CDWOW to be fined (maybe)

[99Flake]

Never used CDWOW so I can't comment on the prices (I suppose I could go and look but I am too lazy). However I feel that £9.99 for a new CD from my local independant is a far better way to buy the CD than over the net. I get it that moment, can take it back if I don't like it and I can chat to the owner about what to buy if I go in with no idea. Not only that but it keeps trade in the country and the little businesses running.

I personally have no problem with them being fined. They are breaking the law and that is that. As pointed out other retailers offer good prices without importing why can't they? All supermarkets have cheap CD's (although only a few pence than my aforemention independant).

[redsky009]

some of us aren't so lucky and dont have decent local independants

[99Flake]

some of us aren't so lucky and dont have decent local independants

Yeah I suppose, I never thought of that. We have three in our area so that is good. Never really occurs to me that other places don't have independants!

[badass]

However much they are giving good value to the consumers if they've been warned and agreed not to breach the rules then sorry but they deserve to be fined.

Whether i agree with the law is here nor their, they are a business and as such are liable to follow it.

TiG

Find me a business that hasn't broken the law ever and I'll call you a liar
All businesses break laws, some more than others. Often they dont even know they are breaking the law.

[dave87]

Badass has a point, Microsoft has been flagrantly abusing its position as a monopoly for years, and only recently has the EU taken action over it...

I highly doubt that the action raised by the Music Industry will be taken further, as it simply shows that they should be selling their goods in this country for cheaper.

[TiG]

Find me a business that hasn't broken the law ever and I'll call you a liar
All businesses break laws, some more than others. Often they dont even know they are breaking the law.

How many companies are stupid enough to continue to rebreak the same law they've been warned about several times.(microsoft got their Euro fines, cd wow got theirs...)

You repeat your mistake then you should expect whats coming to you. This is breaking the law by intent.

This isn't breaking law by neglience, accidentally breaking the DPA regs or anything else, its breaking copyright law which is something you just aren't going to get away with.

TiG

[Saracen]

The law needs changing. End of. Its obscene that you can purchase a load of genuine stuff in another country and pay all of your import taxes on it and then be breaking the law by selling it in another.

Not necessarily.

Copyright exists in creative works, and the owner of that copyright gets to determine what rights they sell, to whom and for how much.

Suppose I write an article for a magazine, and sell it for £100, with the rights being FBSR. That means the publisher has bought the rights to publish it first, in the UK. It has NOT bought the rights to publish anywhere else, and that includes both multinational media like the internet, and in other geographically specific locations, nor has it bought the right to reprint it or allow others to do so.

If they'd wanted that right, I would have charged a different rate.

Now suppose I want to publish in, say, the US. There's a much bigger readership, so my rate reflects that. Then suppose I want to publish in Ruanda. The readership is much smaller, and moreover, the economic situation is very different. I'd charge a much more modest rate, or it wouldn't sell at all.

But if I sell it for that modest rate in Ruanda, it doesn't imply any publisher anywhere else in the world can buy a copy then publish in every country they feel like. I set my rates for a country according to market copnditions in that country, and it's MY right to determine if I publish elsewhere, and for how much.

Then, if you consider a product, like a CD, that has a physical aspect to it, you have other costs that might include setting up local offices, national or regional distribution and marketing operations, and so on.

Many organisations structure their marketing effort, and pricing, according to local conditions. If you assume your prime market is the US and/or EU, and price accordingly, your sales in areas with far lower average salary levels are likely to be zero, because nobody will be able to afford the product. If you price your product in the US and/or EU at the pricing levels in those much smaller niche markets, you'll lose a fortune and may well not even be able to run the marketing operation from the revenue generated. The product may not be worth producing in the first place.

One reason why prices are different in different parts of the world is simply that economic conditions are also different. It may not be the only reason, but it's certainly one reason.

Average prices for everything, from a loaf of bread to a car or house, vary dramatically between different parts of the world. That makes it impossible to come up with a single price that fits everywhere. So companies segment their operations.

And when a company buys product in one market and sells it in another, it undermines that entire structure.

Also, suppose that article I mentioned wasn't an article but a CD full of songs. I've sold it to EMI for sale in the UK, and to Sony for sale in the US, and each of those companies have bought on the understanding that they have SOLE rights in their respective countries. Now, someone like CD-Wow comes along and buys in one country and sells in another, undermining MY ability, as creator and rights owner to be able to do so.


Oh, and this business of segmentation is a very well established principle, and it's far from only being about music. Supermarkets have run foul of this, which is why they stopped buying jeans in the far East and importing them. The parallel import situation is legally a complex one, with the European Court of Justice apparently settling it fairly clearly in the Silhouette and (more recent) Sebago cases, but the UK courts muddying the waters considerably in the Cool Water case.

