Music industry

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The music industry is the business of music. Although it encompasses the activity of many music-related businesses and organizations, it is currently dominated by the "big four" record groups, also known as "the major labels"/"the majors" — Sony Music Entertainment,[1] EMI, Universal and Warner — each of which consists of many smaller companies and labels serving different regions and markets.

Usage

When the term music industry is used in a narrow sense, it refers only to the businesses and organizations that record, produce, publish, distribute, and market recorded music (e.g., music publishers, recording industry, record production companies). This corresponds to the International Standard Industrial Classification (ISIC) that includes sound recording and music publishing activities (J-59).

When the term is used more broadly, it refers to a range of sub-industries that come from a number of different industrial classifications, including Information and Communication (which includes sound recording and music publishing activities), programming and broadcasting activities (e.g., radio stations), education (e.g., music training schools), Arts, entertainment and recreation, and manufacturing and retail sales (e.g., of musical instruments). In this broader sense, the term usually also encompasses not-for-profit organizations such as Musicians' Unions and writers' copyright collectives and performance rights organizations.

History

Early commoditization of music

Until the 1700s, the process of composition and printing of music was mostly supported by patronage from the aristocracy and church. In the mid-to-late 1700s, performers and composers such as Wolfgang Amadeus Mozart began to seek commercial opportunities to market their music and performances to the general public. After Mozart's death, his wife (Constanze Weber) continued the process of commercialization of his music through an unprecedented series of memorial concerts, selling his manuscripts, and collaborating with her second husband, Georg Nissen, on a biography of Mozart.[2] In the 1800s, the music industry was dominated by sheet music publishers. In the United States, the music industry arose in tandem with the rise of blackface minstrelsy. The group of music publishers and songwriters which dominated popular music in the United States was known as Tin Pan Alley.

The phonographic age

In the early 20th century, the phonograph industry grew greatly in importance, and the record industry eventually replaced the sheet music publishers as the industry's largest force. A multitude of record labels came and went, but a handful of label corporations prospered for decades. By the end of the 1980s, the "Big 6" — EMI, Sony, BMG, PolyGram, WEA and MCA — dominated the industry. In mid-1998, PolyGram merged into Universal Music Group (formerly MCA), dropping the leaders down to a "Big 5". They became the "Big 4" in 2004 when Sony combined with BMG.

21st Century changes

Just as radio and television did before it, the advent of file sharing technologies has changed the balance between record companies, song writers, and performing artists. Bands such as Metallica have fought back against peer-to-peer programs such as the infamous Napster, and the arguments for and against technology to circumvent them - digital rights management systems - remain controversial. With the advent of Apple Inc.'s iTunes online music store in 2003, legal music downloads became widely available.

By June 2008, digital music sales generated around $2 billion in revenue, with tracks available through 500 online services located in 40 countries, representing around 10 percent of the total global music market. Revenue from retail CD sales, however, continued to fall. IBISWorld reported in June 2008 that "the industry's financial future looks bleak," but noted that, although revenues have decreased, artists have suffered less than record companies, since they can "make most of their money on merchandise sales and touring."[3]

Business structure

The music industry is made up of various players, including individuals, companies, unions, not-for-profit associations, and rights collectives, and other bodies. Professional musicians, musical ensembles, singers, conductors, and arrangers, and sound engineers create sound or video recordings of music or do live performances onstage. Professional musicians negotiate their wages, contractual conditions, and other conditions of work through Musicians' Unions or other guilds. Composers and songwriters write the music and lyrics to songs, which are sold in print form, as sheet music by music publishers. Composers and performers get part of their income from writers' copyright collectives and performance rights organization such as the ASCAP and BMI (or MCPS and PRS respectively for the UK); these societies and collectives ensure that composers and performers are compensated when their works are used on the radio or TV or in films. When musicians and singers make a CD or DVD, the creative process is coordinated by a record producer, whose role in the recording may range from suggesting songs and backing musicians to having a direct hands-on role in the studio, coaching singers, giving advice to session musicians on playing styles, and working with the senior sound engineer to shape the recorded sound through effects and mixing.

