapes. Look at the size of that VCR tape, and tell me that it costs less to manufacture than a DVD disc. The cost to manufacture (once again, after the master is made) has got to be cheaper for DVD discs than for VCR tapes. So will a movie on DVD eventually be the same, or cheaper, than the same movie on VCR. Or will the movie industry rip us off the same as the music industry. What do you think?

More Pet Peeves

The CD vs. cassette thing was so long, that I decided to do the rest of my pet peeves next month. So tune in again in December for more pet peeves from Scott's Site. Send in your own, and maybe they can be added to the article.

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