Corruption

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Daz
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Corruption

Postby Daz » Wed Oct 09, 2002 6:45 am

No, not anyone we know! I am here cuz Kytlan mentioned something that I decided to follow up on, and share here for those who have not perhaps kept up-to-date on the story.

From Forbes:

Betsy Schiffman, 10.01.02, 11:33 AM ET

NEW YORK - Theoretically, a price-fixing scheme is a surefire way to maintain revenue--even if it is an efficient way to land in jail. But for such a blazingly simple plan, those clever music executives proved that if anyone can screw it up, they can.




After a two-year battle waged against the major record companies and music retailers--Bertelsmann, EMI (otc: EMIPY - news - people ), AOL Time Warner's (nyse: AOL - news - people ) Warner-Elektra-Atlantic, Sony Music Entertainment (nyse: SNE - news - people ), Vivendi Universal's (nyse: V - news - people ) Universal Music, Trans World Entertainment (nasdaq: TWMC - news - people ), Tower Records and Musicland Stores--New York state and Florida attorneys general announced a $143.1 million settlement.

The companies did not admit guilt in the alleged price-fixing scheme, but they will pay $67.4 million in cash to consumers who got ripped off buying overpriced CDs between 1995 and 2000. They will also distribute $75.5 million worth of CDs to nonprofit organizations and schools. (The teachers undoubtedly will be grateful for free copies of Eminem's latest album.)

The settlement gives the distinct impression that the record companies' priority was to make the case go away quietly. Although music executives said the legal costs of the case didn't make it worth fighting for, it's a conspicuous cop-out considering that legal fees never stopped them from going to absurd lengths to win their battles against Napster or MP3.com.

While illegal, the benefits of price-fixing are seemingly obvious. If a few leading companies agree to set prices at a certain range, nobody loses in the event of a price war--well, besides the customers, and they don't really count. But if the big five were in cahoots on a price-fixing scheme, how did they manage to lose money on it?

It's been a rough few years in the music industry. CD shipments dropped 7% in the first six months of 2002, and seizures of counterfeit CDs were up by 69.9%. That follows a 5.3% decline in CD shipments in 2001, according to PricewaterhouseCoopers. Those declines are showing on the labels' bottom lines. In March, EMI said it would cut 20% of its employees and eliminated 400 acts from its roster. In August, Universal Music Group said its operating income in the first six months of the year had dropped 28% compared with the same period last year.

Music executives have done nothing but bellyache about sagging sales and profits, and they have blamed everyone but themselves for it. At first they blamed the file-swapping services for cannibalizing sales, then they blamed the artists for not producing enough hits. In truth, it could have been the industry's alleged price-fixing arrangement that crippled music sales.

Price-fixing is only beneficial at a range where it can support sales. It would make no sense, for example, for McDonald's (nyse: MCD) and Burger King to agree to set the price of a hamburger at $1,000. It would be even more ridiculous for McDonald's and Burger King to try to sell $1,000 hamburgers at the same time that some kid is hanging outside the chains giving hamburgers away for free. Even if the chains could theoretically make $999 on each sale, the chances of a sale would be astronomical.

This is essentially what happened in the music business. CD prices may have been set too high, but they were also set too high at a time when record companies were getting eaten alive by the Napsters of the world. It could be argued that if CD prices were cut in half, consumers might be willing to buy more albums by unknown artists, since the purchase wouldn't be such a large investment. And the more unknown artists sell records, the less dependent labels would be on hits from pop idols such as Britney Spears.

But more important, would Napster even have existed if there hadn't been a demand for it? The record industry essentially stoked the fires of the pirate music market by setting prices prohibitively high. Necessity is, after all, the mother of invention.


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Daz
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Postby Daz » Wed Oct 09, 2002 6:47 am

Anyone ever wonder if the book publishers of the world are up to something? I mean, music's downfall was its digital successor, but, well - for E-books someone has to go through quite a bit more trouble. If there was a vast trade for E-books to replace literature from the publishers . . . would we learn any dirty secrets?

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Ragorn
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Postby Ragorn » Wed Oct 09, 2002 7:19 pm

The price of CDs has nothing to do with piracy. Every single commodity which can be digitally reproduced in our society is being traded for free on the internet... books, movies, music, software, porn, school essays, you name it. I believe pretty firmly that the piracy rate among music would be approximately the same as it is now, even if CDs cost $5 a piece. People might buy more CDs, sure, but very few people actively engage in piracy out of spite for the record labels. People download songs they want because it's convenient and free. If a CD were $5, more people might go out and buy the album anyway, but I seriously doubt you'd see much decline in KaZaA traffic.