Most professional musicians, bands, and singers are signed with record labels, which are companies which finance the recording process in return for part or full share of the rights in the recording. A record company is an entity that manages sound recording-related brands and trademarks which consist of their owned labels; their owned and licensed master recordings; and various related ancillary businesses such as home video and DVDs. Labels may comprise a record group which is, in turn, controlled by a music group. As such, a larger umbrella label may have a number of sub-labels releasing music. Music publishers exist separately (even if sharing the same ultimate holding company or brand name), and they represent the rights in the compositions - i.e. the music as written rather than as recorded.

Record companies and record labels that are not under the control of the Big Four music groups and music publishers that are not one of the Big Four are generally considered to be independent, even if they are part of large corporations with complex structures. Some prefer to use the term indie label to refer to only those independent labels that adhere to criteria of corporate structure and size, and some consider an indie label to be almost any label that releases non-mainstream music, regardless of its corporate structure. According to US Market Research Firm NPD Group, iTunes recently surpassed Wal-Mart as America's largest music distributor. A record distributor is a company (often a record label)[citation needed] that works with record labels to promote and distribute their records, either in their home market or overseas.

Once the CD is recorded record distributor companies organize the shipping of the CDs to music stores and department stores. Record labels have use an "A&R" (Artists and Repertoire) manager to help develop the performing style of bands and singers signed the label. A&R managers may organize shared tours with similar bands or find playing opportunities for the label's groups which will broaden their musical experience. For example, an emerging singer-songwriter with little live playing experience may be sent on a major tour with an electric folk rock act from the same label, so that this person will gain more confidence.

When CDs sell in stores, or online, part of the money is returned to the performers in the form of royalties. While most recordings only earn royalties for a short period after they are released, a small number of recordings have become "classics", with longstanding popularity, such as albums by the Beatles or the Rolling Stones; these albums have continued to earn royalties for the surviving band members decades after their original release date. Record labels usebusiness managers to deal with all of the financial transactions and coordinate the contracts and other arrangements. Solo performers, singers, groups, and ensembles typically have a band manager who organizes rehearsals, books rehearsal space, organizes tours (including booking hotels, flights, equipment rentals, etc), and makes sure that the stage is set up properly. The band typically has a tour promoter to market the performances by arranging interviews, buying billboard ads, newspaper ads, or hiring postering crews. While some smaller bands use the band manager to book shows, bands with busier schedules may have a separate booker who phones bars, nightclubs, music festivals, or other venues, and schedules performing engagements. Most national touring bands have roadies, who are movers who unload guitar amplifiers, drums, instrument cases, and other gear. Bands may also have their own sound engineer, who mixes the sound during the show using an audio mixer and electronic effects.

Statistics

US music market shares, according to Nielsen SoundScan (2005)

Nielsen SoundScan reported that the big four accounted for 81.87% of the US music market in 2005:[4]

and in 2004, 72.64%:

  • Universal Music Group — 29.59%
  • Sony Music Entertainment — 28.46% (13.26% Sony, 15.20% BMG)
  • Warner Music Group — 14.68%
  • EMI Group — 9.91%
  • independent labels — 27.36%
World music market sales shares, according to IFPI (2005)

The global market was estimated at $30-40 billion in 2004.[5] Total annual unit sales (CDs, music videos, mp3s) in 2004 were 3 billion.

According to an IFPI report published in August 2005,[6] the big four accounted for 71.7% of retail music sales:

  • Universal Music Group — 25.5%
  • Sony Music Entertainment — 21.5%
  • EMI Group — 13.4%
  • Warner Music Group — 11.3%
  • independent labels — 28.4%

Prior to December 1998, the industry was dominated by the "Big Six": Sony Music and BMG had not yet merged, and PolyGram had not yet been absorbed into Universal Music Group. After the PolyGram-Universal merger, the 1998 market shares reflected a "Big Five", commanding 77.4% of the market, as follows, according to MEI World Report 2000:

Note: the IFPI and Nielsen Soundscan use different methodologies, which makes their figures difficult to compare casually, and impossible to compare scientifically.[7]

Total Value by Country

According to the IFPI more than 95% of the total revenue from music in 2003 was derived from the 30 major countries in the proportions shown above.

