Music industry - History of Business in the U.S.
Definition: Companies that record, produce, distribute, promote, and market recorded music
Significance: The music industry has brought listeners numerous types of music in various, changing formats. These changes in format as well as changes in music tastes challenged companies to adapt while protecting copyrights and finding ways to profit using the new technology.
Copyright and fair compensation for work have always been the major concerns for not only music publishers and producers but also composers and artists. While testifying to the Senate and House Patent Committee’s copyright hearings in 1906, composer John Philip Sousa said his writing ability rose with his compensation. In 1909, Sousa was one of the composers who successfully lobbied for a copyright law that would force record companies to compensate composers for using their music. The law gave artists copyright of their work for twenty-eight years, with one renewal for the same time period. The law also stipulated that record companies compensate composers for recording and selling their music (then 2 cents per pressing of a music cylinder of printed sheet music). Since Sousa’s time, the laws for copyright have continued to change. Although copyright laws have protected the music industry in the United States to some degree, international piracy is still a major problem.
Printed sheet music was an early product of the music industry. Although the early publishers of printed music were independents, during the 1880’s, a number of sheet music firms began establishing themselves in a section of Manhattan near Twenty-eighth Street and Broadway that became known asTin Pan Alley. This group of publishers began to streamline the composing and producing of sheet music, paying a given rate per song. The Tin Pan Alley group also began marketing their songs through vaudeville performers, something earlier music publishers did with minstrel performers. Tin Pan Alley also targeted its marketing toward white upper-middle-class Americans, who preferred waltzes, marching music, and vaudeville songs. Anything that had an ethnic or African American sound was avoided.
In 1877, Thomas Alva Edison created the phonograph. He did not intend his invention to be used for distribution of popular music; rather, his main intent was for the device to function as a secretarial aid for dictation. During the late 1890’s, when some vendors of the phonograph began selling it to saloons and train stations for use as “coin-in-the-slot” music machines, Edison was displeased. By the 1890’s, the phonograph had become a popular way to hear music throughout the country, and other phonograph companies were trying to cash in on the music arcade movement. In response, in 1896, Edison gave Columbia Phonograph Company permission to use his phonograph technology to create the first machines that could play cylindrical records at home. A competing company, Victor Talking Machine, was also working on the home phonograph market and eventually bested Edison and Columbia, thanks to its savvy use of both a better way of cranking the machine (a modified knitting machine motor) and of celebrity—creating several recordings of songs sung by popular singers. Both Columbia and Victor survived, however, because although each company used certain items patented by the other, neither decided to sue.
In 1919, the radio was first introduced to the American home. The Radio Corporation of America (RCA) began marketing affordable radios to families, and by the early 1920’s, most households had one. At first, the phonograph companies were worried that radios would hurt their market and reacted to the new technology by trying to fight it. The industry soon realized, however, that radio was a useful tool for marketing their singers and merchandise.
One outcome of the advent of the radio was the success of smaller record companies through the promotion of African American and hillbilly music, two markets ignored by the major phonograph companies and Tin Pan Alley. Smaller companies, such as Okeh Records, began to make money by selling records by African Americans and rural country artists. Because the songs by the major labels and composers were the songs that were being featured on the radio, there was not as strong a need to purchase those records. However, records by African Americans and rural southerners were not being played on radio, so those who wished to hear those songs had to buy them from the smaller independent labels.
In 1921, record sales hit a peak of $106 million, a figure that would not be topped until 1945. Record sales hit their lowest point during the Great Depression, with only $6 million dollars in sales in 1933. The Depression hit the music industry hard, forcing early phonograph innovators such as Thomas A. Edison, Inc., to close. Other larger companies that were successful during the early phonograph era folded because of their reluctance to cooperate with radio.
Records and Rock
After World War II, the music industry experienced a mini-boom between 1945 and 1947. The brittle shellac 78-revolutions-per-minute (rpm) phonograph records gave way to long-play (LP) 331⁄3 - and 45-rpm records made of vinyl, which were less fragile and had better sound quality. The LP record could play more music per side than a phonograph (twenty minutes per side as compared with four). The 45s allowed for a single song to be purchased and listened to, and reminiscent of the nickel arcades of the 1890’s, the jukebox became popular. During the 1950’s, a number of smaller record companies, such as Sun Records and Chess Records, began marketing rhythm and blues and eventually rock and roll.
The major music labels were not receptive to rock and roll when it appeared during the 1950’s, and despite the fast-rising popularity of the genre, they were slow to sign rock acts. Filling in the void were numerous small record labels, such as Chess Records, Sun Records, and Atlantic Records, which made fortunes selling records in the new musical style. The peak of independent record companies came in 1962, when they accounted for 75 percent of music sales. By that time, the major labels had begun to realize that to survive, they needed to sign more rock-and-roll acts.
As rock music became more popular during the 1950’s, the demand for personal appearances and tours by artists began to increase. Disc jockey Alan Freed held several popular concerts in Cleveland that featured a variety of artists. He twice broke the record for money made from a concert. Soon Dick Clark, Murray “the K” Kaufman, and other celebrity disc jockeys began holding concert promotions across the United States.
