The music industry is a term most commonly deployed in reference to the activities of the four largest transnational record corporations – often designated as the “majors” or the “big four,” namely SonyBMG, EMI (Electric and Music Industries), the Warner Music Group (WMG), and the Universal Music Group (UMG) – which collectively account for approximately 75 percent of all legal commercial music sales globally. All of these corporations are umbrella organizations linking smaller music labels, subsidiaries, and supplementary organizations together through complex corporate ties to larger transnational media conglomerates. Emerging from a long series of mergers occurring over the past century, these music corporations wield significant influence over the contemporary global music market.
Consequently, many scholars point to the ways these corporations “control” global music production, sustaining their position through the technological, political, and economic power they bring to bear on the ways music operates transnationally as culture and commodity. Other scholars, however, suggest that the complexities behind this term are not properly engaged within such arguments. Still others critically point to the ways in which the term music industry has come to stand in for all global music practices, ignoring the significant ways music is produced, consumed, and circulated beyond the immediate logics and power of the big four. While debates on specific aspects of the power, identity, and future of these entities continue, their impact on the historical growth and development of music as a global commodity is not in question.
History Of The Music Industry
The term “music industry” initially referred to activities surrounding sheet music publishing and its ancillary industries (theaters, music education institutes, publishing houses, etc.), responding to a growing general interest in music in European societies in the sixteenth century. The economic relationships surrounding music became further enhanced with the advent of music copyright protection, which additionally regulated and stimulated music market commerce. By the end of the nineteenth century, the use of music had morphed from being primarily a secular pursuit of the wealthy or local communal activity to being structured through a range of commodities (e.g., sheet music, concerts, instruments, etc.) commonly bought, engaged, and enjoyed through market practices. Through the increasing intersection of these disparate markets and technological developments, the “recording industry” came into being.
Music recordings were initially but one of many kinds of recorded performances utilized to sell gramophone machines, the initial objective of the nascent “gramophone industry.” However, the transnational sales success of Enrico Caruso’s recordings in particular steered this industry to focus on music as its primary venture with these machines. Caruso’s success demonstrated that recorded music sales could transcend local markets and served to establish global production strategies as the industry norm early on. Anglo-American music products were positioned for success through these strategies due to the ways in which western colonialism established and directed global flows of culture and communication. Some local music cultures were simultaneously developed as a means to nurture gramophone sales in regional markets, while others were ignored for cultural or economic reasons (e.g., Sub-Saharan Africa), allowing them to subsequently develop alternative dynamics to their music cultures.
Emergence Of Dominating Companies
Several companies – the Gramophone Co. (UK), Deutsche Grammophon (Germany), and Pathé Frères (France) in Europe, and the Victor Talking Machine Co., Edison, and Columbia (CBS) in the USA – quickly emerged to dominate the developing global music market, for several reasons. First, the increasing consumer pool and demand that materialized in industrialized countries (where all were headquartered) meant greater profits for these companies (as opposed to those in developing markets), and in turn, greater assets and a stronger potential for broader investment globally.
Second, these companies intentionally developed extensive global distribution channels and networks for their products, understanding quickly that rapid delivery of products to meet/create demand in more markets was the key to building their operations. Third, by producing complete systems of recording technology (recording equipment to records), these companies controlled access to most of the scarce and expensive music pressing facilities and recording technology of the time. Fourth, these companies possessed and fostered active research and development divisions, which kept them at the cutting edge of technological innovation and market developments. Finally, the undeveloped retail sector for records and gramophones placed constraints on market competition, further strengthening the dominant position of these companies, while demand for records was skyrocketing.
Consequently, the emerging global music market quickly became an oligopoly by the time of World War I. Local record production remained vibrant, however. Small market activities were often regulated through the regional factories, network subsidiaries, and licensee agencies the dominant companies had established in these outlying areas. Consequently, global music production was structurally “filtered” by these companies, a position only strengthened by the transnational extension of patent and copyright law through international treaties and agreements regarding the circulation of cultural products.
However, despite largely controlling the emergent infrastructure surrounding global music commerce, these companies’ attempts to dictate or predict the sale of records were consistently thwarted by local cultural proclivities. A series of market fluctuations occurred in the 1920s and 1930s, initiating several mergers and moves toward consolidation in the industry. The global shift in interest toward American culture, coupled with developments in media and technology (radio, jukeboxes, the 33 and 45 rpm, etc.) and the USA’s increasing presence and power in global affairs after World War II served to stabilize the global music market oligopoly once again.
By the 1950s, the six biggest companies – now RCA-Victor, Columbia, Decca, Capital, MGM, and Mercury – accounted for 50 percent of global sales. By 1960, four companies (RCA-Victor and CBS in America; Decca and EMI in Europe) dominated the global market, expanding their influence by extending their distribution and financial networks and consolidating their power by forming music corporations. Growth and integration continued in the global music market as trade barriers were relaxed, standards of living increased in developing nations, and music technology and products spread farther and faster than ever before.
