The most expensive part of a CD is the jewel case. In 1995, material costs were 30 cents for the jewel case and 10 to 15 cents for the CD. Wholesale cost of CDs was $0.75 to $1.15, which retailed for $16.98. On average, the store received 35 percent of the retail price, the record company 27 percent, the artist 16 percent, the manufacturer 13 percent, and the distributor 9 percent. When 8-track tapes, cassette tapes, and CDs were introduced, each was marketed at a higher price than the format they succeeded, even though the cost to produce the media was reduced. This was done because the apparent value increased. This continued from vinyl to CDs but was broken when Apple marketed MP3s for $0.99, and albums for $9.99. The incremental cost, though, to produce an MP3 is very small.
Why did the cost of audio music increase when the production costs decreased?
value increased