By Jo Best, 4 February 2004 17:00
NEWS The wrangling between CD-Wow and the British Phonographic Industry (BPI) has taken a new turn, with the industry body taking the CD and games seller to court over claims it misled customers over pricing.
The two have recently been to court over how CD-Wow had sourced its CDs choosing to buy from traditionally cheaper areas like Asia rather than Europe which ended in the music seller being forced to source its CDs from within Europe. The net result was that CD-Wow initially put up its prices which is where the second spat begins.
The BPI claims that CD-Wow sent emails to its customers saying that the price hike had been imposed on it, when the matter of pricing was purely down to the online seller itself. The judge agreed and CD-Wow is now subject to a temporary injunction that means it will no longer be allowed to suggest that the price rise came as a result of a surcharge from the BPI.
A BPI spokesman told silicon.com that the association had received negative feedback due to the seller's comments on its pricing. "You're likely to get complaints from consumers if they think we're to blame for any price rise," he said. "Naturally we were disappointed that CD-Wow sought to mislead its customers in this way."
He said he hoped the injunction would change people's outlook. "Consumers should be aware that cases like these are not about pricing; retailers are free to set whatever price they like. We just want them to source legally. Amazon and the supermarkets have proven that you can sell CDs for under £10 and still make a profit," he said.
BPI-inspired or not, the CD-Wow prices have dropped back to their original £8.99 level, as the online music shop appears to have embarked on some unique cost-cutting measures.
"We've been working our little cotton socks off to source our chart albums within the EU at the lowest possible price and cutting our margins even more. There have been a few cutbacks in the office, I'm working out of the YMCA and using an etch-a-sketch as my PC was sold," the company said in an email newsletter.
One music industry insider said that the case probably stemmed from consumers' misperceptions of record companies. "The recording industry has been investigated numerous times over CD pricing in recent years. That could be down to their own PR... it seems that even consumers' groups are completely unaware of the millions of pounds the record industry invests in producing artists. The manufacturing costs are only a small part of the cost of a CD, yet many people still think £10 for a CD is too much."
CD-Wow's co-founder, Philip Robinson, declined to comment.
The case will be back in court on 1 March.
Comments
There are 29 comments. Join the discussion
1. Colin Walls
I wonder about CD prices. When I was a student, 20-odd years ago, a pint of beer cost 20p and an LP cost £2. On that basis, as a pint now costs £2, an LP should cost £20. But instead, we whine about a CD [which is better than an LP in every possible way] costing half this.
2. anonymous
I don't know about you, but I am getting sick of the entertainment industry whinging about the costs of producing artists ... Where are the numbers? Who, precisely, is losing how much, when CD WOW sell an album for £8.99, and who (precisely) is making the profift from the same item being sold in the UK High St for £14.99. I think that until this becomes clear, the BPI and it's members deserve full investigation from all consumer groups .....
3. Scott Wakefield
As a customer since the company first started up, I am 100% behind CD-WOW. I find the BPI's argument just doesn't stack up. Yes, they invest money into producing new artists and yes, the cost of a CD doesn't just represent the manufacturing costs alone, but this still doesn't explain why CD-WOW can source discs at a significantly lower price in other markets. In fact, the BPI's stance that manufacturing costs are only a small part of the overall cost does undermine the one possible argument it could make - that it's cheaper to produce CDs in the Far East and, hence, they can be sold for less! Call me a cynic, but in my view the higher cost of CDs in Europe is entirely because the record companies think the market can stand it and they can get away with it. If the record industry took the additional costs associated with A&R, etc. and applied them evenly in all territories, the problem would go away as the small differential in local manufacturing costs would make very little difference to the overall cost price.
And for the BPI - as the mouthpiece of the record inductry - to get the hump because CD-WOW implied the price rise was down to them, when patently it was, really does take the biscuit!
4. anonymous
Seems to me that there's some pretty muddled thinking here: fine, record companies have to invest in recording artists, but do they do this ONLY at the expense of the European customer? If they need money for investment surely it should be raised on all of their CD sales and so the cost of a CD should be the same everywhere. I think that this is symptomatic of a much wider problem, it's not just CDs that are cheaper in the Far East, it's practically everything from hotel rooms to semiconductor components: why is manufacturing going off-shore? Not just because of cheap labour! For example, the labour in the cost of a mobile phone is around 5% of the unit cost which is lost in the cost of transport. So it's something else! If you look at this closely you find that the component costs are much cheaper in the Far East, but these components come from the same place as the ones used to build the phone (or whatever) in Europe - so why is this? My conjecture is that it is the same reason that CDs (cameras, trainers etc etc) cost less in the Far East and that is because the big multinationals have used their power to rip off the European consumer. So I say good luck to CD-Wow, PLAY.com and anyone else who attempts to break the stranglehold that the record companies have on the European market. In the end they are fighting for our jobs, certainly those of people who work in the declining manufacturing industry!!
