Royalties may lead to price hike for CD-R

Royalties may lead to price hike for CD-R

Prices for compact-disc recordable (CDR-R) may increase soon, the result of royalty demands from the recording medium's patent holders. But name-brand disc sellers like Memorex and Verbatim say they don't believe price increases will be significant.

Ritek and CMC, the two major CD-R manufacturers in Taiwan, have come under the eye of the patent holders for CD-R technology - Koninklijke Philips Electronics, Sony and Taiyo Yuden. An increase in royalty enforcement and a decrease in the number of smaller competitors have changed the way the disc makers sell to the disc middlemen, like Maxell or Memorex.

Last year, manufacturers could sell excess inventory on the spot market - whatever the CD-Rs could sell for at that particular moment - often dramatically below production costs, lowering overall prices at the end of the chain, said Brad Yeager, a Memorex spokesman. Today, disc makers are more reluctant to churn out CD-Rs without a sales contract in hand because a royalty must be paid on every disc sold, he said.

As a result, Memorex's per-disc cost has increased more than 30 per cent on prices at the end of 2000. Memorex announced an increase in costs to retailers beginning June 1, but wouldn't specify how much prices will go up. Consumers should expect to see a price increase, but Yeager noted that the increase is not likely to be severe.

Other disc sellers echoed the sentiment. "From what I've been able to determine, the higher prices are only applicable to Ritek," said Andy Marken, a Verbatim spokesman. Competitive pressure will keep prices down, and consumers will not likely see any serious changes in costs, he said.

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