Through this essay I intend to come to a conclusion as to whether record labels are dying out. I have researched this specialist subject in great detail and have gathered a lot of evidence to investigate this specialist subject. During the past few months I have carried out research on a weekly basis through such sources as the Internet and the newspaper.
I intend to argue the case on both sides of the argument, which are yes the record labels are dying out, and no they are not dying out. Arguing both cases will then help me to conclude the specialist subject.
I will write about the history of the music industry and how it used to be run, this will help me see how the music industry has developed and what effect this has had on record labels and artists. I will also write about how the music industry is ran now to see the difference between the industry now then it was some decades ago.
The music industry has changed in the past few decades due to a number of factors, which have had a huge effect on the music industry as a whole. Technology and bands deciding to ‘do it themselves’ through taking on the job role of the record label have been two major changes in the music industry I will write about how and why these factors have changed the music industry to how it is today.
I will also write about possible directions the music industry to go in the future to keep the music industry alive. This will be done through my opinion on the subject and other people related to the music industries predictions as to what will happen.
People are buying much less music, fewer bands/artists are getting signed and record labels are generating less profit. Some independent record labels are already going out of business due to the drastic changes within the music industry.
Through the research I have gathered I intend to investigate all of the factors listed above in order to come to a conclusion on the question ‘Are record labels dying out?’
History
The music industry used to be run very differently from how it is run now. The first record label to sell music is called ‘Columbia Records’. It is an American label and was founded in 1888, it is also the oldest surviving brand name in pre-recorded sound. It was originally a local company, which sold and distributed ‘Edison phonographs’ and phonograph cylinders in Washington D.C, Delaware and Maryland. The first three major record labels issuing recordings were Edison, Victor and Columbia.
Thomas Edison made the first recording of a human voice, which was the nursery rhyme ‘Mary had a little lamb’ in 1877. In the year 1902 he created the ‘Gold Molded’ cylinders, which were sold for $0.50 each, this was able to be mass produced through a molding process due to the improvement of the hard wax surface. ‘Red seal’ 10-inch discs also came on sale for $1.00 and had a 4-minute capacity. These had various popular artists in that time such as baritone Mattia Battistini. This information was found through the Internet. The article is titled ‘Recording technology history’ and was written by Steven Schoenherr.
1950′s
During the early 1950’s there were five record labels dominating the music industry which were as follows: RCA Victor, Columbia, Decca, Capitol and Mercury. Capitol became the fourth biggest record label when EMI the UK’s biggest music operation bought capitol for $8.5 million. During the years 1954-1958 independent record labels dominated the charts through the distribution of rock and roll and R&B recordings and the market share for the major record labels fell dramatically. By this point the music industry was booming and there was a lot of money to be made.
Major record labels came back to dominate the music industry during 1958 onwards.
1960′s
Many record labels were bought out by others during the 1960′s and the major labels in the music industry kept changing due to this.
Towards the end of the 1960′s the major labels changed to being CBS, Warner Brothers, RCA Victor, Capitol-EMI, PolyGram and MCA.
As you can see the major labels dominating the music industry are very different to the ones in the 50′s. This is due to companies such as Warner Brothers with lots of money behind them buying out labels. Warner Brothers bought out independant labels such as Valiant and Autumn.
1970′s
Towards the end of the 1970′s the top major labels were CBS, EMI, Warner, PolyGram and MCA
This shows that most of the major labels were able to stay dominent within the music industry. I feel that labels were able to keep making money due to the level of technology there was during the 1950′s-70′s as their was no such format as MP3′s therefore no one could illegally download the music and had to purchase the music at record shops.
1980′s
Towards the end of the 1980′s the major labels were Sony, Warner, PolyGram, BMG, EMI and MCA.
Sony managed to become the most dominent label through purchasing Columbia for $2 billion. Sony had a lot of money available as they created the compact disc player along with Philips. CD’s and players became commercially available in 1982 and were a huge success, Vinyl Lp’s was the most popular configaration until mid 1980′s and then the cassette took over until until 1992 when the CD became the most popular configaration. To this day CD’s are still in production. Although MP3 files have taken over from CD sales they are still available to purchase.