Peter...
ps I also think that the injunction is totally unfounded: of course, by forcing CD-Wow to source in Europe, the BPI forced them to increase prices!!
5. anonymous
So we don't know about the "millions of pounds the record industry invests in producing artists".
Well sorry, but they should go and look at the dross that they come up with in the way of manufactured bands who can only put out covers (and poor imitations at that) and mime (most of them admit to this on TV).
Then review their investment policy and put some of the millions back into keeping CD prices lower. Their A&R people must be laughing all the way to the bank as must the various managers of so called "artists" fleecing them.
Good luck CD-WOW!!
6. Dan Whitelock
After the results from the previous out of court settlement and the news reportage regarding the case, I decided to look more into it as I was not happy with the result, being a regular CD-WOW! customer, fed up with paying ridiculous prices for music in high street stores.
I complained to the BPI with information sourced from the Consumer Association website(http://www.which.net/media/pr/jan04/general/bpi.html) in particular, quotes from the Consumers' Association's Principal Policy Adviser, Phil Evans who stated that he condemned the action by the BPI.
This is what my complaint was based upon and NOT information from CD-WOW. I complained to the BPI via email, which I also copied to the the Consumers Association, BBC Watchdog and CD-WOW! Needless to say the only people who replied were CD-WOW!
What the BPI are doing now is pathetic and screams out that they are sore losers and resent the fact CD WOW! have reorganised and still offer CD's at good prices.
Give it a rest BPI.
7. David Caddick
The BPI are to blame anyway!
This is supposed to be a freemarket society, and if CDs are cheaper in the Far East why can't they be sold in the UK.
The court action was stupid!
8. anonymous
Strikes me that if the BPI hadn't got involved, CD Wow would not have needed to put its prices up (even if it was only temporary).
The rest is just semantics.
9. anonymous
Companies like CD-Wow and Amazon should seek a counter-injunction for BPI for negatively affecting their sales suggesting that cheap imports are suspicious or inferior.
Consumers are getting bored of the BPI moaning that consumers aren't being charged more money for the same product.
As for consumer groups not understanding that record companies invest millions in production of artists! As a consumer I understand that a record company will only invest in production against higher expected revenues and profits. If the revenues fall so would future production investment.
And, the cost of production (i.e.studio equipment) has fallen significanlty in recent times. And it's no longer surprising to hear about albums being recorded in bedrooms, artists owning their own studios and small in-house studios being used at reduced fees.
10. Gary Clinton
I kept thinking "What has the price of CD's got to do with pornography?" and then I realised it said phonography!
11. Zakala
Perhaps the industry should stop spending millions to "produce" artists and get behind the hundreds of artists who manage to record their music and sell CDs through small independant music labels.
Distribution not prostitution!
12. Zakala
Perhaps the industry should stop spending millions to "produce" artists and get behind the hundreds of artists who manage to record their music and sell CDs through small independant music labels.
Distribution not prostitution!
13. anonymous
Rool on the P to P reveloution. When will this industry stop suing customers and Channel suppliers? All the execs have grown too used to profits rolling in due to the lack of compitition.
Global companies like moving their suppliers offshore, but seriously object if customers try and do the same thing.
14. ben spencer
The BPI's position is ridiulous. They may manage to kill off CD-Wow, but more web sites will spring up, and customers are increasingly savvy about where to get hold of cheap CD's. It is also counter-productive as more people will source pirated music from dodgy market stalls, further eroding their profits.
Besides - I really don't care if Dido makes a few quid less from her inane tuneless warbling...
15. anonymous
Any claim that pricing of CD's is due to marketing and investment is flawed whilst cassettes (I dying breed I know) are still cheaper to buy than a CD. CD's have always been more expensive and there simply is no justification for this.
16. anonymous
So jobs can be sourced offshore, but not music CDs? We can outsource IT and helpdesks to other countries, but when we apply the same principles to CDs this gets blocked. One of my previous employers can close down an entire manufacturing plant and move it to another country without a problem, but a retailer supplying direct to the public can't.
Does this equate to being allowed to send our jobs abroad and reduce income, but not do anything to reduce the cost of living?
