| The record industry has been accused of overpricing its CDs | |
By Paul Sussman CNN.com writer
LONDON, England -- For those of us who grew up in the age of the vinyl LP, the advent of CDs in the mid-1980s proved something of a mixed blessing.
They improved sound quality, and were certainly more durable, being able to withstand numerous plays without ending up sounding like someone had just ice-skated across them.
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At the same time they somehow lacked the character and immediacy of the good old LP, and were, more significantly, much more expensive.
It is this question of cost that has from the outset been at the root of most complaints about CDs.
"There's always been a consensus that they are priced too high," says music expert Gary Crossing, of Web site dotmusic.com. "They cost about 50p (73 cents) to produce, and then retail for about 15 ($22)."
The issue made headlines in the U.S. last year when an investigation by the Federal Trade Commission (FTC) claimed that pressure tactics by the world's five biggest record labels were keeping CD prices unreasonably high.
The FTC estimated that since 1997 consumers had paid $480 million (329 million) more than they should have for CDs because of the record companies' insistence they should not be sold below a certain price.
While the five companies involved -- Time Warner, Sony, EMI, Bertelsmann and Universal -- refused to admit any wrongdoing, they did agree to end the practice of forcing retailers to charge a minimum price for CDs.
Now a similar investigation has been launched by the European Union, whose Competition Commissioner, Mario Monti, is concerned that the same five labels are exercising excessive influence over CD prices on this side of the Atlantic.
European consumer groups have welcomed the EU investigation.
They have long complained both about the difference in price between Europe and the U.S. -- the average cost of a CD in Europe is 11.82 ($17.35) as opposed to 10.87 ($15.85) in the U.S. -- and the fact that a small group of companies are effectively controlling the entire market.
"It is a cause of some concern to our organisation," says Machiel Van Der Velde of the Brussels-based Bureau European des Unions des Consommateurs (BEUC).
"We feel there is no real honest competition in terms of prices. The music companies fix the price and then everybody has to sell to it."
Vocal complaint
The British Consumers' Association (BCA) has been particularly vocal in its complaints, hardly surprising given that the average cost of a CD in the UK -- 14.16 ($20.66) -- is 20 percent higher than that of the rest of Europe, and 31 percent higher than the U.S.
"There's a big problem in the way manufacturers keep such a tight reign over the way CDs are sold," says BCA spokeswoman Jenny Driscoll. "There seems to be a concerted effort to prevent retailers such as supermarkets selling at reduced prices."
The record labels have robustly refuted such claims.
"We still believe that CDs are good value for money," says Lisa Bond, spokeswoman for Universal Music. "We certainly don't think they are too expensive."
Music journalist Andy Capper of New Musical Express Magazine agrees.
"The fact is there is huge expense involved in actually getting them into the shop.
"You've got to pay the artist, the manager, the PR company, the marketing people, the products manager, the label manager... the bottom line is there are just too many people involved in rock and roll these days."
The EU Commission has been careful at this stage not to accuse the record companies of any specific malpractice.
But if any evidence is uncovered, however, consumer groups are hoping for firm and decisive action by the EU.
"If the Commission finds that the companies have been behaving like a cartel," says Driscoll, "We would expect them to hand out severe fines and really set a precedent."
RELATED STORIES:
Brussels inquiry into price of CDs
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RELATED SITES:
Dotmusic.com
Federal Trade Commission
Sony Music
EMI
Bertelsmann
Universal Music
Euopean Union
BEUC
IFPI
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