Anyway, there's two things at stake in the CD-Wow situation. The first is whether they've broken copyright laws, and it certainly seems that they have. The second is that they've apparently broken a High Couirt order, and in many ways that's far more serious. If it's deemed that they did that deliberately .... they're in potentially very deep poop.

[badass]

<snip>

Good argument but doesn't wash with me.
If you write your article, demand a cost per unit sold.
Also, the local cost arguments dont mean anything for importing/exporting of things like bananas so why anything else you can physically buy?

[KBeee]

Local taxes (i.e. VAT @ 17.5% as opposed to Sales Tax @ 5%) can make a difference, but as anyone knows, the cost + reasonable profit margin means nothing. The price of anything, is what people are prepared to pay for it. If people in the UK are prepared to pay &#163;200 for Vista, then that's what the people in the UK are charged.
A CD pressed in a plant outside Dusseldorf, shipped to Hong Kong, and re-sold and shipped to the UK at &#163;10, is obviously a lot worse than a CD pressed in a plant outside Dusseldorf, shipped to the UK, and sold for &#163;15. No wonder the UK is called "Treasure Island" by a lot of international companies.
Free Trade is a concept eagerly approved by multinationals, so long as it's only to their advantage. As soon as Free Trade starts hitting their profit margins, see how fast they run for Protectionism or the Lawcourts.
Of course, there's nothing wrong with this, as any Company wants to maximise profits, but when the people who are Elected to protect us from the modern Robber Barons side with the Barons, then something is wrong.

[Saracen]

Good argument but doesn't wash with me.
If you write your article, demand a cost per unit sold.

Feel free to try that. I can tell you how many articles you'll sell. Zero. This is not based on idle speculation or guesswork, but nearly twenty years of writing professionally and dealing with international publishers. If you're writing a book, and especially if you're a brand name (Ludlam, Grisham, etc) you might be able to right your own terms like that, but otherwise, you stand no chance.

IP laws give me the right to sell my work how I want, and to give me some comeback when publishers take liberties. This HAS happened .... ask anyone working for Dennis publishing a few years ago about the Australian publication that suddenly started "reprinting" PC Pro articles.

Also, the local cost arguments dont mean anything for importing/exporting of things like bananas so why anything else you can physically buy?

I wasn't aware that IP rights existed in bananas?

Also, bananas are a commodity product and market forces determine prices. Creative works aren't commodity items, except in the sense that if you want to compete with me for the commission to write an article for a given publisher, you'll need to :-

• learn about the subject (if you don't already know it)
• learn how to write (and I don't mean grammar, spelling, etc but how to write for your target publication and target audience. For instance, an article written for the Mirror and one written for the Times, even on exactly the same subject, will be written very differently. You need to understand your customer and adapt accordingly.
• spend several years building a relationship with the editors and/or publishers at your chosen publications
• get there with the idea before I do

Regularly, I write more than one article on the same subject, for different publishers. This might be in different countries, but it also might be for different markets in the same country. For instance, it might be a review of Vista. How you write that for Personal Computer World and how you write it for, say, the Daily Telegraph, will be different.

There are, of course, commercial limits to this. No editor is going to want to see essentially the same article by the same person in his main competitor’s publication, but many don't care if an article on the same subject appears in a publication that isn't a competitor.

So that Vista review will be different, partly because of the commercial realities, and partly because of the target audience.

But here's the crunch. In order to write that article, I have to understand the product .... and I'm using Vista as a topical example, but it could be about a CD, or a holiday destination, or how to grow Orchids. The subject matter is irrelevant. The concept isn't.

So, using Vista as the example, I need to understand Vista. To write that article, probably 75-ish% of the effort is in understanding the subject matter. If it's a travel piece, it's in the time required to do the travelling. And so on.

So, 25% of the time is the writing, 75% of the time is the research and preparation. If I can write an article for three, or ten different publications, I can reuse that research time. If I write three articles based on one piece of research, the cost (in time or money) of that research is one third (per article) or what it would have been. If I can sell that travel article to a 'lifestyle' magazine, to a Sunday paper's glossy supplement, to a airline 'free' magazine and to a travel website, it may well mean that a given project becomes a commercial reality for me, whereas selling it to just one publisher means it isn't.

And THAT is why being able to control I rights is so important to me. It's more than important, it's fundamental and absolutely essential, because without it, a good part of what I do would simply not be economic and therefore wouldn't happen.


