I worked for a company that made CDs for independent artists, and started selling Vinyl (didn't manufacture those in house, though). Vinyl is expensive to make, and heavy and expensive to ship. So I'd guess the vast majority of that cost would be eaten up in raw manufacturing and shipping costs, without even talking about middleman costs. And if I recall, our margin was pretty small.
Just last weekend, I saw the episode of "How It's Made" on Science Channel that covered vinyl pressed records.
Here's a comparison of the processes.
Vinyl:
- Manufacture lacquered master discs (50% QC rejection rate!)
- Ship lacquered discs to recording studio
- Put master in recording machine
- Cut test groove
- Inspect with built-in microscope
- Cut lead-in
- Cut audio tracks, in 2-channel stereo
- Cut lead-out, label master by hand
- Ship back to factory
- Use chemical process to create nickel-silver negative
- Peel metal negative off lacquered disc
- Manually find center with microscope
- Center-punch and trim metal master
- Use metal master to stamp out vinyl disc copies
- Ship heavy discs to distributors
Digital:
- Press "record", press "stop"
- Upload raw audio tracks to studio file server
- Sequence and mix raw audio into master song track
- Assemble album
- Add metadata
- Re-encode master tracks to consumer quality
- Upload to distributor's server
The capital requirements for digital recording are very low now, having benefited from Moore's Law. If you can buy just one high-quality microphone and one decent laptop, and invest a whole lot of your own time, you can single-handedly produce an album with quality comparable to the best studio recordings of the vinyl era.
While Bobby McFerrin is the first person that I am aware of who did this, some artists will record separate tracks of themselves performing every part of a song, and painstakingly assemble the result in the studio to make their album. Then they hire other people to play those parts at live performances, or just leave some parts out.
In the vinyl era, you needed session musicians on staff at the studio. If someone screwed up, you couldn't easily re-record just that track. You usually had to re-do the whole thing.
So there are good reasons why music was relatively more expensive back then. Those reasons no longer apply.
They didn't cover reel-to-reel recorders in that episode.
Obviously, recording the raw studio performances directly onto the masters that were to be reproduced would be a waste of resources. Multi-track reel-to-reel recorders were still pretty costly, even if the tape was relatively cheaper than the other costs of recording. That tech also improved up until the digital era, but I imagine most of the progress now goes into computer software.
People haven't really recorded directly to a groove in a plastic medium since wax phonograph cylinders. When you cut a vinyl master, you were probably doing it from tape.
Don't forget printing, labels, test presses, and pre-mastering. I started a vinyl record label a year ago and it's wild how man people/businesses are involved in the manufacturing process.
Plus retail has its costs too, markup for vinyl used to be around 50%, plus VAT. So you'd buy the 12" from the distributor at 5–6 € net and sell it for 9–10 € incl. tax (numbers from 10 years ago in Germany, probably haven't changed all that much). Owing to low volume (you can only move so many units), running a record store inevitably leads to self-exploitation.
