In a Rolling Stone report on Wal Mart’s push for $10 dollar CD’s there’s this interesting sidebar:
Does a CD have to cost $15.99?
Major labels insist that the low prices mass retailers such as Wal-Mart and Best Buy demand are impossible for them to achieve. But Best Buy senior vice president Gary Arnold counters, “The record industry needs to refine their business models, because the consumer is the ultimate arbitrator. And the consumer feels music isn’t properly priced.” Labels point to roster cuts and layoffs as evidence that they can’t sell CDs cheaper.
This breakdown of the cost of a typical major-label release by the independent market-research firm Almighty Institute of Music Retail shows where the money goes for a new album with a list price of $15.99.
$0.17 Musicians’ unions
$0.82 Publishing royalties
$0.80 Retail profit
$1.60 Artists’ royalties
$1.70 Label profit
$2.91 Label overhead
$3.89 Retail overhead
That’s a pretty remarkable breakdown. Label get $7.01per CD and retailers get $4.69 for a combined percentage of 73% of the price of each CD. Royalties, artists, and manufacturing costs combined total only $4.29.