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MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

ROBERT SIEGEL, host:

I'm Robert Siegel. And now the latest in our series on music formats. 2010 was another terrible year for the music industry and in particular for the CD. Sales of compact discs dropped last year by almost 20 percent. For a while, they lifted the fortunes of the recording industry to new heights.

But as NPR's Joel Rose reports, the CD also contained the seeds of the industry's collapse.

JOEL ROSE: At the end of the month, the last CD will roll off the line at a Sony factory in New Jersey. At its height, the plant employed 1,300 people cranking out hit albums like Michael Jackson's "Bad."

(Soundbite of song, "Bad")

Mr. MICHAEL JACKSON (Musician): The way you make me feel, you really turn me on.

Mr. JIM JONES: The overtime was just - you had it whenever you wanted it, 10 hour days if you wanted it. Saturdays, Sundays, you could get it. That's how busy it was we were. You know, a lot of times it was mandatory. It was posted. You had to work, and that was it.

ROSE: Jim Jones drives a forklift at the Sony factory in Pitman, New Jersey, a job he's had since 1982, when the plant still made LPs. It's also where Jones met his wife, Cindy. Back in the 1990s, they worked in the warehouse together, rushing out hit CDs.

Ms. CINDY JONES: I can't remember the last one. I mean, it's been so long since there was a big hit. It's just slow.

ROSE: Sony will still make CDs at its factory in Indiana. But the closure of the New Jersey plant is telling. Sales of compact discs have fallen 50 percent over the past decade.

We're a long way from 1983, when Casey Kasem introduced the CD to his radio audience like this.

Mr. CASEY KASEM: When it comes to technology, improvements never end. But lately, in the field of recording, they may have come up with the last link in the chain of evolution: the compact audio disc.

ROSE: The CD was invented by hardware manufacturers Sony and Philips. At first, executives at the major record labels didn't like the new format. But they started to come around, thanks in large part to Jac Holzman, the founder of Elektra Records, who will be inducted into the Rock and Roll Hall of Fame next week. Holzman was a big advocate for the CD when he was at Warner Music Group.

Mr. JAC HOLZMAN (Founder, Elektra Records): The CD was sexy. And it would bring higher prices, from about $8 for cassettes or LPs at the end of the '70s, to about $15 in the early '80s. You could resell your best catalogue again. CDs were lighter and cheaper to ship, which is a big consideration.

ROSE: All that meant giant profits for music industry in the 1980s and '90s, says Steve Knopper. He's the author of "Appetite for Self-Destruction: The Spectacular Crash of the Record Industry in the Digital Age."

Mr. STEVE KNOPPER (Author, "Appetite for Self-Destruction: The Spectacular Crash of the Record Industry in the Digital Age"): The CD sold so well. And it created this gigantic boom in the industry. And everybody got rich. And people just got incredibly accustomed to this to the point where in the late '90s, the only way that you could get the one song that you liked was to buy the $15 to $18 CD at the Tower Records.

ROSE: At first, Knopper says people didn't mind paying a lot for the new format.

Mr. KNOPPER: You didn't hear the outcry at the time of, you know, hey, we're getting price gouged. Instead, the public was going: This is much better sound.

ROSE: Record labels promised that the price of CDs would come down eventually. And the discs did get cheaper to make. But the labels kept retail prices and profits high. Jac Holzman says that was a mistake.

Mr. HOLZMAN: It's fine to keep that up for two or three years. But the labels kept it up far too long. And I think it was a fraud on the public and on the artists.

(Soundbite of music)

Mr. LARRY HAAS: Oh yeah, I think they shot themselves in the foot: $18 was just ridiculous.

ROSE: Still, Larry Haas says he still prefers CDs. In fact he's shopping for used discs at the Princeton Record Exchange in New Jersey. So is Scott Gordon.

Mr. SCOTT GORDON: There's a certain thing about holding it in your hand. As long as this store is here, and I'm breathing, I'll be here probably four times a year.

ROSE: Hardly enough to bring back the glory days of the CD. Sales peaked in the year 2000. Back when the disc was designed, no one in the music industry thought much about ripping or burning on a personal computer.

Then came the MP3, and Napster, and all of the other peer-to-peer networks. But the CD hasn't faded out yet.

Mr. JON LAMBERT (General Manager, Princeton Record Exchange): It is still our bread and butter.

ROSE: Jon Lambert is the general manager at the Princeton Record Exchange. He says sales of new CDs have declined dramatically. But the store makes up for it with a brisk business in used discs, especially in the $5 and under section.

Mr. LAMBERT: Probably the biggest fallout from the downloading mentality is it became more a singles market. And people were willing to pay a couple dollars for the songs off an album. But they weren't willing to pay $18 for a new CD.

ROSE: Lambert says he wouldn't be surprised if new releases on CD slow to a trickle in the next 10 years as record labels turn their attention to so-called cloud-based music services. But that's a story for next week. Joel Rose, NPR News, New York.

SIEGEL: And you can hear more stories from our series on music formats at nprmusic.org.

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