Albums sales and market value

The following table shows album sales and market value in the world in the 1990s–2000s.

N Country Album Sales Share Share of World Market Value
1 USA 37-40% 30-35%
2 Japan 9-12% 16-19%
3 UK 7-9% 6.4-9.1%
4 Germany 7-8% 6.4-5.3%
5 France 4.5-5.5% 5.4-6.3%
6 Canada 2.6-3.3% 1.9-2.8%
7 Australia 1.5-1.8% 1.5-2.0%
8 Brazil 2.0-3.8% 1.1-3.1%
9 Italy 1.7-2.0% 1.5-2.0%
10 Spain 1.7-2.3% 1.4-1.8%
11 Netherlands 1.2-1.8% 1.3-1.8%
12 Mexico 2.1-4.6% 0.8-1.8%
13 Belgium 0.7-0.8% 0.8-1.2%
14 Switzerland 0.75-0.9% 0.8-1.1%
15 Austria 0.5-0.7% 0.8-1.0%
17 Russia 2.0-2.9% 0.5-1.4%
18 Taiwan 0.9-1.6% 0.5-1.1%
19 Argentina 0.5-0.7% 0.5-1.0%
20 Denmark 0.45-0.65% 0.5-0.8%

Singles sales

Physical single sales in the world in the 1990s-2000s and digital single sales in 2005.

N Country Physical Sales Share Digital Sales Share in 2005
EU 34-50% 13.2%
1 Japan 26-32% 1.7%
2 USA 4-25% 85%
3 UK 14.5-16% 6.3%
4 Germany 9-12% 5%
5 France 4-12.5% 1.9%
6 Australia 1.8-4.6% 0.48%
7 Netherlands 1.3-1.7% < 0.2%
8 Belgium 0.8-1.8% < 0.2%
9 Sweden 0.6-0.96% < 0.2%
10 Switzerland 0.5-0.92% < 0.2%
11 Austria 0.58-0.82% < 0.2%
12 Italy 0.3-1.0% < 0.2%
13 Spain 0.3-0.7% < 0.2%
14 Norway 0.3-0.47% < 0.2%
15 Ireland 0.2-0.5% < 0.2%
16 Canada 0.1-0.6% < 0.2%
17 Portugal 0.01-1.0% < 0.2%
18 Republic of South Africa 0.02-0.45% < 0.1%
19 New Zealand 0.19-0.29% < 0.1%
20 Denmark 0.10-0.25% < 0.1%

