The Music Industry: How Record Labels Changed Everything

Abstract

The days of the superband are over. Artists do not make extravagant amounts of money or dominate the market for decades anymore. The middle class of musicians has emerged, and it is here to stay, but  the artists that comprise it are not as permanent (Holmes, “There’s A Rising Middle Class”). In today’s music industry, survival is the name of the game.

What happened to the rockstars? This is the question Michele Catalano, a writer for Forbes Internet magazine, asks in her article, “Where Have All the Rockstars Gone?” She wants to know what happened to the era that produced near immortal music legends multiple times per decade, “where is this generation’s Led Zeppelin? … Is there no band whose name will be sported on the tattered t-shirts of kids 30 years from now?” It is a thought-provoking question. There have been several icons to pop up over the last ten years, but no artist or group of artists have fully taken control of the music market like the 1960-80s. The real question is has the music industry become so corporate to a point where staying in the market is nearly impossible?

Artists spend large portions of their lives trying to be signed to a record label or performing for their respective label. Courtney Love, a current musician and actress, states in her letter to recording artists that in order for these recording companies to make a profit, the album must go gold or platinum. According to Professor of Music Business/Management Maggie Lange in a 2008 interview titled “Two Things That Your Record Deal Absolutely Must Have,” “only about five percent of artists see a backend royalty.” This statement means that only five percent of signed artists ever make a profit. With that kind of success rate, the incentive to enter the record deal market for musicians is minuscule, and the selectivity has only increased as time has passed. Today, the successful artists are straight out of a cookie cutter says Robin Davey in his article on  MusicThinkTank.com, “Now if you do not fit the predisposed top 40 vision of the major label machine, there is no space left for you.”  This extremely selective doctrine of hiring artists wreaks havoc on the salaries of artists of today. Musicians are near the bottom of the list in respect to money . On average, the salary for a musician is $39,337 (payscale.com). This number includes all artists, whether signed or unsigned by a record label. Music labels provide every asset a signed artist requires to produce an album, but these assets are treated as an advance on the royalties of the musician or band. After revenue is generated, the money is usually divvied out in the following manner:

Money Chart
This chart, from MinorityFortune.com, shows the most likely scenario of monetary distribution for your average band. The first aspect that should become apparent is that the band earns approximately one-sixth of what the record label acquires. This one-sixth is then split among the band members, including their management and support team. Those artists that get signed are being forced out of their share of royalties.

The monetary issues are only half of the problem to the musicians. This preview of the documentary Money for Nothing: Behind the Business of Pop Music by the Media Education Foundation expresses a sample of the artists’ creative concerns about the monopolies being formed by record labels.

The filtration that occurs previous to the publication of albums obviously angers artists. Their hard work and artistic expression is tampered with and sometimes never even published due to an executive order. This instruction is made on purely economic intuition by a businessman, not based on what the artist wants. A real-world example of this scenario is Ben Folds’ song One Down, a satirical piece poking fun at his record label’s requirements. His lyrics about disregarding integrity and being forced to produce are the aspects that make this song effective (“One Down- Ben Folds”).

Artists come and go, and record companies are forever, as shown by this timeline, and the balance of power is really not that balanced .Record Label Longevity

The music industry has become the mirror of the oligopoly that was seen in the artists of the 1960s through the 1980s. The “rule of three,” a life trend that seems to apply in any situation, infers that in any mature industry, such as that of music, three top competitors will emerge (Henderson). Compared to the end of the above timeline, it appears the “rule of three” claims yet another victim. With this narrow selection of options for artists, the record labels can be more selective in who they sign and what the terms are. By delineating the product, the artist, the record label can influence the profit, particularly due to the set up of the music industry: the recording companies control everything. They have the majority in production studios, distributors, and marketing strategies. Record labels know they are in control, and they throw their weight around accordingly, adopting the “take it-or-leave it” attitude to deal with contract negotiations with new artists. This forces new musicians to accept detrimental contracts while the music industry squeezes every last penny out of the fresh meat artists like the imaginary band in Courtney Love’s letter to recording artists on Salon’s online magazine (Love, “Courtney Love Does the Math”).

Today, the market is made up of several sources of income including CDs, digital purchases, and online streaming. The makeup of incoming revenue has changed over the last forty years. These images from the Recording Industry Association of America (RIAA) show the composition of the income of the entire music industry from 1973 to 2013, a four-decade span.

FusionCharts

Music Industry Change Gif

The top graph shows that the music industry is struggling in the most recent decade, down over fifty percent from its peak in 1999. It also shows the dominance of the CD and its efficiency in producing revenue before the turn of the millennium. During this time, consumers were buying whole albums for full price, and fans bought all the albums of their beloved bands and musicians. This concept of purchasing was blind to which band was under scrutiny because fans bought the whole CD, regardless of the band. However, from the outside looking in, if an artist was not already established in the business, generating sales was tough work. That is the original purpose of record labels: getting music out there. Then music labels started making real money and making business moves to increase profit. This evolution of the market forced the shift of power to occur, from the select few artists that controlled the fan-base to the cartel of record labels that wanted to control the fan-base’s wallet.

