Isn't it funny that digital people whine about paying $23 for a high quality, theoretically the best sounding version of the recording. Never hear that from analog lovers!
Why are downloaded cd's so expensive? Is it a rip-off?
- Thread starter Kingsrule
- Start date
Isn't it funny that digital people whine about paying $23 for a high quality, theoretically the best sounding version of the recording. Never hear that from analog lovers!
I think there are a number of things at play there. It is just generally accepted that a high quality Analog front end requires a decent investment, and secondly one can see the cost of manufacturing vinyl is clearly expensive, with low volume..not to mention the cost of printing/packaging and shipping.
Many of the expensive hi Rez downloads were mastered years ago and many simply ripped from DVD-a or SACD.
But didn't we hear the same complaint in 1980 eg. Why should CDs cost more than LPs?
Vis a vis point one, one needs a decent investment, say on the order of a VPI Classic 3 for great sounding digital.
Vis a vis point 2, that's a slightly different matter. The adage caveat emptor applies whether you're buying a download or LP. You need to know the source. There's a helluva lot of crappy digital copies being used to cut LPs just to take advantage of the renaissance in analog.
Vis a vis point one, one needs a decent investment, say on the order of a VPI Classic 3 for great sounding digital.
Vis a vis point 2, that's a slightly different matter. The adage caveat emptor applies whether you're buying a download or LP. You need to know the source. There's a helluva lot of crappy digital copies being used to cut LPs just to take advantage of the renaissance in analog.
Can't disagree. But to go back to point 2, assuming all is done correctly, the mastering and manufacturing process, and the shipping, is clearly not cheap for boutique, primo vinyl.
Mp3 and AAC are lossy. FLAC and ALAC are lossless.
They are not always more expensive. See iTunes and Amazon MP3.
FLAC and ALAC files are probably 20% bigger than 256 mp3 or AAC. Many download sites, like Merge and Bandcamp sell
their albums zipped...a huge space saver.
If there is a premium it is for better perceived quality.
Exactly, the 45 rpm pressings run $50-65 or more. The new Clarity, hand pressed limited quantity aka the 21st century UHQR vinyl pressings will be probably $100 or so. People seem to snap them up and for good reason.
So to answer your original question why analog guys don't whine and complain about cost is
that to enjoy high quality vinyl they know you gotta pay to play.
Bruce B
WBF Founding Member, Pro Audio Production Member
All,
To put some numbers into the conversation and to make things more meaningful, here are some cost breakdowns that can help shed some light on the industry economics:
For those interested in old/ hard media:
Sample Breakdown of the Price of a Physical Album (CD)
Item Percentage Dollar Amount
Artist Royalties 15% $2.25
Publishing Royalties 5% $0.75
Packaging and Manufacturing 5% $0.75
Distribution 5% $0.75
Marketing and Promotion 15% $2.25
Record Company Overhead 20% $3.00
Record Company Profit 10% $1.50
Retail Overhead 20% $2.25
Retail Profit 5% $0.75
Retail Price 100% $14.99
If interested, you guys can make assumptions and make appropriate adjustments for vinyl.
Now in the digital world:
Sample Breakdown of the Price of a Digital Album Sold on Apple’s iTunes
Item Percentage Dollar Amount
Artist’s Share 14% $1.40
Record Company’s Share 56% $5.60
Apple iTunes’ Share 30% $3.00
Retail Price 100% $9.99
Furthermore, Apple’s analyst estimated share consists of (per song) :
Retail price: $.99
Wholesale cost $.69 (average price per song after Apple pays $0.70 to major labels)
Network fees $.05 (network fees at $0.05 per song, includes the delivery fee, and the hardware and software to facilitate delivery)
Transaction fees $0.10 (per song per song to credit card firms; this is compared to approximately $0.25 per song when iTunes first launched)
Operating expenses $.05 (general administrative expenses associated with operating the iTunes Store)
Operating profit per song $.10
Now you can argue that apple is a big gorilla, and can do a great job managing their business that drives down network fees, transaction fees, and operating expenses.
As another comp, Radiohead charged a $.90 for a 160 kilobits per second (kbps) the audio quality download of their album. As an additional comp to present a high end scenario, Amazon charges an approximate Delivery cost $0.15/MB to authors for Kindle books in a self publishing model. Say a song is 5 mb, the delivery cost is $0.75 per song. For a 10 song album, it would be about $7.50.
These numbers are just something to think about; they need to be adjusted with the value adding activities of high res audio downloads. I don’t have much time to play with the numbers, but I think this gives an idea of the economics of the industry. Either way, the digital distribution costs are not that high, and considering that once a the digital distribution center is built, the incremental costs of each download are near $0.
Also, here’s an interesting article by David Byrne from Wired magazine - David Byrne's Survival Strategies for Emerging Artists — and Megastars:
http://www.wired.com/entertainment/music/magazine/16-01/ff_byrne?currentPage=all
To put some numbers into the conversation and to make things more meaningful, here are some cost breakdowns that can help shed some light on the industry economics:
For those interested in old/ hard media:
Sample Breakdown of the Price of a Physical Album (CD)
Item Percentage Dollar Amount
Artist Royalties 15% $2.25
Publishing Royalties 5% $0.75
Packaging and Manufacturing 5% $0.75
Distribution 5% $0.75
Marketing and Promotion 15% $2.25
Record Company Overhead 20% $3.00
Record Company Profit 10% $1.50
Retail Overhead 20% $2.25
Retail Profit 5% $0.75
Retail Price 100% $14.99
If interested, you guys can make assumptions and make appropriate adjustments for vinyl.
