"The State Of The Music Industry in 2004"

[petpiranha]

2 interesting articles by Mike Gray: http://www.cdtimes.co.uk/content.php?contentid=356

Part One: What’s happened to CD-Wow?
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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.

Part Two: Let’s Go Shopping!
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Firstly, let’s arm ourselves with the appropriate tools. To take advantage of globalisation, you’ll need to know the currency conversion rates. A Universal Currency Converter will provide you with rates for every currency you can humanly think of, and this is what we’ll be using to work out the rates as we examine today’s prices. Rates vary, and you can use that to your advantage. The current strength of the pound against the US dollar is to our advantage, as is the weak Australian dollar (or Pacfic Peso as some have taken to calling it). Remember, there is a customs limit of £18 for personal imports, and while most CDs fall under this threshold you should be careful when ordering box sets. In the figures below we’ll take account of any customs charges likely to be incurred when making comparisons.

Firstly, we’ll take a look at singles. In the UK, singles are a declining market. They’re declining in more ways than that, however, as the number of tracks on a single has been declining consistently for the last five years. Where singles used to contain 4 tracks as a maximum, it is now three, and the BPI’s plan to rejuvenate the singles market includes two track singles, marketed at the princely sum of £1.99. The exception is remixes, where there is a time limit set instead of a number of tracks limit.

So let’s take a trip down under, chums, to HMV Australia and the web home at www.hmv.com.au where we can see a very different picture emerge. Here, singles can be 4 tracks (or even more in some cases) and the prices tend to be a lot lower. We’ve chosen comparable products in terms of track listing and popularity in each case.

Our shopping basket here:

P!nk – God is a DJ
Kelis – Milkshake
Black Eyed Peas – Shut Up


Let’s take P!nk first. The Australian single costs just £1.93 at today’s exchange rate and contains four tracks. Those are:

1. God is a DJ
2. Trouble (acoustic version)
3. God is a DJ (D-Bop Mix)
4. God is a DJ (Spider Remix)

In the UK the single is split into two parts. (source : www.hmv.co.uk)

Part 1 (£2.99)
1. God is a DJ
2. Trouble (acoustic version)
3. God is a DJ (D-Bop Remix)

Part 2 (£1.99)

1. God is a DJ
2. Trouble (hyper remix)

Total cost for the Australian version is £1.93
Total cost for the UK version (as you have to get two parts to get the same number of tracks) = £4.98

Now let’s look at the Kelis single:

HMV Australia want £1.16 at today’s exchange rate.

1. Milkshake (clean)
2. Milkshake (x-press 2 triple thick vocal mix)
3. Milkshake (DJ Zinc remix)
4. Milkshake (Freq Nasty’s Hip Hall Mix)
5. Milkshake (Tom Neville Remix)

HMV UK was £3.99 for

1. Milkshake (clean)
2. Milkshake (x-press 2 triple thick vocal mix)
3. Milkshake (DJ Zinc remix)
4. Milkshake (Freq Nasty’s Hip Hall Mix)
5. Milkshake (Tom Neville Remix)
+ an enhanced video portion.


And finally, an identical single, Black Eyed Peas

HMV Australia want £1.93 for

1. Shut Up (Album version)
2. Tell Your Momma Come (Live from House Of Blues, Chicago)
3. Karma (Live from House Of Blues, Chicago)
4. Shut Up (Video)

HMV UK want £3.99 for the same thing.


“Aha!”, you say, “but they’ve got to be shipped half way round the world, and then customs will want their cut.”

Wrong. The shipping for those singles would be just $7 Australian, or 3 UK pounds.

So :

HMV Australia (with shipping) = £8
HMV UK (without shipping) = £10.97 – and that’s if you only buy one part of the P!nk single.

This is below the customs limit and would not incur any charges.

These examples were chosen because of their current popularity, and the retailers chosen because they are the same store in a different country. The same is true of the vast majority of CD singles, and online stores.


Unfortunately, albums are a different story. Australian albums tend to work out at around £11 via an online retailer, so there’s no point in looking there when we’re trying to make globalisation work for us. Let’s instead look at North America, where Universal Records has just slashed CD prices and other labels may well follow suit. This, combined with the strength of the pound against the US Dollar and Canadian Dollar should mean that we’ll find some deals.

Let’s take Canada as an example, and www.amazon.ca

Here we buy:

Nelly Furtado – Folklore $12.99 Canadian
No Doubt – Singles $12.99 Canadian
Sarah McLachlan - Afterglow

How much *is* $12.99 Canadian, then?

Yup, damn those pesky foreigners - it’s £5.50 at today’s market rate. Now even when you factor the shipping in at nearly £2 if you only order one disc, you find that we’re undercutting www.cd-wow.com’s old prices. Better still, if you order two of those albums, you’d be paying just $32.96 Canadian - £14.

www.hmv.co.uk want £9.99 for each of those albums, and that’s before shipping.

However, one of these titles does bring up a good point. The Nelly Furtado album has a bonus track, exclusive to the UK market. Could this indicate that someone out there has realised that offering better value to the consumer might stop them importing? We can only hope.


There are yet more options – the second hand market is another good way of getting cheap CDs. Stores such as www.djangos.com and www.secondspin.com in the US tend to offer good value for money on good condition second hand products and are worth considering.

When it comes down to it, options are what this article was all about. The option of choosing where to buy a CD and choosing where that CD is sourced. It’s about the consumer getting the best value, and in the case of independent musicians, the middle man being cut out altogether. It’s also about not being dictated to by companies that exploit and approve of market forces when it works in their favour, but disapprove of others doing the same.

This is an industry where on the same day as they force a music retailer to increase prices, they have a pop up on their site explaining how they are campaigning for cheaper music and asking visitors to sign a petition to help them do so. There’s a word for that. Hypocrisy.