Once online downloading of singles became an option, music sales started the decline to today’s industry revenue level, due to the growth of music purchasing and streaming websites. The internet and the ability of the consumer to dissolve the classic album into a list of singles has torn down the illusion of the CD and made music into an industry of profitability.

UnitsAs shown by this graph, more than fifty percent more units of music are being sold than ever before, which is eerily similar to the percent change in revenue seen in the other RIAA graph. The money the record labels used to delegate to paying artists has been completely redistributed to account for deficits, and what money the artists can make is minimized because of copyright agreements and pathetic royalty rates (“The Economics of Making Music”). Artists that are used up, out-of-date,  and cannot contribute to the work force are deemed a financial waste and forced out(“How To Make It in the Music Industry”). Those that can stay relevant make a pittance on online downloads and streaming (Reed).

Over 700 new albums were released in 2013, compared to under 400 in 1973 (Wikipedia). This statistic appears contradictory to all the information provided above. Why would anyone go into the music industry when there is no monetary incentive? Artists are releasing albums in order to prove the system wrong, being successful without a record deal, like Kellee Maize — “an unsigned rapper and singer from Pittsburgh.” With the advent of the Internet, music is wildly more accessible and marketable to the population, making the publication of an album much easier and the accumulation of income from said album just as simple. The overall trend presents itself as a freeform influx and exodus of these modern artists where getting into the music industry is relatively easy whether or not the artist has a deal, but continuing to produce music, making a sustainable profit, and staying relevant are extremely difficult.

 

Works Cited


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“List of 2013 Albums.” Wikipedia. Wikimedia Foundation. Web. 1 Dec. 2014. <http://en.wikipedia.org/wiki/List_of_2013_albums>.

“MONEY FOR NOTHING: Behind the Business of Pop Music | Media Education Foundation.” Media Education Foundation. Media Education Foundation, 1 Jan. 2001. Web. 28 Nov. 2014. <http://www.mediaed.org/cgi-bin/commerce.cgi?preadd=action&key=113>.

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“The Two Things That Your Record Deal Absolutely, Positively Must Have.” ArtistsHouseMusic. Web. 27 Nov. 2014. <http://www.artistshousemusic.org/videos/the two things that your record deal absolutely positively must have>.

Catalano, Michele. “Where Have All The Rock Stars Gone?” Forbes. Forbes Magazine, 28 Feb. 2013. Web. 26 Nov. 2014. <http://www.forbes.com/sites/michelecatalano/2013/02/28/where-have-all-the-rock-stars-gone/>.

Davey, Robin. “What Are the Odds of Succeeding WITH a Record deal?” Music Think Tank. Music Think Tank. Web. 27 Nov. 2014. <http://www.musicthinktank.com/blog/what-are-the-odds-of-succeeding-with-a-record-deal.html>.

DiyMusicBiz.com. “How To Make It In The Music Industry.” MusicClout. Musicclout Inc. Web. 28 Nov. 2014. <https://www.musicclout.com/contents/article-359-how-to-make-it-in-the-music-industry.aspx>.

Forde, Kevin. “Top 10 Albums Only Recorded Because Of Contractual Obligations.” Toptenz.net. 16 Apr. 2013. Web. 27 Nov. 2014. <http://www.toptenz.net/top-10-albums-only-recorded-because-of-contractual-obligations.php>.

Henderson, Bruce. “The Rule of Three and Four.” www.bcgperspectives.com. The Boston Consulting Group. Web. 27 Nov. 2014. <https://www.bcgperspectives.com/content/Classics/strategy_the_rule_of_three_and_four/>.

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Holmes, David. “There’s a Rising “creative Middle Class” — Patreon Raises $15M to Make Sure Those Artists Get Paid.” PandoDaily. PandoDaily, 23 June 2014. Web. 26 Nov. 2014. <http://pando.com/2014/06/23/theres-a-rising-creative-middle-class-patreon-raises-15m-to-make-sure-those-artists-get-paid/>.

Love, Courtney. “Courtney Love Does the Math.” Salon. Salon RSS, 14 June 2000. Web. 26 Nov. 2014. <http://www.salon.com/2000/06/14/love_7/>.

Love, Courtney. “Courtney Love’s Letter to Recording Artists.” GerryHemmingway.com. Web. 25 Nov. 2014. <http://www.gerryhemingway.com/piracy2.html>.

Maize, Kellee. “How I “Made It” in the Music Industry: My Top 10 Tips.” The Huffington Post. TheHuffingtonPost.com, 25 Mar. 2014. Web. 28 Nov. 2014. <http://www.huffingtonpost.com/kellee-maize/how-i-made-it-in-the-musi_b_5024003.html>.

Reed, Brian. “Who Really Profits from Your ITunes Downloads?” Investment Strategies, Education & News. Investing Answers, Inc., 11 Nov. 2011. Web. 26 Nov. 2014. <http://www.investinganswers.com/personal-finance/rich-famous/who-really-profits-your-itunes-downloads-3818>.

Resnikoff, Paul. “30 Years of Music Industry Change, In 30 Seconds or Less… ” Digital Music News. Digital Music News 15 Aug. 2014. Web. 28 Nov. 2014. <http://www.digitalmusicnews.com/permalink/2014/08/15/30-years-music-industry-change-30-seconds-less>.

 

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