Music Industry

Music Industry

Music Industry, an activity of companies and individuals that share the aim of promoting performers and selling recorded music. The roots of the business lie in the sheet-music firms that were established in the 19th century, while record companies, who form the main thrust of the industry today, emerged in the 20th century from the manufacturers of audio equipment and elements of the film industry. The music industry is highly profitable: in 2003 the worldwide music market was estimated to be worth US$32 billion.

Music Industry

The industry is dominated by a few major record companies, such as Universal (based in the United States), Sony BMG (United States), EMI (United Kingdom), and Warner (United States). Each company may own a series of subsidiary labels. Many smaller record companies also profit outside this system by working in specialized areas of music, often banding together in the alternative, independent economies. A musician or a band aiming for success will seek to sign a deal with a record company. Before this happens, they may be visited by an A & R (artists and repertoire) representative, who will try to assess the talent and suitability of the act, either in concert or on the basis of a demo (demonstration tape or CD). Many A & R people employ regional scouts to keep them informed about emerging talents in different territories. An act may employ a manager to liaise between themselves and the record company. A manager may take 20 per cent of the musician’s income as payment for his services.

Another key area for the musician to address is finding a deal for song publishing. Copyright in the song is assigned to a publishing company, and its role, apart from producing a sheet-music edition of the song where appropriate, is to administer the copyright: granting licences for all uses of the song, and collecting and distributing income from those uses, though an advance fee may be paid to the act against expected royalty payments in the future. In many cases record companies set up their own publishing divisions to administer their own artists’ copyrights; some successful artists are self-publishing.

Each time a song is broadcast or performed in public, the composer and publisher should receive payment (a performing royalty). This money is collected by a collecting society (there is generally one for each territory, such as the Performing Right Society, which collects on performances in the United Kingdom). Similarly, there is a fee payable each time a recording is released (the so-called mechanical royalty), and this is also collected by an authorized society, again organized on a territorial basis (the Mechanical Copyright Protection Society in the United Kingdom). Both these sources of income are then divided between the publisher and the artist in the proportion laid down by the artist’s publishing contract.

The A & R person normally oversees the recorded work of the acts that he or she signs, helping to choose the recording studio and a producer to oversee the project. When a satisfactory record has been made, the act is ready to be presented to the outside world. One of the important figures at this stage is the press officer, who will send out review copies of the record to journalists and will aim to coordinate a media campaign, with news stories and features in the relevant publications.

At the same time, promotions people, or “pluggers”, will be visiting radio and television stations, working up an interest in the artist, and trying to improve the act’s profile. This issue will also be addressed by the marketing department, which takes out advertisements in the press and television and ensures that posters are placed in prominent locations. Meanwhile, the large companies may employ a “strike force” to visit record shops and ensure that their label’s product is well distributed and displayed. A successful act may also require an agent, who will sort out concert tours. The agent also deals with music promoters who set up large events such as festivals. A merchandise company may be used to sell branded T-shirts and other merchandise, especially in association with tours.

The large record companies have departments that deal with international promotions, artwork, accounts, legal contracts, video production, and artist development. In return, the label may absorb much of the profit from the act’s record sales, allowing the artist a fraction (perhaps 14 per cent) of the revenue that has been generated. The music industry is a high-risk business, often staffed by Maverick figures who occasionally draw accusations of corrupt practices. The ostentatious style of some parts of the business is balanced by the fact that many acts fail to make a profit. However, the greatest stars generate large sums of money. For instance, the Michael Jackson album Thriller had by 2003 sold more than 51 million copies worldwide, earning tens of millions of dollars for CBS Records.

One issue of concern to the music industry in recent years has been piracy. In 2002 the International Federation of the Phonographic Industry (IFPI) reported that the illegal sales of commercial recordable CDs had tripled in the previous year, as a result of organized copying. According to the Federation, the pirate market was estimated to be worth US$4.3 billion.

File-sharing, the practice of downloading songs from the Internet, copying and sharing them without paying for them, has also been the source of much debate. Peer-to-peer sharing (P2P) became an intense issue in 2000, when it was estimated that 50 million people had used the Napster network, without due payment. This presented a real threat to the music industry, as it damaged its revenue stream and its copyrights. More importantly, the Napster debate indicated that much of the industry’s business model was out of date, particularly its distribution process. Critics have also suggested that the music industry was slow to realize the potential of this new medium and has wasted time and resources trying to resist the popularity of P2P. The Recording Industry Association of America began to address the issue by taking legal action against companies and individuals for illicitly distributing music. A number of artists and other leading figures in the industry have called on governments to take action against the growth in music piracy around the world.

In 2003 the major companies gave their support to a legal and profitable file-sharing system, iTunes. Under this well-publicized scheme, customers could pay for legitimate downloads, and while some felt that the cost was kept high to protect CD sales, the system delivered 70 million tracks in the first year. However, the issue of value has been a recurring debate. Rather than nurturing talent over a long time, many acts have been pressurized to make a quick profit, hence a rise in the number of generic pop bands. Meanwhile, customer confidence was shaken when the American music industry was found guilty of illegal price-fixing in 2000.

Amid the growing trends of piracy and slower global sales, music companies have struggled to remain competitive, prompting new sales strategies and restructuring. In October 2003 Sony and BMG announced plans to merge their music operations. A few weeks later, a deal between Warner Music and EMI collapsed when the former was bought from Time Warner by a group of investors led by the Canadian businessman Edgar Bronfman Jr.

Figures released by the IFPI in 2004 indicated that, during 2003, recorded music sales (not including sales in digital formats) had fallen (for a fourth consecutive year) around the world by 7.6 per cent on the previous year, and in some countries, the rate of decline was in double figures.

Music Industry

Contributed By:
Stuart Bailie