By George Mannes
Senior Writer, www.thestreet.com
10/04/2002

We know what went through your mind when you read about the music industry price-fixing settlement announced Monday. You thought, "Finally! After paying out the wazoo for audio CDs over the past few years, I -- the little guy -- have finally won!"

Fat chance.


As we read all the David-beats-Goliath stories about the $143 million settlement this week, all we at the lab could think about was, "Doesn't anyone know how to do long division anymore?"

See, New York Attorney General Eliot Spitzer, for one, proclaimed that this "landmark settlement" to address years of price-fixing will provide consumers with "substantial refunds." But after working out the math, we're not so sure.

Let's start with the years covered in the settlement, 1995 through 2000. During that time, record companies shipped a total of 4.98 billion CDs into the U.S. market, according to the Recording Industry Association of America. That doesn't even include CD singles.

Now let's look at the $143 million settlement to be paid by the defendants in the case, which include AOL Time Warner, Sony, Vivendi Universal, Trans World Entertainment and Best Buy subsidiary Musicland Stores.

It turns out that only $67.4 million out of the $143 million settlement will be in the form of cash. The rest will come in the form of 5.5 million CDs distributed for free to "public entities and nonprofit organizations," at an implied value of about $13.75 apiece.

So there you go. Assuming the 43 states involved in the suit don't get a cut of the cash settlement for expenses -- again, fat chance -- you've got a $67.4 million cash refund to be divided among nearly 5 billion CDs. Do the math and you've got 1.35 cents per CD.

Wow. Think about it. If you bought 100 CDs over the years in question, you'd get a whopping $1.35 refund. If you'd bought 1,019 CDs, you'd get enough money back to go out and treat yourself to one of those $13.75 specials.

Forgive us if we're not impressed.

Spitzer's office, for what it's worth, says the settlement -- of which Eliot is so proud -- is not, in fact, final. There was no further comment.