1990′s
Towards the start of the 1990′s the RIAA (www.riaa.com) reported that the cassette was still more dominent then the CD of music purchases in 1990. The cassette had 55% of the market share, the CD had 31% of the market share. 5 % of the market share was by vinyl LP’s. The CD finally became the most popular configaration in 1992.
During 1989 and 1990 the World Wide Web was created based on the works of Tim Berners-Lee. This opened a huge gateway for music in the way it was listened to, the way it was purchased, the way it was advertised and the way it was acquired illegally. MP3 files were also approved by the Moving Pictures Experts Groups (MPEG) as the new storage for computer audio files which were of CD quality. These some of the main changes within the music industry which would have a massive effect on the industry.
In 1998 Diamond multimedia introduced the portable MP3 player and this was to have a huge effect of the music industry.
2000′s
During the 2000′s the record labels were shrinking through merging together. This was through loss of earnings as the internet allowed users to download free music off such websites as Napster and MP3.com. record labels fought back through attempting to purchase these websites. The biggest record label during the 2000′s ‘Vivendi Universal’ purchased MP3.com, Vivendi Universal became the biggest label through Canal+ merging with Seagram.
Napster was closed down due to copyright infringement as illegal downloading was becoming increasingly popular. A lot of people would rather illegally download the MP3 files for free rather then pay for them.
Record labels started to fight back to illegal downloaders through the RIAA filing lawsuits against people who illegally downloading songs. But due to the large amount of people illegally downloading they were only able to sue a small amount of the people worldwide illegally downloading.
During the 2000′s there were 4 major labels as Sony and BMG emerged the other three labels were Universal, EMI and Warner.
During this decade more people watched shows such as American Idol and The X-Factor then they did the Grammy awards and the Brit awards. Which was a huge wake up call to the music industry, as more people were interested in watching amatuer performers in a competition then major signed acts, this was a new way of record labels making money through using media such as the TV to make a profit through people voting for their favorite amateur performers to win the shows.
The winners of shows such as American Idol and The X-Factor were given poor record contracts which ensured that the record labels earned the maximum amount of money possible while the artist earned the minimal amount.
The music industry has changed drastically over the decades. The record labels started to lose money during the 1990′s and it is constantly getting worse to this day. This is due to a number of factors such as configurations music is stored on and the internet, these were not problems during 1950-1989 then started to become an increasing problem from 1990 onwards until today, this will carry on being a major problem within the music industry and may be the main reason that record labels would die out. therefore the record labels need to come up with a solution to this problem in order to stay in business.
The record labels were constantly changing and emerging throughout the decades and they seemed to never be the dominent label for very long until one of the competitors took over.
Record labels had to merge together to keep there companies alive. after looking at the history of the music industry I have started to believe that yes the record labels are dying out, but there are still record labels to present, so it makes me think that they are not dying out as record labels are still running to this day
the information i found about the music industries history is shown on the following webpage: (http://playlistresearch.com/recordindustry.htm)
This backs up all of the information i have found in regards to the history.
Technology
Technology such as the MP3 format, the Internet and Cheap recording equipment have had a huge impact on the music industry and affected the record labels.
The MP3 format and the Internet
Shown in the history of the music industry above is a short description of when the Internet and the MP3 format were both created. These put together were a huge threat towards the record labels as they opened a huge new way for music listeners to get there music.
There are some opportunities for the record labels to embrace the Internet as new media channels offer a new way of selling products through digital downloading, music on demand and complementing CD sales with online content. Although the internet offers new revenue streams for the record labels, it also has a lot of dangerous threats to the record labels survival with it.
The record labels tried to control the distribution of music via the internet through websites such as ‘iTunes’, and ‘Amazon’ where people could purchase the MP3 files. There were and still are P2P (Peer to Peer) file sharing websites where people can download music free of charge, and although this is illegal to download the songs without the copyrighters permission these websites are still used on a daily basis by thousands and thousands of people.
A survey was carried out by three researchers (Herkko Hietanan, Anniina Huttunen, and Heikki Kokkinen). The survey was filled in by 6,103 people and was on three magazine websites, two of which were technology news sites. It shows that the P2P sharers are aware that they are breaking the law through downloading the songs for free, but it also shows that over 50% of the people in the survey said they would be happy to pay a monthly fee for a service that enabled unlimited video and music file sharing and downloading.
