RECORD companies have come under attack for the ''massive hidden profits'' they make through selling compact discs at inflated prices. And leading the way in Britain are two of the biggest-selling bands on CD, Simply Red and Dire Straits. Although it is a row the companies must face - there is a select committee of MPs investigating CD prices - there has been little notice taken in Hongkong where prices are considerably lower. Working with a profit margin of 10 per cent, Hongkong record companies deny they are gouging the consumer, citing the British value added tax as the main reason for the price differential. ''There are several factors that make the price of a CD cheaper in Hongkong than in Britain,'' said Alistar Monteith-Hodge, executive editor of Asia Beat magazine. ''First, the cost of pressing CDs here is much cheaper, and second, the publishing companies in Britain are separate from the studios so they take a large chunk of money, whereas h ere the majors own the publishing company.'' But while the record companies deny they are ripping off consumers, they refuse to release the breakdown of a CD, with one executive saying the public had no right to this kind of information. In Britain, Dire Straits manager Ed Bicknell, and Elliot Rashman and Andy Dodd, managers for Simply Red, gave evidence to the Commons National Heritage select committee that multinational companies could afford to drop prices by up to GBP2 a disc. ''If CD prices come down, Simply Red will make less money. That is what my artist is prepared to accept, because we also believe that more people will have access to what is the populist art,'' said Rashman. Flexing artistic muscle of this sort is unheard of in Hongkong, where artists have no real lobby group. ''It would not be in Canto-pop star Alan Tam's interest to stand up and say 'I want more money from royalties' or 'lower the price of my CDs' because he would be dropped like a hot potato,'' said Monteith-Hodge. The move by Simply Red and Dire Straits to take on their record companies by demanding lower prices for CDs, has been supported by the Consumers' Association. The rock managers also denied pop's millionaire stars made vast amounts of money from royalties, claiming the artist and the composer together received only a small percentage of the retail selling price. The pricing of CDs was determined by the record company, dealer discounts and retailers, they argued. Rashman told the MPs that all pop artists, no matter how successful, received the same restricted rate. THIS is not the case in Hongkong, according to the record companies. Individual singers determine royalties depending on popularity. The UK select committee, chaired by former Labour shadow foreign secretary Mr Gerald Kaufman, is taking evidence on whether CD prices are artifically high in the UK and why they are so much cheaper in the US. Bicknell told MPs: ''I would like to see prices come down at least in the short term to revive a somewhat sluggish market. I don't think the record companies would go out of business if prices went down for a couple of years.'' He said media reports about the earnings of pop groups and multi-million-pound deals were based on a ''massive misconception''. He argued that the record industry's figures, produced by the British Phonographic Industry (BPI), artificially inflated artists' earnings. Dodd said the BPI's figure for the cost of manufacturing a CD, GBP1.05, was vastly inflated. He said he knew of one company which could do a run of 10,000 discs for 58 pence each. ''The prices charged for CDs contain a massive hidden profit element,'' hesaid. However, the managers cautioned against forcing record companies to reduce prices if retailers did not follow suit. The Consumers' Association, which also gave evidence, said copyright restrictions were ''at the heart of the extreme and unfavourable price comparisons between the US and the UK''. The full price of a CD in shops was up to GBP15, although special offers could be priced at GBP10. In the US, the identical product cost substantially less, the association argued. Bicknell said the reason prices were lower in the US was that nobody would buy CDs if they cost more. In Hongkong, CD prices range from $90 to $120.
