Study finds Amazon has been selling counterfeit CDs

The company has vowed to stop the practice and to pursue those selling the fake merchandise

Financial trends and news by Steven Loeb
October 31, 2016
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Part of the issue that I have with buying online is that sometimes I don't know who I'm actually buying from. For example, I recently bought a new t-shirt that I saw advertised on Facebook. The shirt looked cool, and though I never heard of the seller, it seemed to get good reviews. Luckily, the shirt arrived as ordered, and was in good condition, but there was no guarantee. I was taking a bit of a leap of faith. 

There are some sites we all know and trust, though. If you order from Macy’s online, for example, you know you'll get what you ordered. The same goes for Amazon... though that might actually not always be the case, it turns out. 

The American Association of Independent Music has begun to warn its indie-label members about counterfeit CDs being sold through Amazon, according to a report from the Wall Street Journal. 

These are CDs that are being sold by Chinese pirates for roughly the same price as a regular CD, making it hard to distinguish between the real and fake product. Not only are these CDs coming out mere weeks after release date, but they are managing to also get them featured on Amazon, in its "buy box." So Amazon is actually promoting fake merchandise. 

The Recording Industry Association of America did a a study over the summer and found that 44 out of 194 CD orders, or nearly 23 percent, were fake. 18 of those were sold directly by Amazon. Of those counterfeit albums, more than half, 28 of them, were greatest-hits compilations, which makes sense: anyone can easily put one together, and who would know where it came from? 

You may be asking yourself: how big of a problem is this, really? I mean, who buys CDs anymore, anyway? Isn't it a dying platform. 

Those are not silly questions. 2015 was the first time that streaming services were the largest source of revenue for the music industry. In all, they accounted for 34.3 percent, compared to 34 percent for digital downloads and 28.8 percent for physical purchases. In the first half of this year, only 13 percent of revenue in the U.S. came from physical sales.

Last year, streaming exceeded $2 billion for the first time ever, and revenues grew 29 percent year-to-year.

Earlier this year, Warner Music Group, revealed that it now makes more money from streaming than any other source of revenue. 

In the United States, the impact wouldn't be that significant. Globally, though, CDs still make up 40 percent of revenue for the industry. That's especially true in Europe, where sales of counterfeit CDs already seems to be having an impact, as Amazon account sales were down at least 17 percent in European market this year as a result. 

In a statement to the Wall Street Journal, Amazon said it has “zero tolerance for the sale of counterfeits,” and that it is “working closely with labels and distributors to identify offenders, and remove fraudulent items from our catalog."

In addition, the company says it is "also taking action and aggressively pursuing bad actors.”

Amazon obviously isn't the only site that has to deal with this, but it is the most trusted brand in e-commerce. If shoppers start to believe that they aren't buying what they're being promised, it could hurt Amazon's reputation, and bottom line. 

VatorNews has reached out to Amazon for comment on how it would work to prevent these sales in the future. We will update this story if we learn more. 

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