Found this interesting article from Rolling Stones. Wal-mart complaining about the cost of CDs, as well as discussing loss-leading.
Wal-Mart Wants $10 CDs : Rolling Stone
There is an interesting table at the end of it:
For a CD that costs $15.99
Quote:
$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
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The artists royalties is pretty high here and artists won't get any until their advance is paid back, but it easily shows why Amazon etc are cheaper than stores: $4.69 off straight away, around 30% of the retail cost. Then because the retail cost has dropped the royalties which are percentage based drop too, so the price is a smidgen lower than that.