Lets extend that analogy a bit further, and refer back to what I said earlier about market segmentation. I notice Bob Crabtree is a Mod here now. I used to do some work for him, at Computer Video Magazine. Some of that was on the same subject as articles done elsewhere. CVM was a niche mag, targeting a much smaller readership than, say, the Telegraph. So .... if I picked a subject that was relevant to his readers, AND to the Telegraph, I could (for example) end up doing a 750 word article for CVM where the word rate was a third of what it was for the Telegraph. The Telegraph, therefore, provided the bread and butter justification for writing the article, and CVM paid for the jam.

But, had the only payment been at the rate that CVM paid, some articles would simply not have been worth writing, and CVM had neither the readership nor the budget to justify rates that would compete with the Telegraph.

And I'm sure Bob would be happy to confirm that if I'd (as you suggested) "demanded" a rate per copy sold, he'd have laughed .... and commissioned someone else, because I'm obviously an unrealistic idiot.


The same principles apply in many business sectors, though obviously they'll manifest in different ways. Consider the situation ion Germany a few years ago (not so much now, though). Just after reunification, you had a market where wage levels, standards of living and costs of living in the affluent West were vastly different from those of their neighbours, maybe a handful of miles down the road, in the East. Could you have sold a CD in East Germany for the same as you could in the West?

OR, how about the USA and India? Why do many companies move production, call centres etc to India? Because of a generally high standard of education (at least in and around the cities), a pretty good to very good standard of English and because labour costs are a small fraction of what they are here. Call centres may be a bad example, because that exercise has been far from a total success, but the point remains ... the cost of operating in India is far below that here. Market conditions are different, costs are different and so market forces and prices are different.

Anyone operating a business is likely to be doing so to make a profit. They have to operate within the bounds of legal frameworks, but in virtually any large business, management owe a legal duty to operate the business in the interests of the owners of that business. i.e. shareholders. They do NOT owe a duty to consumers to provide goods at the lowest price, but to shareholders to protect their interests.

If they can make a small profit by selling at a price in one market sector that suits that market sector, then it's better than not making it at all. But the FACT remains that in order to make that profit, they have to have to product to sell. They have taken the risks, provided the capital, produced the CDs, etc. Much of that cost will be fixed. Some will be variable (on levels of production) and some will be local and variable. If they can make a profit in a given geographical location that exceeds local costs of operating, then it's worth operating in that geographical location because any net revenue goes towards reducing the unit cost element of those fixed costs.

However, if some outsider then starts buying your product in that low-cost area and shipping it to a high-cost area, they DIRECTLY undercut your profitability in that high-cost area and that may well be where the core of your profits are based. So you can end up with the situation where the loss of sales (and hence profits) in a prime area far exceeds the profitability of operating in that low-cost area.

If you extend that to the logical conclusion, it's not worth operating in low-cost areas at all.

And why? Because some outside agency has decided to leech on your product. They've done none of the preparation or product development, taken none of the risk and put none of the funds back into future products. They're just trying to leech the cream off the top.


Go back to the microcosm of my article-writing. I do the research, spend the time and effort to do the 75% of the job that is the preparation. I then sell the article to CVM. If that meant I couldn't then approach the Telegraph, or PC Pro, or a glossy supplement, or the Boston Globe or Washington Post, it may well be that the article wouldn't be financially viable in the first place and so wouldn't get written.

IP rights (be it copyright, trademark protection, etc) aren't by any means perfect, and personally, I certainly don't fully agree with all the implications of current UK law (like it not being legal to copy a CD I've bought to my iPod (etc) or onto a car copy). But, nonetheless, IP protection is essential to allow much creative effort to occur at all, and if it didn't exist, we'd all be worse off because a lot of the creativity would not be economically viable .... or that CVM wouldn't have been financially viable because they couldn't afford to pay the rates writers would need ('cos even we have to eat and pay our bills) and CVM, a superb if niche mag, wouldn't have existed.

CD-Wow seems, allegedly, to have ignored the hell out of both the law and an agreement they explicitly entered into to stop breaking it. As such, they deserve whatever happens to them.

[Agent]

What happened to free trade?
Once the products have been sold, what business is it of the record company where it goes? They get paid - whats the issue?

Top way to fight piracy, as always.

[simonfitba]

Too many long, well thought out posts. Let me just say this... I like cheap cds, stops me from stealing music on the net.

[Saracen]

What happened to free trade?

What do you mean, what happened to it? There is not, and certainly in modern times, never has been free trade. It was an economic idea and, like many ideas, is far better in theory than in practice.

But we're part of the EU, and a MAJOR function of the EU is the protectionist element. What do you think import duties are all about? What do you think schemes of national subsidies like the Common Agricultural Policy are for?

