The other side of the record companies' disc story

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The Independent Online
THE COMMONS Select Committee on National Heritage's final hearing on compact disc prices last week was a heated session with record company bosses giving evidence and MPs asking some hard questions. The executives used a number of several arguments to justify CD prices. This is the other side of the story.

'CDs are reasonably priced in comparison to other forms of entertainment' - Rupert Perry, EMI.

To compare like with like, CDs in Britain are expensive in two ways: they cost around pounds 3 more than cassettes or vinyl LPs; and they cost 50 per cent more than in the United States.

Prices are lower in the US because sales are higher per capita.

Exactly. Sales would be higher here if prices came down. Every time chainstores offer discounts on old albums by U2 or Simply Red, they go back into the chart.

Without the higher revenue from CDs, record companies could not invest in new talent.

On the contrary, the high price of CDs is stifling new talent, by discouraging consumers from taking risks. The British album chart is clogged with collections of old hits. Since CDs arrived in 1983, Britain, once the world leader in talent-spotting, has fallen well behind. The country where CD prices are lowest is where the most new talent is developed.

More than 50 per cent of CDs are 'mid-price' or 'budget'.

Fifty per cent of titles may be, but only when they have been on sale at full price for as long as possible, so they represent considerably less than 50 per cent of sales. We are protesting at 'full-price' discs that cost pounds 12- pounds 15.

CD sales are going up, so the public must be happy.

Sales are going up because the industry has done all it can to kill off the LP. The public has been coerced. Many classical and jazz titles are now released only on CD.

'Price only becomes a factor for a certain type of consumer at the budget end of the market' - Rupert Perry.

So the only person bothered about CD prices is the one who isn't being overcharged?

The record business is not making excessive profits. If CD prices were lower, companies would fail.

It could be just as profitable if CDs cost less. Sales would rise, enabling fixed production costs to be spread more thinly.

It's the shops' fault.

When our campaign began, in January 1992, the chainstores were certainly part of the problem. But they soon began to compete on price. The record companies made no such adjustment. Now W H Smith, Britain's biggest record retailer, proposes a pounds 2 cut - the record companies are resisting.

'We have no involvement in setting retail prices' - Mr Perry.

The record companies set dealer prices. If a disc's dealer price is pounds 8.19, shops can scarcely sell it on for a tenner. In the past year record companies have put dealer prices up.

The suggestion that the big record companies operate a cartel is outrageous.

We have not suggested this, but the big record companies charge similar prices for CDs. Unlike the shops, they do not compete on price. So the situation is just as it would be if there were a cartel. Hence the renewed interest of the Office of Fair Trading, which feels that the business may be a case of 'complex monopoly'.