Finally CD-Wow state the facts - they have been forced to purchase from European suppliers who are more expensive than their previous suppliers, but are not allowed to explain that these increased costs are why they have had to put their prices up. All credit to them having managed to reduce their prices, but I suspect that this is at the expence of their profit margins - hence they may need to cut staff or worse.
It looks to me as though the courts have managed to move the profits from the retailer to the record company (not the artist as I very much doubt there is a difference to them wherever the CD is sold). Then they have gagged the retailer from pointing this fact out.
It all sounds very dodgy to me!
17. Wayne Moore
"The manufacturing costs are only a small part of the cost of a CD, yet many people still think £10 for a CD is too much."
Of course £10 for a CD is too much. When popukar recording artists sign £80,000,000 contracts, of course the money has to come from consumers. The BPI should wake up to this.
Not to mention the fact that if CD's are cheaper in Asia, does that mean it costs less to 'produce artists' for that region?
18. anonymous
Racial Discrimination??? Is it my imagination or am I being stopped from buying legal cds from Asia because I am European?? It seems the record labels are happy to supply CDs to the asian market at this price but you can only but them if you are Asian?!?!? Is this right?
19. anonymous
Re Colin Walls comment above:
sorry Colin, a lot more recently than when I was a student, a desktop computer with about 1MIPS performance cost £20k. On that basis (which is a much more real comparison) an CD should cost pence...
Peter...
20. Paul James
I dont mind paying for CD's, cars or whatever, it's the "Rip off UK" bit thats wrong.
Why are we always charged more than other countries?
21. Silwni PM
Why on earth shouldn't CD Wow source from Asia ? These are poor countries which need the income. Besides, I understood perfectly why they had to put up their prices if they were more expensive to buy in the EU. I think recording companies waste far too much on their singers. Most of them are rubbish anyway and if they spent more time practiceing their singing instead of wearing fancy clothes and making show off videos more money could be saved on the cost of CDs
22. Dave Barnett
People are not upset about payin ten pounds for a CD its when they are £15 or £17 in HMV thats when people start to get irritated.
23. Alfred Reading
CD are not the only rip-off'
I did a comparison of digital cameras taking the cheapest prices before tax in USA and UK for online purchases. This showed that on average identical cameras in USA were 40% cheaper than in UK. No explanation can cover up what is obviously exploitation.
24. Kevan Chippindall-Higgin
I agree with everybody's comments save the issue of the £2 pint. This has been caused by the malevolent attention of numerous chancellors. Had they left it alone, £1 a pint sounds about right, so in fact the numbers do make sense.
On a more serious note, America, the land of the free and the EU, champions of the Single Market, still do things to suit themselves. Microsoft products vary wildly in price. Take Terminal Services. A standard 20 pack costs £1,627.88 + VAT. However, for the exact same product, schools pay just £54.96!!! I dare say that in America, that schools price would be in dollars.
Let us not forget that it was the EU which stopped Tesco (I think) from retailing goods bought from America. What is more, these goods were not bought from the manufacturer at a Tesco bying muscle price but form a wholesaler, and they were STILL much cheaper.
This whole area of licensing is a complete racket. It is in fact legal extortion and the only way that this is going to be dealt with is by rebellion. For as long as we are robbed blind by these people, then pirates, parallel importers, peer to peer file sharers and the like should be supported.
25. Geoff Martyn
The BPI are to blame for the price hike - it's as plain and simple as that. So CDWOW can source CDs cheaper in the far east. So what? That's called competition. It's what makes the world go round. If the prices are lower in the far east, then quit moaning and put your own prices down. Put the wind up the competition!! To change the rules and go crying to your lawyer is pathetic.
26. anonymous
its the multi-million recording contracts that are keeping the "manufacturing" prices so high, surely.
27. anonymous
its the multi-million recording contracts that are keeping the "manufacturing" prices so high, surely.
28. phil evans
Dear Dan,
I must apologise if Consumers' Association did not reply to your email - all I can say is that it did not reach me. If it had I would have replied wishing you well....it might also be worth noting that www.playusa.com will now no longer supply UK consumers with US sourced CDs. Whatever happened to the global market? or do we only get them when they suit particular industries?
regards,
phil evans
principal policy advisers
consumers' association
29. Rich Werner
The BPI are proving that they are money grabbing. They complain if we download the music and then ban CD-WOW from selling them cheaper than the highstreet. I for one will consider a move back to P2P. It's cheaper, I can try before I buy (metephorically speaking), and most importantly it irritates the BPI and the RIAA