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Gort
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Postby Gort » Wed Oct 09, 2002 8:53 pm

The record industry tried to become the music equivalent of OPEC, but the world had something more efficient than solar power to give it a run. I love it! Now all we have to do is break our addiction to fossil fuels, and we can all breathe easier.


Hrmm, how to get around the need for gas and oil... hrmm....

Toplack

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Postby Guest » Thu Oct 10, 2002 11:37 am

I've said it before, and I'll say it again:

Analyze the music industry's sales since the announcement that Napster would be shut down, and you'll find that they killed the proverbial goose that laid the golden egg.

Piss on your customers, and you will find quite a few of them leave.

(That's not to mention the fact that trying to shut down file sharing is like striking the head of a hydra).
Musi
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Postby Musi » Thu Oct 10, 2002 12:34 pm

If I REALLY like a band and a few songs on their album, I'll save up and buy it (just like I'm waiting VERY impatiently for U2's 1990-2000 double album to come out!!).

About the only time I ask my husband to download stuff from Kazaa, is if it's super rare. Like Monty Python songs that I don't have...yet.

I have over 12 cds burned of mp3s that I made of the cds I own. I do it cause I hate scratching up my cds Image especially since they seem to ream us on a $0.02 piece of plastic by charging $18 a piece Image

How are they going to pay back the ppl for overcharging? Did they keep track of EVERYONE that bought an overpriced cd? One of my friends was from Bangladesh, and he said that people are pushing carts FULL of brand new cds that were released in the US and charging $1 AT THE MOST!! What's that tell you Image


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Musi "Desperate to get ress" Ailis
Corth
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Postby Corth » Thu Oct 10, 2002 1:16 pm

It tells me that there is quite a good market for counterfeit CD's in Bengladesh?

Image

Corth

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Mikayla
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Postby Mikayla » Fri Oct 11, 2002 3:54 pm

what big business forgets is that if you shit on people they will come back, but the music industry is learning that not happening, but see when you get your degree in bussiness all they can think of is in money, they lose all common sense, but that is not my fault, my fault is i hope they go out of business for stupidity Image thank you would you like fries with your unemployment?



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Krogenar
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Postby Krogenar » Fri Oct 11, 2002 5:14 pm

Well, if the music industry really is 'sticking it to us', all we have to do is stop buying the music. That'll teach them. Collusion is when the record companies tacitly agree to not engage in a price war. It does make some sense to do this, but that won't allow these companies to all decide to charge $200 for a cd - it just wouldn't fly. If the record companies set their prices too high (whether collusion is present or not) they will see sales decrease, as only the people willing to buy music at that price will pay.

As for paying $18 for a disc that cost 2 cents to make - that doesn't follow really. Its the labor that went into producing the music that we're really paying for. It's like a wedding dress: made of ultimately humble material, but it has a lot of value added to it in the form of labor.

Example: Puff Daddy decides he wants a hooker. So he calls his agent and whines. A record exec, anxious to keep Mr. Poofy happy, pulls some strings and gets him his hooker. Cost to the music company: $700. They then pass those costs on to US, the consumers. Image It's just not fair.

I blame the evil recording ARTISTS, for demanding too much money! *grin* <- sarcasm.


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Postby Croban/Owom » Fri Oct 11, 2002 11:53 pm

http://www.world-theatre.com

they are one of my customers. fear them.

i am actually hoping they go out of business.

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gordex
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Postby gordex » Sun Oct 13, 2002 10:17 am

At what point do you think the 1 percenter's, or monopolists are going to stop fucking you? If your answer is somethnig other than "never", then you are sadly mistaken. Wake up and smell the shit that is being shoveled our direction.

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Kasula
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Postby Kasula » Sun Oct 13, 2002 3:42 pm

DA man aka BIG corportions are like dinosaurs, they are big and powerful and can eat alot but they are slow and stupid. When corportions get too big, they dont research new ideas or develop new items they just try to protect what they got and steal or eat smaller companies. The music industry were too slow in jumping on the music swapping train, and now they are crying about how its taking all their profits. Trying to protect intellectual properties is like trying to hold back the flood by putting a finger in the dike(no pun intended hehe), it just wont happen. Corportions in their lust for money, has lost sight of what is most important... the respect of their customers. Down with Da Man! Down with Corportions! Proletarians of the world- UNITE! Image
Keran
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Postby Keran » Sun Oct 13, 2002 9:46 pm

I dont buy CDs anymore. Well I do buy the blank ones. *whistle*

Power to the people! Let the bards sing!

Toarn

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