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29.11.2013
The online extension of Billboard Magazine, billboard.biz is the essential online destination for the music business.
The whole idea of business models comes from Harvard Business School, and the music industry is overrun with gurus and consultants. Physical properties of sound and electricity were discovered by the early 19th Century and technology pioneers tried various contraptions.
Record companies developed and owned the technology, and sold (or licensed) players and records. So the record industry around 1900 would be very familiar to us, and we would also recognise the rash of copyright and patent suits. Radio spread rapidly alongside the record industry and there was clearly a demand for more than local entertainment. In the decade before World War Two, and for a while after, record labels often retained their own in-house bands and artists.
In 1930, fronting dance bands, singers like Al Bowlly developed an intimate style of singing using microphones.
Live radio shows with popular artists were still a big draw but broadcast use of records and recording was inevitable.
Within two decades the industrial momentum of the war and progress of technology led to new, high fidelity, record formats.
In 1948 Columbia Records launched 33 rpm 12 inch vinyl records and in 1949 RCA Victor introduced 45 rpm 7 inch vinyl records—long players and singles.
After a short time in the studio Elvis Presley was making local hit records before touring, getting too big for Sam Philips’ independent Sun Records and moving to RCA for $40,000 (including a personal bonus of $5,000). From the early 1950s popular music was increasingly targeted at the new singles charts, but stage musical soundtracks remained big earners from the 1940s to the 1960s including: Oklahoma!, My Fair Lady, West Side Story, The Sound Of Music, and Hello Dolly! Towards the end of the 1950s impresarios like Larry Parnes renamed and packaged live acts like Marty Wilde, Billy Fury and Georgie Fame to cash in on the American trend set by Elvis, Buddy Holly and Little Richard.
The Major record companies as we now know them had yet to emerge from the mass of small independents and larger groups who controlled distribution.
First was the birth of the corporate industry as bigger labels hoovered up independent labels formed over previous decades. Second, the combined effect of radio, television and singles charts led labels themselves to take more control of pop acts.
Major labels like to emphasise their creative contribution in developing the record industry. So now, the original business model that had lasted 75 years was joined by another: acts with no pedigree were tailored to a singles chart template.
Over the next three decades big labels increasingly signed chart acts from management, production and development companies. In the Eighties an unexpected bonus in the form of CD re-sales inflated the Majors further and the outrageous promotion of singles as loss-leaders for albums reached a peak with MTV videos costing hundreds of thousands apiece. Taking dance ideas from hip-hop DJs, producers now used drum machines, sequencers and synths to construct records for newly developed artists.
The record industry had prepared a strategy for the Internet but they were out of touch with technology.
The spike in CD sales between 1990 and 2000 was more of a windfall for the record industry than a birthright.
The Majors looked at the decline of CD, matched it with the growth of filesharing and concluded: that must be where the money went. The old model was built on ownership of technology and mass production but Apple, Dell, HTC and Panasonic now control that. Independents (XL, Domino, Warp, etc.) run a far tighter ship and tend not to spawn expensive media artists in-house. The second model failed for the Majors in 2000 when they lost their grip on the supply chain (radio, distribution and retail). Of course, a lot will happen on the Internet—new tools for communication, broadcasting, distribution and retail but no new business model.
SXSW and MIDEM used to be mostly about music but now they speculate about the new business model and 7 Tips For Exploiting Social Networks. The first model began around 1895 with the marketing of mass produced audio records (discs). And I may gloss over the extraordinary recording careers of Patti Page, Shania Twain, Def Leppard and Elvis Costello, among many others, but you can test your own favourites against my argument. Thomas Edison developed recordable cylinders, unaware of the demand for pre-recorded music. There was popular music before there was a record industry and without it there would be no record industry. Significant growth occurred first in the British Empire (which still existed) because the American Pacific market was smaller. In the 1930s record industry boffins had perfected stereo vinyl discs playing at lower speeds.


