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Inefficiences are inherent to entertainment industries like publishing. Business has to change, but it takes time. Consumer pressure is a start, but is it consumer pressure when the consumer is taken out of the decision chain? Writing about Wal-Mart and censorship is somewhat of a hobby for us (yes, we could take up knitting, but the cats…). We have argued that Wal-Mart’s business practices are a form of backdoor censorship. They’re the only game in town for many consumers, and they have sufficient purchasing power to dictate content and packaging. Wal-Mart imposes its vision of morality (no sex, but, boy, you can buy a gun) on communities.

To us, that is censorship. Why not let the consumer make choices? If they find book covers offensive or lyrics objectionable, they will let the world know. The choice shouldn’t be made for them, yet Wal-Mart feels the need to act as community parent. The implication from
Wal-Mart is that sex, violence, and drug references have no artistic merit. We would argue otherwise — did we mention the message sent by having full displays of guns? The mother, in her wild youth, was an NRA member; what she took away from her experience was the strong belief that guns are not toys. We were never allowed to have plastic guns, of any sort, in the household. If you want to protect your community, how about starting with removing all toy weapons from the shelves? Teach children the seriousness of these objects. It’s not always water streaming out when you pull the trigger.

Back when Tipper Gore started the advisory sticker movement (yes, a bit fast and loose with the history here — there are plenty of resources to fill in the blanks), our first response was, “Why didn’t she know what her kids were listening to?” Even the most casual follower of Prince’s career had to be aware that he wasn’t PG. Entertainment industries can only do so much to inform consumers; there are plenty of resources to fill in the gaps. We live in a society where it is almost impossible to gauge what might be considered offensive. Yet, the entertainment companies (we are including publishing, motion picture, and music in our defintion) bear the brunt:

Wal-Mart’s wariness about music ended once the music industry adopted a voluntary advisory sticker on albums deemed to contain adult language or sexual content. Today, before any new album is released, someone at each label is charged with asking, “Do we have any Wal-Mart issues?” If an advisory sticker is placed on an album, the label will put out a clean version about ninety percent of the time. Since the edited version of a hit record usually averages only about ten percent of a record’s total sales, they do it mostly to keep Wal-Mart happy.

But, wait, you say: don’t forget, consumers have choices; they can shop anywhere. Yes, we agree, they do, they can. Except when they don’t or can’t. Small retailers cannot compete with Wal-Mart on pricing. Wal-Mart, as discussed in the Rolling Stone article linked below uses its power to dictate pricing. It sets prices and expects manufacturers to meet them. In the case of music, it has chosen to make CDs loss leaders. Except, of course, it’s pricing choice doesn’t factor label costs into the mix. The chart below outlines costs associated with music at a $15.99 list price. Even if Wal-Mart chooses to eat its profit, it’s still requiring labels to cut into their profits (or, perhaps its asking the artists to take lesser royalties?).

Major labels insist that the low prices mass retailers such as Wal-Mart and Best Buy demand are impossible for them to achieve. But Best Buy senior vice president Gary Arnold counters, “The record industry needs to refine their business models, because the consumer is the ultimate arbitrator. And the consumer feels music isn’t properly priced.” Labels point to roster cuts and layoffs as evidence that they can’t sell CDs cheaper.

This breakdown of the cost of a typical major-label release by the independent market-research firm Almighty Institute of Music Retail shows where the money goes for a new album with a list price of $15.99.

$0.17 Musicians’ unions
$0.80 Packaging/manufacturing
$0.82 Publishing royalties
$0.80 Retail profit
$0.90 Distribution
$1.60 Artists’ royalties
$1.70 Label profit
$2.40 Marketing/promotion
$2.91 Label overhead
$3.89 Retail overhead

That’s approximately $4.69 going to the retailer; a similar sum goes to the label. The artist gets $1.60, plus a small amount going into union funds (we see this like we see Social Security — don’t count on it being there when you need it). Then there are the fun costs: packaging and manufacturing, distribution, and marketing and promotion ($4.10). Labels would argue these are negotiated and discounted in a highly competitive manner. Possibly. It’s hard to see what’s behind these numbers, but our experience is that the distribution of physical media is resource-intensive, what with all those trucks and rising fuel costs and all. We won’t even mention the wasteful advertising while better forms of marketing are litigated out of existence.

We believe there is waste and inefficiency built into the entertainment distribution process, and consumers, rightly, should demand lower prices. The entertainment businesses, however, have to make money. We’ve said they are not charities, and, because art is so subjective, not every investment in an artist will pay off. There needs to be some room to play in the mix. Publishing, music, and motion picture companies are struggling to redefine their business processes. It’s hard changing a century or more of practices.

But when Wal-Mart arbitrarily sets pricing and demands that manufacturers meet their target, that affects the entire American business model. As retailers, producers, and even artists fall victim to one company’s desire to increase its profits, unchecked, it’s clear there’s something wrong. It seems to us that determining what the market will bear is not being decided at the right level. For writers and musicians, this has a chilling effect: you, the one on the fringe, the one who doesn’t quite fit into the mainstream…you, well, we can’t take a chance on your work. It won’t sell in Wal-Mart, and we don’t have the extra cash to support an experiment. Sorry.

• Wal-Mart Wants $10 CDs: Biggest U.S. record retailer battles record labels over prices
• Yes, Indeed, That’s Censorship Making the Scene