Recorded Music Retail Sales

Interim Physical Retail Sales in 2005 - all figures in millions

COUNTRY UNITS VALUE CHANGE
Singles CD DVD Total Units $US Local Currency Units Value
1 USA 14.7 300.5 11.6 326.8 4783.2 4783.2 -5.70% -5.30%
2 Japan 28.5 93.7 8.5 113.5 2258.2 239759 -6.90% -9.20%
3 UK 24.3 66.8 2.9 74.8 1248.5 666.7 -1.70% -4.00%
4 Germany 8.5 58.7 4.4 71 887.7 689.7 -7.70% -5.80%
5 France 11.5 47.3 4.5 56.9 861.1 669.1 7.50% -2.70%
6 Italy 0.5 14.7 0.7 17 278 216 -8.40% -12.30%
7 Canada 0.1 20.8 1.5 22.3 262.9 325 0.70% -4.60%
8 Australia 3.6 14.5 1.5 17.2 259.6 335.9 -22.90% -11.80%
9 Spain 1 17.5 1.1 19.1 231.6 180 -13.40% -15.70%
10 Netherlands 1.2 8.7 1.9 11.1 190.3 147.9 -31.30% -19.80%
11 Russia - 25.5 0.1 42.7 187.9 5234.7 -9.40% 21.20%
12 Mexico 0.1 33.4 0.8 34.6 187.9 2082.3 44.00% 21.50%
13 Brazil 0.01 17.6 2.4 24 151.7 390.3 -20.40% -16.50%
14 Austria 0.6 4.5 0.2 5 120.5 93.6 -1.50% -9.60%
15 Switzerland ** 0.8 7.1 0.2 7.8 115.8 139.2 n/a n/a
16 Belgium 1.4 6.7 0.5 7.7 115.4 89.7 -13.80% -8.90%
17 Norway 0.3 4.5 0.1 4.8 103.4 655.6 -19.70% -10.40%
18 Sweden 0.6 6.6 0.2 7.2 98.5 701.1 -29.00% -20.30%
19 India - 10.9 - 55.3 79.2 3456.6 -19.20% -2.40%
20 Denmark 0.1 4 0.1 4.2 73.1 423.5 3.70% -4.20%
Top 20 74.5 757.1 42.8 915.2 12378.7 -6.60% -6.30%

In its June 30, 2000 annual report filed with the SEC, Seagram reported that Universal Music Group was responsible for 40% of worldwide classical music sales over the preceding year.[8]

Music industry organizations

Further reading

  • Krasilovsky, William; Shemel, Sidney: This Business of Music, Billboard Books, ISBN 978-0823077236
  • Lebrecht, Norman: When the Music Stops: Managers, Maestros and the Corporate Murder of Classical Music, Simon & Schuster 1996
  • Imhorst, Christian: The ‘Lost Generation’ of the Music Industry, published under the terms of the GNU Free Documentation License 2004
  • Leonhard, Gerd: Music Like Water - the inevitable music ecosystem
  • The Methods Reporter: Music Industry Misses Mark with Wrongful Suits
  • Music CD Industry - a mid-2000 overview put together by Duke University undergraduate students
  • d’Angelo, Mario: Does globalisation mean ineluctable concentration ? in The Music Industry in the New Economy, Report of the Asia-Europe Seminar, Lyon, 25-28 oct. 2001, IEP de Lyon/Asia-Europe Foundation/Eurical, Editors Roche F., Marcq B., Colomé D., 2002, pp. 53-54.
  • d'Angelo, Mario: Perspectives of the Management of Musical Institutions in Europe, OMF, Musical Activities and Institutions Sery, ParisIV-Sorbonne University, Ed. Musicales Aug. Zurfluh, Bourg-la-Reine, 2006.
  • The supply of recorded music: A report on the supply in the UK of prerecorded compact discs, vinyl discs and tapes containing music. Competition Commission, 1994.

References

  1. ^ In August 2008, Sony announced its intent to purchase BMG's stake and rename the group Sony Music Entertainment, Inc., making it a unit of Sony Corporation of America. The buyout is awaiting regulatory approval. Ref: "Sony to Purchase Bertelsmann's 50% Stake in Sony BMG" (Press release). Sony Corporation of America.
  2. ^ Dear Constanze The Guardian
  3. ^ June 2008, The Tables Have Turned: Rock Stars – Not Record Labels – Cashing In On Digital Revolution, IBISWorld
  4. ^ Paul Cashmere (2006-01-05). "Universal Is The Biggest Music Company of 2005". Undercover (Australia). Retrieved 2006-05-27. {{cite web}}: Check date values in: |date= (help)
  5. ^ According to the RIAA the world music market is estimated at $40 billion, but according to IFPI (2004) it is estimated at $32 billion.
  6. ^ IFPI releases definitive statistics on global market for recorded music
  7. ^ [1]"Digital Music Futures and the Independent Music Industry", Clicknoise, February 1, 2007.
  8. ^ BUSINESS AND PROPERTIES The Seagram Company Ltd.

See also

External links

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