Originally Posted by skofarrell
Since I've never bought a cd single in my life, I was more interested in comparing album pricing.
At the magical $9.99 price, you can buy the album on itunes/napster/y! music or you get a physical CD (sometimes the CD is on sale, but let's assume it isn't). I'll leave the various benefits of the CD over the drm wrappered electonic media aside for the time being, but would like to focus on the costs involved.
It would seem to me that the electonic media would have a much lower cost for the label to produce. I imagine that the costs to produce the cd itself run in the $1-2 range. Since the sale price is the same, does the artist get more money for electronic sales, or does the record label keep the extra as profit?
Why aren't the savings passed on to the consumer?
I think of iTunes and the like as singles medium (the growth has certainly been through singles sales, but not album sales).
However, a new CD in a store would cost $13-20, so the download has quite a discount.
Simple economics state that they will charge whatever the market will bear (physical or virtual). This has no relation with the cost of production -- "passing the savings along" is a myth for products of all kind (see every other forum on Flyertalk as an example -- airline seats, hotel rooms, car rentals, etc.).