Even in theory, free trade has a price. Part of that is that you put national domestic employment very definitely in second place. If you want truly free trade (and we don't) watch the unemployment figures sky-rocket. Ask farmers about free trade. Our population is relatively static and as a result, food demand in the UK is relatively static. In a true free trade environment, British farmers would have a hell of a job competing with countries where wage levels are a fraction of those here, and free trade requires those countries that can "efficiently" produce goods to do so. Do we want to drive all our farmers out of business? Do we want to be entirely reliant on importing ALL our food?

Or, perhaps, do we provide some protection for farmers, because it's in our national interests to keep basic food production in the country? If you do, there goes free trade.

What about energy production? Do we want to be totally reliant on Russian gas, etc, or does our national strategic interest suggest it'd be stupid to allow ourselves to be held at economic gunpoint like that?

Another part of the price is that you lock developing nations out of advanced industries, because they don't have the infrastructure to compete. In essence, you lock them into an agricultural existence. It's actually called the 'agricultural problem'.

But nor, for that matter, do we want absolute protectionism, because that has a price, too.

Free trade is an illusion. It's an economic theory, and like most theories, it contains lessons we can learn and gives an insight into how things work, but as soon as you start trying to use it literally to create policy, you find out that in order to make the model simple enough to actually use it, you simplify all the reality out of it.

Free trade? Don't make me laugh.

Once the products have been sold, what business is it of the record company where it goes? They get paid - whats the issue?

Top way to fight piracy, as always.

It's the record company's business because the goods were sold, in a market at a price, in a way that presupposes compliance of other companies with international law. For the reasons, see my post above.

Most companies supplying regionalised products do so with contracts that stipulate that their distribution chain respect agreed catchment areas, AND that they impose the same condition on their trade customers. I haven't seen record company contracts, but I have seen contracts for several other types of industry, and it's common for anyone buying such products as a trade to agree to that as part of their contract of supply. I'd be very surprised to find CD-Wow hadn't such a stipulation in their contracts.

It's exactly the same principle as used in many franchise businesses. When you buy the franchise, you buy the right to operate in a given area. You do NOT have the right to operate in another area because that right has been sold to someone else, and that sonmeone else has paid good money for that right. Now scale that up from a franchise operating in a local area to national level.


Agent, CD-Wow ignoring laws and agreements isn't free trade, it's business anarchy. It's saying that any company can ignore any law it likes, and you're happy with it providing you get your goods a pound or two cheaper, regardless of who gets cheated in the process. Well, if you advocate business anarchy and companies freely ignoring the hell out of laws they don't like, it won't stop there. Guess what the first laws they'll ignore will be? Anything to do with consumer protection, so you can kiss goodbye to the Sale of Goods Act, Unfair Contract Terms in Consumer Contracts Regulations, the Distance Selling Regs, and so on.

CD-Wow need to act legally, just like their competitors do. If that means you pay a pound or two more for a CD, so be it. But they decided to ignore the law, and then when caught and chastised, agree not to do it again and then ignore that, too, all in the name of making their own grubby profits at other's expense.

[Agent]

To confess, I only skimmed over the article. Having read it properly after your reply, I feel like a bit of a twonk as I totally got the wrong end of the stick didn’t I?

My bad!

[Saracen]

To confess, I only skimmed over the article. Having read it properly after your reply, I feel like a bit of a twonk as I totally got the wrong end of the stick didn’t I?

Damn. And blast.

And there was me digging out and dusting off my economics degree and looking forward to spouting forth on the many problems with Free Trade .... like the fact that the principle of totally unregulated free trade flies right in the face of the principles of Fair Trade, and I don't know about anybody else, but I rather like (and support) the Fair Trade movement.

And you ruined it by that post.

Darn. And botheration.


Oh, and in case anyone picks me up on the notion of Trade Trade being anti-free trade, I'm talking about the principle of protecting small-scale rural farming communities against the predations of multi-national buyers, not the actual methods of operation of free trade, since it's essentially a branding exercise that allows consumers to voluntarily support the principle, or not, as they wish.

But the principle of Fair Trade is the opposite of the principle of Free Trade, the latter being essentially the notion that competition and efficiency is the total, final, absolute and utter arbiter of who should produce what, regardless of any other objectives or the social desirability of perhaps bankrupting an inefficient nation (who may, after all, be inefficient because they're poor).

Anyone support the notion that if you can't compete, you starve? Because the implication of totally Free Trade is that productive efficiency is the ONLY criteria worthy of note, and devil take the hindmost.


Hey, it looks like I spouted forth a bit anyway. How'd that happen?

[Girdag]

Aw man, I'm just about to start an Economics degree. Will I be able to defeat people with long and complex arguments as well? It could be a really useful party trick!