CD's are not expensive, nor are they overpriced.
I think everyone agrees $9.99 is a fair price for a CD, but how did they get there?
By huge retailers like Wal-Mart pressuring the labels to lower their wholesale price. It wasn't by the kind benevolance of the labels.
Without the kind of pressure Wal-Mart/Best Buy/Amazon brought, we'd still be paying $16.99 at Tower for CDs.
The labels do not understand the value of their product in the public eye, period. Especially digitally.