The majors facilitated and kept a careful watch on global trends, as their advantages in capital, distribution, production capabilities, and market influence positioned them more effectively to exploit product potential across a wider spectrum of interest and markets. As such, by the mid-1960s, the majors had commonly become characterized as bloated impersonal corporations interested only in producing superstars, blockbuster albums, and profits, despite releasing and promoting a wide array of records, artists, and musical genres.
The 1970s brought new investment in the music industry from larger entertainment media entities, which viewed the industry’s profits as a means to bolster their corporate bottom lines. Polygram and Warner joined EMI, RCA, and CBS to become “the big five.”
Industry growth into the 1980s was fueled by the eventual co-optation and incorporation of disparate sub-cultural genres (disco, punk, new wave, reggae, ska), the development of communication technologies and networks (the Sony Walkman, MTV, the compact disc), and the integration of international markets and disparate voices (“world music”). All of these extended the commercial logics related to music ever deeper into the global realm. The emergence of internationally oriented perspectives – stimulated by the extended reach of communication technologies and the ways in which transnational corporations began to conceptualize “global” culture, markets, and strategies – served to intensify the means with which, and the scale on which, the majors approached their business.
The concept of the global music superstar was redefined after the success of Michael Jackson’s Thriller. The subsequent transnational success of other stars (Madonna, Prince, Bruce Springsteen, etc.) coupled with the increasing awareness of music’s profits in international markets only solidified emerging conceptions and ideas regarding global music trends and the “logic” of marketing English-singing global superstars transnationally. The enormous profits generated in the 1980s reinforced the power and priorities of these companies.
The switch to digital technologies as the industry standard generated another series of mergers and acquisitions, with several foreign companies entering the arena in search of further integration and synergy. At the close of the 1980s, six integrated music firms – Warner, EMI, Polygram, MCA, Sony, and BMG – controlled 66 percent of the global music industry. The dawn of the 1990s brought developments in media synergies, cross-media marketing strategies, and initiatives to further exploit music profitability in many new markets (e.g., China, the former Soviet bloc). Sales soared and optimism abounded, with the industry recording an alltime high profit of $40 billion in 1995. The euphoria, however, was short lived.
The Industry In Crisis
By 1998, it became clear that the industry dynamics were changing. Sales began to stagnate, music piracy increased, and Polygram divested its music divisions, leaving Universal, EMI, BMG, Sony, and Warner as the big five in 2000. Digital formats and technological innovations allowed for the confluence of organized hard piracy networks, CD-R technology, the Internet, and peer-to-peer file sharing to present a dramatic, extensive, and sustained threat to the majors.
The big five’s hold over global distribution – its primary source for profits – was substantially undermined despite the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement (1994), the US Digital Millennium Copyright Act (1998) (utilized to enforce global rights management policies at the state level), and a proliferation of lawsuits against file-sharing companies, individual users, and Internet servers. Judicial progress was most often offset by the arrival of new and more advanced file-sharing technologies and networks, and efforts to develop digital rights management (DRM) software and legitimate online distribution or subscription networks often caused more difficulties than solutions, disrupting integrated marketing capabilities and angering customers and industry professionals alike.
In 2004, the latest successful merger out of several ongoing attempts between the majors produced SonyBMG, rearranging the field into the big four. Despite downsizing, restructuring their organizations, and reconfiguring their business models, the majors’ situation remained dire: 2006 marked the industry’s sixth consecutive year of losses. In light of virtually unabated music piracy and file sharing, the imminent demise of the CD and most specialized retail music stores, and shifts in practices and capabilities related to music production, consumption, and distribution (e.g., Pro Tools software, the rise of the iPod and the single format preference, ring tones, MySpace.com, YouTube), the majors were forced to aggressively pursue alternative income streams (e.g., commercial and television song placement) as a means to offset their losses.
Expectations For The Future
It remained to be seen how the big four would adapt to the new media landscape. Although the majors retained for the time being a dominant position with regard to global retail market share and their ability to impact developments related to global music culture and commodities in general, scholars have begun to reconsider the complexities related to their contemporary situation and how the global dynamics regarding music are being reconfigured. For some, this means reconceptualizing the big four: exploring the complexity of these organizations’ networks, procedures, and strategies on multiple levels, so as to ascertain a more intricate understanding of how they actually “dominate” global music production, and also how the current global “crisis” for these corporations is related to the nexus of cultural identity, globalization processes, and neo-liberal policies and practices. These studies equally address how (on multiple levels) ideas of structure, culture, determination, agency, music, identity, geopolitics, and corporate power are conceptualized and enacted.
Others have begun to focus on how music is produced, used, and circulated transnationally within and beyond the reach and logics of the big four, suggesting that conceptions of the global music industry need to be broadened. Still others are considering how alternative spaces, innovative technologies, new “products,” and emerging policies are redefining the commercial use and value of music. As these research trajectories suggest, much work remains to be done with regard to understanding the emerging dynamics surrounding music as both symbolic culture and transnational commodity in relation to how the music industry – as a cultural industry – is globally organized.
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