Part 5: The Recording Industry

Chapter 15

Start Thinking. . . What does it take to get music recorded and

distributed?Who are the different people involved in this

complex industry?Are major labels receding in importance?

Chapter GoalsAcquire an understanding of the history of

the record industry and how it came to its present condition.

Gain a true picture of the record business by analyzing it in terms of major versus independent labels.

Learn how record companies function through their various structures.

Development of Recorded MusicLate 1800s early inventions

1900 – 1920s record sales begin, “commercial” jazz

1930s Great Depression , jukeboxes

1940s singles, jukeboxes, one-stops, LPs

1950s TV, rock and roll, rack jobbing, stereo sound

1960s social turmoil, retailing, Beatles, major labels

1970s indie labels, singer-songwriters, crossover recordings

1980s technological change, CDs, video

1990s home recordings, DAT, electronic delivery of music

2000s piracy and P2P file sharing, legal downloads, 360 deals

Perspective3,000+ labels in the U.S.Major label

owned and/or distributed by major distribution company

Independent labelindies lack affiliation with a major

Majorsdominate salesare well funded

Major LabelsTremendous investment in recordings requiredArtists attracted to majors

prestige + marketing fundsstability of established companymore elaborate recordings

Advantages in economies of scaleMaintain inventories for longer periodsClear advantage in costly marketing of recordsPush weak recordings to sales success

Independent LabelsFirst to find the “next big thing”Successful indies may be bought out by

majorsTechnology blunted majors’ advantage

majors focus on most popular + most lucrativeleaves modest-selling artists + genres to indies

Develop brand name awareness + consumer loyalty

Connections at local and regional level

Specialty LabelsSome of the most successful independents

classical musicSome release records “privately”Some may limit activities to certain

demographic marketsGospel music

effective promotional methodsSpecialty labels successful

don’t compete with mainstream musicdon’t rely on traditional or expensive

promotion

Do-It-Yourself LabelsCDs + home-recording equipment +

broadband = DIYSome DIY labels progress into indie

companiesrun by small staffgain mastery of production, CD pressing,

downloads, guerrilla promotion, and marketingMixed track record

Radiohead

Record Company StructureStructure and size may vary, but all

companies handle same basic tasks

Record Company Structure

Record Company StructureExecutive Officers CEO, COO, CFO, general managerOften strong entrepreneur who started labelTwo backgrounds for CEOs:

lawyerproducer

Must know “art of the deal”Must have good “ears”

Record Company StructureArtist & Repertoire (A&R)Concerned with finding + signing new talentMust keep informedRemain involved after signing

assist artistsadminister production or budget details of

albumact as liaison between artist and label

Large labels may have separate A&R departments

Record Company StructureDistribution/SalesConvince retailers to order and display CDsGet prominent “shelf space” at online storesScience in ordering specific quantities of CDs

don’t want excessive returnsdon’t want empty shelves

Record Company StructureMarketingProduct managementRadio promotion

heart of marketingget airplay and chartingarrange promotional appearances, interviews,

giveawaysVideo promotion

airplay on TVvideo streaming on the Web

Record Company StructureMarketingPublicity

media exposureless expensive than promotion

Advertisingco-op advertisingtrade publication ads

Creative servicesdesign all marketing campaign materials

Record Company StructureSpecial Products (Catalog)Two core responsibilities:

1. handle requests to license masters of older product

2. find new ways to redesign or repackage music “best of” packages themed multi-artist compilations boxed sets

Record Company StructureInternational DepartmentOversee foreign salesEnsure effective communication between

domestic and foreign affiliatesForeign sales may exceed domestic salesForeign territories will maintain their own

A&R operations

Record Company StructureBusiness and Legal AffairsIndustry revolves around contracts and

copyrightsLegal department

negotiates and drafts agreementsminimizes litigation

Larger companies may break these into smaller departments

Record Company StructureAccountingHandles a host of financial functions

recording budgetsinventorymanufacturingroyalties

(may be handled by separate department in larger company)

Record Company StructureMerchandiseHistorically supported concert toursNow handles artist-related merchandise360 deals give labels a direct stake in

merchandise revenue

Record Company StructurePublishing AffiliatesLabels generally own two publishing

companiesASCAP affiliateBMI affiliate

Seek to get publishing rights from artistsPublishing company

must show profit from own operationsmay sign artists not on record company’s

roster

Trade AssociationsRecording Industry Association of AmericaRepresents both major and minor labelsCertifies best-selling recordsLobbies government for label-friendly

regulationsRepresents industry to consumersCollects industry statistics Battles online piracy and CD counterfeitingMost prominent force in the big music labels’

drive to curb piracy

Trade AssociationsNational Academy of Recording Arts & SciencesHosts Grammy AwardsRegular membership

persons professionally active in industryAssociate membership

indirectly involved in record productionSponsors charitable endeavorsOffers grants and assistance programs

For Further Thought. . . What advantages do major labels have over

independent labels?What unique offerings do independent labels

bring to the recording industry?Will Do-It-Yourself recording and distribution

make labels irrelevant in the future? Why or why not?