Now in the digital world:
Sample Breakdown of the Price of a Digital Album Sold on Apple’s iTunes
Item Percentage Dollar Amount
Artist’s Share 14% $1.40
Record Company’s Share 56% $5.60
Apple iTunes’ Share 30% $3.00
Retail Price 100% $9.99
Furthermore, Apple’s analyst estimated share consists of (per song) :
Retail price: $.99
Wholesale cost $.69 (average price per song after Apple pays $0.70 to major labels)
Network fees $.05 (network fees at $0.05 per song, includes the delivery fee, and the hardware and software to facilitate delivery)
Transaction fees $0.10 (per song per song to credit card firms; this is compared to approximately $0.25 per song when iTunes first launched)
Operating expenses $.05 (general administrative expenses associated with operating the iTunes Store)
Operating profit per song $.10
Now you can argue that apple is a big gorilla, and can do a great job managing their business that drives down network fees, transaction fees, and operating expenses.
As another comp, Radiohead charged a $.90 for a 160 kilobits per second (kbps) the audio quality download of their album. As an additional comp to present a high end scenario, Amazon charges an approximate Delivery cost $0.15/MB to authors for Kindle books in a self publishing model. Say a song is 5 mb, the delivery cost is $0.75 per song. For a 10 song album, it would be about $7.50.
These numbers are just something to think about; they need to be adjusted with the value adding activities of high res audio downloads. I don’t have much time to play with the numbers, but I think this gives an idea of the economics of the industry. Either way, the digital distribution costs are not that high, and considering that once a the digital distribution center is built, the incremental costs of each download are near $0.
Also, here’s an interesting article by David Byrne from Wired magazine - David Byrne's Survival Strategies for Emerging Artists — and Megastars:
http://www.wired.com/entertainment/music/magazine/16-01/ff_byrne?currentPage=all
garylkoh
WBF Technical Expert (Speakers & Audio Equipment)
Except that you have to amortize the cost of the data center, and still pay for the fiber connectivity, plus because customers demand higher and higher performance every 6 months, you have to continue to upgrade the digital distribution center.
There is a good reason that small ISPs have all closed down. They forget that customers want faster and faster service at lower and lower price. If they don't charge enough to pay for continual upgrades, their customers fly away in droves and don't come back. Then, go bankrupt because they haven't even begun to recoup the upfront cost before earning enough to upgrade the data center. I know - I started the first ISP in Asia to go IPO on Nasdaq.
IMHO (I haven't crunched the numbers lately) $0.15/MB is cheap compared to building your own. Anyone seen how slow HDTracks has become lately? The problem is always at the consumer end. They are sucking down megabytes per minute (see the thread on Internet download speeds) but don't want to pay for it. Then, someone at the other end has to pay to provide the downloads without getting properly compensated.
It's an evolutionary-psychology problem because such "goods" are so intangible that as human beings, we haven't evolved sufficiently to make the mental change to accept. Can you hold a megabyte? What is delivery of a megabyte worth to you?
HD Tracks has always been slow, not sure why.
I always thought they were doing it on the cheap to make even more $$
Also I think your argument that customers will go elsewhere for faster service doesn't stand up to music downloads. If you want it, that's where you have to get it, fast or slow there aren't alternatives.......
I always thought they were doing it on the cheap to make even more $$
Also I think your argument that customers will go elsewhere for faster service doesn't stand up to music downloads. If you want it, that's where you have to get it, fast or slow there aren't alternatives.......
I don't find HDTracks slow at at all. I just bought two 96 Khz downloads and they completed in in mere minutes.
I downloaded a CD quality album from Qobuz in 3 minutes. That is just my experience.
Hi Gary,
I think we are getting here to the crux of the "make/ buy" decision. Ronald Coase won the Nobel Prize in economics for his work on this, so the decision is complex and involves analysis and critical thinking. In some cases it makes sense to outsource, and in others it makes sense to do things in house rather than purchasing from an independent market firm. Apple and Amazon have diverse comp numbers above, yet both are large companies with excellent management. Both can achieve economies of scale that a small company like HD Tracks doing this in-house cannot achieve. And as you mention, technology keeps evolving, it requires investment and expertise; failure to keep up can be costly... Yet a small company like HD Tracks can avoid coordination and transaction costs by doing things in-house. It's a fallacy to believe that "make" is always the best way , and it's a fallacy to believe that buy is always appropriate. One has to consider what leads to most efficient production by assessing the costs and benefits of using the market... I do wonder about the specifics of the Radiohead operation that was able to do things fairly cheap.
But with all discussion about costs, we must not forget that smart business owners make their pricing decisions based on the perceived value that is provided to the customer.
The price should obviously cover the costs, but the price should appropriately extend to reflect the market's perception of the product. This is easier said than done, especially for entrepreneurial firms with limited resources dealing with experiential products. And I really wonder how much of it is happening here.
