CD-R Prices Spinning Higher

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If you're looking to back up your hard drive, make a custom CD of your favorite music, or create an iMovie, CD-R media is among the least expensive storage solutions available. But don't expect prices to stay low for much longer.

Consumers can expect to see dramatic price increases for these compact disks throughout the year, industry sources say. Distributor TDK has raised its prices this year, while Memorex is poised to follow suit on June 1. Both companies expect hikes to continue through the summer, with CD-R prices potentially rising by as much as 350 percent from last year's lowest price by the end of 2001.

The CD-Rs you buy from your favorite retailer are branded by the distributor, not the manufacturer. And these distributors (such as TDK and Memorex) get their CD-R media from the same manufacturers. The price that distributors pay manufacturers for individual CD-R media has risen 30 percent since the end of 2000, and should continue to rise because of renewed patent enforcement, a dwindling product supply, and industry consolidation. So naturally, consumers will feel the pinch.

"Manufacturers worldwide had not forecasted such strong continued growth in the CD-R market and have grossly under-projected their planned capacity for this demand," says Chris Bailey, TDK product manager for optical media.

Almost every CD-R in the world is made in Taiwan. An industry shakeout has thinned out the once booming CD-R manufacturing industry, leaving just a handful in business. "There were over 20 manufacturers in Taiwan," says Memorex President Mike Golacinski. "Now there are about five."

As Taiwanese manufacturers scrambled to sell off excess inventory last year, prices were artificially deflated. At the same time, the patent-holders on CD-R media -- Philips, Sony, and Taiyo Yuden -- have renewed pressure on the manufacturers to pay patent royalty fees, something some manufacturers refused to do last year.

Consumers have remained somewhat sheltered from these market factors so far, but they won't for much longer. Memorex's Golacinski says consumers can expect to see prices increase about $5 on a 50 CD spindle -- going up to $25 from $20. Even with the price increase, Golacinski adds, CD-Rs remain one of the cheapest storage solutions available.

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