1. Part 5: The Recording Industry

2. Chapter 15

3. 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?

4. Chapter Goals Acquire 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.

5. Development of Recorded Music Late 1800searly inventions 1900 – 1920srecord sales begin, “commercial” jazz 1930sGreat Depression, jukeboxes 1940ssingles, jukeboxes, one-stops, LPs 1950sTV, rock and roll, rack jobbing, stereo sound 1960ssocial turmoil, retailing, Beatles, major labels 1970sindie labels, singer-songwriters, crossover recordings 1980stechnological change, CDs, video 1990shome recordings, DAT, electronic delivery of music 2000spiracy and P2P file sharing, legal downloads, 360 deals

6. Perspective 3,000+ labels in the U.S. Major label owned and/or distributed by major distribution company Independent label indies lack affiliation with a major Majors dominate sales are well funded

7. Major Labels Tremendous investment in recordings required Artists attracted to majors prestige + marketing funds stability of established company more elaborate recordings Advantages in economies of scale Maintain inventories for longer periods Clear advantage in costly marketing of records Push weak recordings to sales success

8. Independent Labels First to find the “next big thing” Successful indies may be bought out by majors Technology blunted majors’ advantage majors focus on most popular + most lucrative leaves modest-selling artists + genres to indies Develop brand name awareness + consumer loyalty Connections at local and regional level

9. Specialty Labels Some of the most successful independents classical music Some release records “privately” Some may limit activities to certain demographic markets Gospel music effective promotional methods Specialty labels successful don’t compete with mainstream music don’t rely on traditional or expensive promotion

10. Do-It-Yourself Labels CDs + home-recording equipment + broadband = DIY Some DIY labels progress into indie companies run by small staff gain mastery of production, CD pressing, downloads, guerrilla promotion, and marketing Mixed track record Radiohead

11. Record Company Structure Structure and size may vary, but all companies handle same basic tasks

12. Record Company Structure

13. Record Company Structure Executive Officers CEO, COO, CFO, general manager Often strong entrepreneur who started label Two backgrounds for CEOs: lawyer producer Must know “art of the deal” Must have good “ears”

14. Record Company Structure Artist & Repertoire (A&R) Concerned with finding + signing new talent Must keep informed Remain involved after signing assist artists administer production or budget details of album act as liaison between artist and label Large labels may have separate A&R departments

15. Record Company Structure Distribution/Sales Convince retailers to order and display CDs Get prominent “shelf space” at online stores Science in ordering specific quantities of CDs don’t want excessive returns don’t want empty shelves

16. Record Company Structure Marketing Product management Radio promotion heart of marketing get airplay and charting arrange promotional appearances, interviews, giveaways Video promotion airplay on TV video streaming on the Web

17. Record Company Structure Marketing Publicity media exposure less expensive than promotion Advertising co-op advertising trade publication ads Creative services design all marketing campaign materials

18. Record Company Structure Special 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

19. Record Company Structure International Department Oversee foreign sales Ensure effective communication between domestic and foreign affiliates Foreign sales may exceed domestic sales Foreign territories will maintain their own A&R operations

20. Record Company Structure Business and Legal Affairs Industry revolves around contracts and copyrights Legal department negotiates and drafts agreements minimizes litigation Larger companies may break these into smaller departments

21. Record Company Structure Accounting Handles a host of financial functions recording budgets inventory manufacturing royalties (may be handled by separate department in larger company)

22. Record Company Structure Merchandise Historically supported concert tours Now handles artist-related merchandise 360 deals give labels a direct stake in merchandise revenue

23. Record Company Structure Publishing Affiliates Labels generally own two publishing companies ASCAP affiliate BMI affiliate Seek to get publishing rights from artists Publishing company must show profit from own operations may sign artists not on record company’s roster

24. Trade Associations Recording Industry Association of America Represents both major and minor labels Certifies best-selling records Lobbies government for label-friendly regulations Represents industry to consumers Collects industry statistics Battles online piracy and CD counterfeiting Most prominent force in the big music labels’ drive to curb piracy

25. Trade Associations National Academy of Recording Arts & Sciences Hosts Grammy Awards Regular membership persons professionally active in industry Associate membership indirectly involved in record production Sponsors charitable endeavors Offers grants and assistance programs

26. 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?