Record labels are fighting back through taking action on people who illegally download music and according to the information gathered in the survey the P2P sharers are aware of this but the risk of getting caught is so small they would rather risk it then purchase the music at the local music store such as HMV.
IFPI estimates that tens of billions of music files are illegally traded annually worldwide at an estimated ratio of 20 illegal downloads to every track purchased. (http://www.ifpi.org/content/library/DMR2008.pdf). this ratio shows that alot more music is downloaded illegally then purchased. This ratio does make me wonder how the music industry is still running and it makes me see why so many record labels would have to merge together to stay in business and why other record labels have became bankrupt.
77% of people who completed the survey said that they have downloaded unauthorized music, movie and TV series files. It is astonishing just how many people illegally download music, movies and TV series files through P2P websites.
The survey is found on the following document:
http://www.law.ed.ac.uk/ahrc/script-ed/vol5-1/hietanen.pdf
P2P websites such as Napster have been shut down due to law suits filed against them by record labels. Napster was shut down in September 2002. The RIAA (The Record Industry Association of America) won a trial about whether Napster were violating the copyright law. The RIAA works with record labels such as BMG, Sony Music, Warner Music Groups and EMI, they have also stated that Napster have cost the music industry $300 million in lost sales sue to illegal downloading on the P2P website.
Napster allowed people to download software off the Internet which let users share files on each others hard drive. This meant that record labels were losing money as people were getting the music for free rather then purchasing the music at a local music store or on websites such as i-Tunes.
For information about Napster I read the following articles:
http://news.bbc.co.uk/1/hi/entertainment/852283.stm
http://tecom.cox.smu.edu/esnir/SnirRecordIndustry.pdf
http://mcs.sagepub.com/cgi/content/abstract/25/3/333
Bands/artists taking on the job role of the record labels
Cheap recording equipment has allowed bands/artists to do the record labels job themselves which basically cancels out the middle man and gives the bands/artists 100% of the profit made. In the past bands were unable to do this as the equipment needed to make industry standard recordings cost so much. But now recording equipment is of such a high quality and is relatively cheap. Some bands/artists have decided to ‘do it themselves’.
Enter Shikari from Hertfordshire decided to ‘do it themselves’ through setting up there own record label to release there music. The record label (Ambush Reality) was set up so that they could stay in control of their careers and not have someone telling them what to do and when to do it. Record labels often get in the way of certain things bands/artists want to do, therefore Enter Shikari took on the record labels job role and did everything when and how they wanted to do it. Below is a quote from a interview Enter Shikari had about the record label:
“That’s something that’s quite important to us. We’ve worked everything out over these three years, organically and naturally, and we feel like we really want to keep as much control as possible, keep the strong DIY effort. With our own label that was something we always thought would be a great thing to do, luckily now we’ve got a nice manager and team around us and we can set this up and do it properly. It’s working at the moment which is great. These two weeks that we’ve had off from playing live, have been really hectic. It’s just been meetings with lawyers, meetings with labels, and all sorts of people. It’s just been non stop. It’s just been hard work, Obviously that‘s not so much the rock ‘n’ roll side of things, that stuff doesn’t get talked about. But obviously when we’re setting up our own label it was something that had to be expected, so it’s been hard work but I think definitely it’ll be worth it”.
Enter Shikari have been offered many record deals from major record labels but turned down the offers and to this day are still releasing music on Ambush Reality. Through 3 years of constant touring they managed to get a cult following and a lot of sales of there singles via the Internet. Enter Shikari have been very successful up to now and I feel they will continue to be successful.
Information about Enter Shikari can be found at the following site:
http://www.ukmusic.com/features/interviews/enter-shikari-do-it-their-way.html
Technology has meant that record labels have been losing money through illegal downloads on P2P websites such as Napster, KaZaa and Lime wire. And technology has also opened new gate ways for bands to make it in the music industry without the record labels help. I feel the record labels are going through a very tough time at present and are desperate to find a way of canceling out the illegal downloads to ensure that they get a lot of revenue.
Although bands/artists are able to ‘do it themselves’ which is proven by Enter Shikari’s efforts. It is a very difficult thing to do and the majority of bands/artists decide to keep with the record labels rather then setting up their own label to ensure that 100% of the profit goes to them. A lot of time, effort and funds is needed for a band/artist to ‘do it themselves’.
