Dáil Éireann debate -
Thursday, 6 May 1993

Vol. 430 No. 4

Adjournment Debate. - Compact Disc Prices

Mr. E. Ryan:

There has been an ongoing debate in England and in America regarding the price of compact discs. A special committee was set up in Westminster to examine this and various interest groups were invited to answer allegations about the price of these commodities. The questions put to the record industry were not answered satisfactorily. The campaign to reduce the price of compact discs to a reasonable level should be stepped up and that is why I asked the Government and the Minister to take up this issue.

Some people might consider this a minority issue but that is not the case. Vinyl records are on the way out and will soon become a collector's item. Compact discs and tapes are the "in thing" and other new types of music are also coming on the market. Most people buy tapes and compact discs and are being charged an exorbitant price for them. I telephoned Tower Records in the US and found that CDs on the shelves there are selling for approximately £6 while they are selling here for £14 and £15. There is the same differential in England. There is no justification for it. When the record companies were asked about the difference they said that that was what the market could bear but that people in America will not buy them for that price. That is outrageous.

Another argument advanced by the record companies was their need to invest in new talent, but they are not doing that, which is a tragedy. The charts are full of old records and CDs of old records are selling at between £6 and £7. There is a blatant rip-off in this area. The cost of a compact disc, plus the cover, is approximately £1. The artists get another £1 and the manufacturer, the record companies and the retailer get the rest. Retailers have tried to introduce competition in prices but, to a certain extent, they are tied by the prices at which they buy from the record companies. This area should be examined and pressure brought to bear to ensure that the price of compact discs is reduced.

A lot of music now being released is no longer obtainable on records. The number of CDs being purchased is bound to increase. Record companies say that the sales of compact discs are increasing which shows that people are happy with the prices. However, it is clear they are increasing because records are being done away with. In HMV at present, the ground floor, which used to sell records, only stocks compact discs and tapes.

Minister of State at the Department of Enterprise and Employment (Mrs. O'Rourke):

I thank the Ceann Comhairle for allowing Deputy Ryan to raise the subject in which he has a very keen interest.

The various points made by Deputy Eoin Ryan are of considerable interest. In bearing them in mind I know that the Deputy will be aware that in the context of the 1990 budget the Minister for Finance announced the abolition of the 40 per cent duty on the chargeable value of compact discs and gramophone records. In announcing this measure, it is of interest to note that the then Minister in his budget statement referred to this measure as one which would help the music industry generally, as it is labour intensive. A further general reduction applied with the reduction in the highest rate of value added tax from 25 per cent to 23 per cent. In the subsequent budget the VAT rate was reduced to the current rate of 21 per cent. In general the result of the 1990 measure, coupled with the VAT decreases, was a reduction of around £2 in the retail price of an average compact disc.

I am aware of concerns expressed, particularly in the UK, that the prices of CDs are high relative to both their cost of manufacture, and to prices prevailing in the United States. The UK Office of Fair Trading is, I understand, considering whether the CD pricing structure merits an inquiry. I should point out that I have not received any representations on the issue of CD pricing in recent years. That is not to say that something should not be done about it. I am conscious that the price structure of a compact disc is complex, involving different elements such as cost of manufacture, royalties-copyright, marketing, packaging, wholesale and retail margins and so on and that it is not clear to what extent, if any, excessive profits are being made.

Having regard to the higher rate of value added tax in the Republic, the retail price of compact discs in the Republic and the United Kingdom is broadly similar. To the extent that the price of CDs in Ireland is determined elsewhere — largely the UK — and to the extent that there is a perception in the UK that those prices are too high, any reduction of prices as a result of action taken in the UK, official or otherwise, will percolate to the Irish CD buying market. That is not good enough.

Implicit in the points made by Deputy Ryan are that action is warranted. We are all aware that statutory price controls were dismantled in 1986. We seek, through the Competition Act, to increase consumer awareness of prices, value and so on. I am aware that there are very genuine concerns in this area and I will be glad to talk to Deputy Ryan afterwards if he has specific information on which I could work. I will take up the issue with the industry. I have asked the Director of Consumer Affairs to examine the matter as a result of the Deputy bringing it to the floor of the House. I have asked him to report to me as the person with political responsibility for consumer affairs.