Video, Cassettes, and New Genres
During the 1970’s, many of the independent labels that made their fortunes through the signing of rock-and-rolls acts were bought out by major labels.
The major labels had learned from their mistake in rejecting new music and greatly profited from promoting first disco, then punk, new-wave, and heavy-metal acts. An ally in their promotion efforts came in the form of music videos.
In 1981, a cable television channel called MTV (Music Television) ushered in the era of music videos. Initially, the music industry resisted producing music videos, thinking that the cost would exceed the returns from record sales, but in the first half of the decade, at least, that proved not to be the case. As it had with radio earlier, the industry soon embraced music videos, and a number of bands and artists—notably Duran Duran, the Eurythmics, Michael Jackson, and Madonna—successfully marketed themselves through elaborate music videos. Also during this decade, a new genre, hip-hop music, emerged. Hip-hop featured a rhythmic style of speaking called rap, over percussive sounds. The major labels were slow to sign hip-hop artists, to their financial detriment. A number of independent labels, such as Def Jam Recordings andTommy Boy Records, began producing and distributing hiphop music at a profit.
By the mid-1980’s, music sales again began to plummet. Part of this could be attributed to the availability of cassette tape recorders, which allowed people to copy music at no cost, a kind of low-tech piracy. The advent of compact discs (CDs), first introduced in 1983 and more widespread toward the end of the decade, helped bring industry sales back somewhat.
As the 1980’s came to a close, a number of major record companies merged. Many of the independents who had specialized in hip-hop music were bought out (Def Jam by Polygram, Tommy Boy by Warner Bros.), and major labels were purchased by international conglomerates (RCA by the Bertelsmann Music Group, or BMG; CBS-Columbia by Sony). The mergers continued, and by the beginning of the new millennium, 80 percent of the music being distributed was owned by four major companies, the highest concentration in the industry since the Tin Pan Alley days.
Size of the U.S. Sound-Recording Industry
Source: Data from the Recording Industry Association of America
Note: Value figures are based on manufacturers’ shipments at suggested list prices.
During the 1990’s the Moving Picture Experts Group Phase 1 (MPEG-1) Audio Layer 3, or MP3, was created. MP3 allows computers to compress quality audio files into an easily downloadable format. Soon Web sites became available for downloading songs, with many sites offering song downloads for free, without compensation to the recording artists or companies, causing them to pursue legislation to protect their interests. In 1998, President Bill Clinton signed into law the Digital Millennium Copyright Act, which was designed to help protect both the music and film industries from piracy.
In 1998, the firstMP3players were marketed, and as with radio and music videos, the music industry’s first response was to fight the new technology vigorously, as it was feared that downloadable music would reduce sales of CDs. However, with the opening of Apple’s iTunes online store in 2003, which sold downloads for use on computers and iPods, record companies began to realize that, like radio and music videos, the MP3 format could be a tool to help market their offerings. Record companies have further protected their content through digital rights management, in which the music that consumers download is encrypted and cannot be shared. However, some consumers have complained that digital rights management prevents them from listening to their downloaded music on all their various electronic music players.
Despite the growing popularity of downloads, the revenue generated has not made up for the drop in the sales of CDs, which in 2007 accounted for 77 percent of revenue (down from 91 percent in 2005). According to the Recording Industry Association of America, from 2006 to 2007, downloaded singles saw a rise of 38 percent, and downloaded albums rose 54 percent, while the number of CDs shipped fell 17.5 percent. Overall, the industry experienced an increase of 11.6 percent in total digital and physical units sold but an 11.8 percent decline in the total value of units.
Chapple, Steve, and Reebee Garafolo. Rock ’n’ Roll Is Here to Pay. Chicago: Nelson-Hall, 1977. Written in a chatty style but does provide good information on rock music from the 1950’s to the mid- 1970’s. The section on concert promotion is particularly informative.
Espejo, Roman, ed. What Is the Future of the Music Industry? Detroit, Mich.: Greenhaven, 2008. A collection of articles discussing the music industry’s future. Topics include illegal file sharing, CDs, and digital rights.
Krasilovsky, M. William, et al. This Business of Music: The Definitive Guide to the Music Industry. 10th ed. New York: Billboard Books, 2007. Considered the bible of the music industry, the book, written by law experts, provides an overview of the music industry in the twentieth century and discusses how new copyright laws and piracy legislation affect musicians and their distributors.
Stamm, K. Brad. Music Industry Economics: A Global Demand Model for Pre-recorded Music. Lewiston, N.Y.: Edwin Mellen, 2000. While very academic in tone, Stamm’s work provides an excellent overview of American copyright laws as well as the issue of international piracy.
Tschmuck, Peter. Creativity and Innovation in the Music Industry. New York: Springer, 2006. Provides an excellent economic overview of the U.S. and international music industry from the emergence of the phonograph to MP3s. Uses tables to show how independents made money from rock and roll and other genres.
See also: American Society of Composers, Authors, and Publishers; computer industry; Digital recording technology; Motion-picture industry; Radio broadcasting industry; Television broadcasting industry.