I feel that technology is more of a threat to the record labels then a gift. And i also feel that P2P websites are more of a threat to the record labels then bands/artists deciding to do it themselves at present. but the future could change this as a lot of bands/artists may decide to do it themselves leaving the record labels with a small amount of artists to earn money off. There are many ways the music industry can go in the future due to the increasing level of technology and I feel the record labels must find a way to keep up with the new technology, the technology gives me the opinion that the record labels are dying out due to the way they have dealt with the technology up to now, as they are not using the technology to their advantage.
Possible Directions for record labels to take
There are possible directions the record labels can take in the future to keep itself alive one of these ways is called the 360 degree record deal. This is the new contract record labels are getting artists such as Paramore and Madonna to sign up to. A 360 degree record deal basically means that the record label will take a cut of the profit from everything. This is an example 360 degree record deal:
1. Recording. The artist will get the regular 15% per CD sale (roughly $1.50-$1.75) with online sales split the same way.
2.Merchandise. The record label will take 10% of the income, which not only includes t-shirt and poster sales, It also includes corporate sponsorship and clothing branding etc.
3.Touring. The record label will take 10% after expenses such as hiring the tour bus etc, For a big band/artist such as Madonna who is on a 360 degree deal this would be a huge amount of money.
4.Publishing. The record label also takes a cut of the publishing .
The old record deals meant the artists main source of income was from merchandise and publishing as the record labels did not take a cut from either of these. but now this new 360 degree contract has started to eat away at the bands/artists income. I feel this is due to the decline in CD sales due to people illegally downloading music from the P2P websites. Record labels have seen they are not making as much profit as they were before and they are thinking of ways to react to the change in the music industry. During 2002 one in three discs sold was pirated and I feel they have took these figures and decided to act on the issue.
I feel the 360 degree deal is not the path the record labels should take in order to ensure they keep the labels alive and profitable as the bands/artists will not be happy with the lack of money they are getting through making their music and I feel the majority of bands/artists will decide to ‘do it themselves’ just as Enter Shikari have.
I used the following resource to find out information about the 360 degree record deal:
http://musicbizinsider.spaces.live.com/blog/cns!894E9884C15D34B5!245.entry?sa=236637456
The major record labels are also considering merging once again as they have done before to ensure that they stay profitable and in business. BMG and Sony are considering merging together, Patrick Reilly a spokesman from BMG said that a tie-up with Sony would form a company that would “help us sustain and maintain or record labels”. He also said that without merging together both record labels would face reduced investment. EMI also believes that merging up with Time Warners Music would save them up to $300 million per year.
I feel this would save the major record labels and keep them running and i also feel this would have no effect on the independant labels. In my opinion this is the way to tackle the problems that have arose within the music industry over the past two decades.
The information about the possiblilty of the record labels merging together is on the following web page:
http://news.bbc.co.uk/1/hi/business/3264083.stm
Conclusion
In conclusion I feel that the record labels are dying out, but I feel that the record labels have took onboard all the threats that have arose which may jeopardize their future within the music industry and are trying to find a solution to the problem before its too late.
I can now understand why artists have suddenly decided to ‘do it themselves’ and i can also see that the record labels are struggling due to these threats which have aroses. Taking more and more money from the bands/artists signed to them is showing that they are making less money then they were in the past before the improved technology came along
If the record labels do not change the way things are going within the music industry at present then I feel they will eventually begin to shut down. But if the record labels find a solution to the problems I feel they will overcome the threats that have arose due to the improvement of technology they will thrive and start to make a higher revenue like they did in previous decades before the internet and MP3 configuration were invented.
I feel the record labels should agree to merge together to increase their revenue and keep themselves running smoothly. The 360 degree record deal does not seem to be the path the record labels should take to improve the situation they are in as I feel more and more bands/artists will decide to ‘do it themselves’ to maximize the money they make through the music they are producing.
There are a lot of reasons why I think that the record labels are dying out, but as the music industry is still running the record labels can not be making a loss as they would not continue to run their businesses. In my opinion the record labels are earning less money then they were before the Internet and the MP3 file were invented and before industry standard recording equipment was cheap and easily acquired. Therefore I feel they are trying to find a way to earn the same amount of profit as they did during the decades before the improvement of technology. But in my opinion unless things change yes the record labels will slowly but surely shut down one by one.