By 1960 the record business was the same as it had always been: find talent, record and distribute, but there was some evidence of artist development emerging at EMI. Again, EMI tidied up The Beatles but they charted within weeks and had a number one record with their second single. Music in this format appealed to a younger audience and there were no clubs or dance halls where an audience of children could separate the wheat from the chaff. In the 1980s they claimed a hand in the development of CD and even charged their artists for the imaginary effort. Even after 1970 Queen, The Police, U2, Radiohead, Oasis, Coldplay and others established themselves on the road before generating substantial earnings for the Majors.
But Major labels, fuelled by income from mergers and record sales, developed massive in-house A&R, media and promotion departments, seeking ready-made acts to fit chart pigeonholes. Samples, loops and computer tools generated quick, undemanding hit templates for teen stars.
Album tracks could not be bought separately at the time and music fans re-bought 4 decades of post-war popular music and centuries of classical. Although each album cost less than 50p to manufacture the industry had allowed overheads to eat up the rest. But nobody ever paid for every song they listen to, so why would listening online be different? Majors are carrying far too much weight to make money from individual track sales even though they still dominate national radio playlists. Chart pop is an expensive game calling for massive investment upfront (the real developers have to be bought out and unknown acts need lots of publicity) and there is no guarantee of success, so it didn’t help. They weren’t prepared for the many-pronged attack on their margins that happened in 2000.
There are no Internet playlist meetings so the Majors can no longer sell records on their own terms. The record industry would really like something that puts them back on the 1990s CD gravy train but that won’t happen.
The second ran approximately from the formation of Warner Communications and Warner Elektra Atlantic distribution under Kinney (1970) to the 2000 crash. Nobody designed or predicted this business model, it was simply what worked at the time (and for the next hundred years).
As early as 1900 the record industry was repackaging black dance music for white audiences. Pioneers (mainly Berliner and his engineering partner Eldridge Johnson) fought off lawyers for almost a decade, gave us the Victor record label and a growing record industry. Licensees and subsidiaries of Berliner technology sold dance music, classics, opera, musicals and other popular songs throughout Europe and Asia.
These technologies incorporated solutions for many separate problems and film, radio and record industries owned the patents. Previous technology had favoured music loud enough to record easily: dance, opera and classics. In 1941 ASCAP asked higher publishing royalties from radio but they had to settle for less after 10 months. Norrie Paramor used studio musicians on early Cliff Richard sessions while the Shadows were taking shape but it wasn’t a lengthy process. The Rolling Stones were selling out the Crawdaddy Club in Richmond, and The Beatles themselves were selling out the Cavern in Liverpool, before they were signed.
The era of so-called artist development had arrived and The Monkees pioneered formula-driven chart success (developed by a TV production company rather than a record label).
And today they like to say they have developed artists over several decades (who will cultivate new artists when the Majors are gone?).
Those changes would turn out to be important but something equally significant had already happened.
Like Elvis they occasionally needed initial development by a smaller label but artist development was down to the bands and their management.
At the same time record retail began to migrate from traditional high street shops to supermarkets and the Majors were forced to reduce their margins. They still have limited sources of online revenue but things look far worse in the shadow of bygone CD sales than they actually are. Neither did they crash because they lost control of technology, in a way that was farsighted if premature. How much of an industry can be supported by talent shows, teen stars, single downloads and streaming licenses is unclear. They have no natural place in music, a freak sequence of technologies merely gave them a fleeting role.
Could the diversity of the Internet conform to one business model now the Majors control a smaller share? Victor’s original disc patents expired by 1918 and shellac 78 rpm discs had become standard (various speeds were used prior to the 1920s).


Jay Wilbur was house band leader for the Crystallate group, notably the Rex label and its predecessors.
Records, radio, and now TV and cinema, were a distant aspiration but first you had to make it in bars, clubs, dance halls and theatres. Recording technology was no longer developed by the record industry, it had been taken over by consumer electronics companies and the next innovation would be made by Sony and Philips.
The Majors sold albums online because they wanted to, they sold singles online because they had to. Nor was it label bosses taking millions in bonuses when their companies were making a loss, although that happens too.
Recording artists still sell (see the Indies) but control of broadcasting, format and retail is history. Their momentum can only last while people buy CDs and master rights remain, or until they get down to fighting weight for the real world. The tools have changed (Britney Spears’ Hold It Against Me video earned $500,000 in product placement) but the rules are the same. In the mid-1920s a variety of dual-mode Orthophonic Victrolas, Electrolas and Radiolas with amplifiers became available. In 1942 AFM sought compensation for jukebox and radio performances and in 1948 a short strike improved musicians’ royalties from TV.
Artist development (if any) was the responsibility of managers but more often it was sink or swim.
In America both approaches were evident: acts like the Beach Boys pursued their own vision while producers like Phil Spector increasingly moulded artists commercially. All the leading examples of manufactured acts (Boyzone, Atomic Kitten, Girls Aloud, etc.) were developed by management or production companies. It is also useful to differentiate labels recording live acts (whether live or studio) and corporations manufacturing radio-friendly content.
Then, starting in 2003, single sales in the USA rose to 6 times their previous peak and they’re still climbing.
Radio was still young with no real need for records and, like recording, mostly featured the real world.
But new-fangled record players weren’t cheap and during the Depression around half of all record production went to jukeboxes. These writers and performers were hired to make dance band recordings for labels who found it difficult to satisfy demand using headline acts alone. Powerful vested interests feared the impact of new technology but when the dust settled restrictive practices would not impede progress. Most often a producer will shop them to a smaller label before they get picked up by a Major. The tunnel vision of the Majors and the constraints of mainstream commerce are optional after all. The tragic killings, assassinations and the senseless ending of precious life that occurred last night in Paris," she continued."In many ways, I feel torn. The iPod of its day was the Victor Victrola, a passive (acoustic mechanical or orthophonic) record player, but a change was coming—amplification.
The stars of the day were too busy to spend as much time in the studio as the labels might have liked, they were earning a living on the road and the radio.
Lady Gaga was dropped by Def Jam before being rediscovered by Interscope, a fellow label of the Universal group.
While blaming filesharing for the decline, can the record industry really expect album sales to hold up next to a sixfold rise in single track sales? A record catalogue could accommodate a lot more material than a band would need to play live. Her exuberant reprise of Bowie and Madonna was never planned at a record label A&R desk.
Both singles and albums are available to buy but sales of single tracks are way up and albums are way down.
Ray Noble, for example, was a concert pianist and composer of popular songs who had won a Melody Maker contest for dance band arranging. So these labels were hiring very capable musical directors to work with some of the best players and singers available.
Recording studio MDs, session fixers and players have been used to varying degrees from the 1890s to present day, unusually pre-war label house bands became as well-known as some of the performing artists they backed on record.



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