O.K. So I just sat down and started to break down a fascinating article by Dave Harker on the Music Industry, the Crisis and the State!!! Why did I do this? Well, reading it is quite challenging. He makes a lot of sociopolitical references and uses a lot of figures to back his statements up with, (which is good really!). However, bottom line is, what he wrote was a pretty factual account of what has happened in the music industry up to 1997/98. And guess what, it makes bloody scary reading, .....for the Industry that is!! So, what are the salient points that arose? Well, try these for starters.......
-Music is an International business, it knows no geographical boundaries -In the current market system, size is the dominant factor for success -Roughly 80% of the world market for recorded music is owned by 5 companies!!! -Not only do they own the production and distribution, but they pretty much "own" the radio stations that market them, the venues where they are performed live and the retail outlets where the music is sold!
O.K. Time out, let's ask a question here. What are these companies doing, i.e. why do they exist? Obviously we could generate a million reasons, and quite a few would be valid. However, as these companies are all publicly traded stocks, they all need to generate one thing. They actually need to generate an awful lot of that thing, and guess what, it ain't Music. These 5 companies which control 80% of the World's music exist to make money. Now that's no bad thing if they then state what they're going to do with all the Moolah, but I've yet to see a business that existed for a reason other than making themselves or their shareholders money!! So, just to nail the point home, the great majority of world music is controlled by 5 companies who need to make lots of cash. Got that? Right, lets move on.................
-By 1992, recorded music sales averaged about 15% of the big 6's(as it was then before the next buyout) turnover -In 1993, over 60% of total U.K. Music Industry NET profits came from publishing royalties -In 1978 there were 4170 new album releases in the U.S -In 1990 there were just over 2,000!
O.K!!! Quick summary. The Industry is owned by a few major corporate players, they protect their monopoly and make it practically impossible to compete with them. They are making a lot more profit through copyright on already established acts than they do on record sales of new ones. As a result, less focus is put on getting new music "out there", and more is put to buying up every available piece of back catalog they can. Result? Consumer gets less music. Now check out these figures......
-By the mid 1990's, the cost to launch a new artist by the recording Industry was anything between $250k and $1million -The Industry reckoned on a success rate of 1 in 8!! -An artist will need to sell 200,000 albums, just to break even!
Beginning to get the picture? Generally big corporations are not risk takers (I've worked for one and it's certainly true from my experience!). So, take this scenario. You're the CEO of a multinational conglomerate and you look at your trading operations and notice that you seem to spending huge amounts of cash on a venture that gives you a 1 in 8 chance of recouping your investment! Plus, you notice that this venture only accounts for about 15% of your turnover. Hmmmmm. Maybe you'd start to look at other revenue streams that a) produced more revenue, and b) had a better chance of success!
So, what happened? Sony bought CBS in 1988 for $2billion, on an industry standard 10% return on turnover, it would have taken Sony 20 years to break even on the deal! So why did they do it?....Copyright and publishing royalties. CBS held one of the most valuable back catalogs on the market, including Michael Jackson's "Thriller". By the beginning of the nineties, that one album had brought Jackson $100million in mechanical royalties (that's album sales to you and me!), but incredibly another $150million in publishing, and what the hell is he doing with all that money?? Remember also that you can double those figures as a rough guide to what the record company was getting!!!!
O.K. Enough ranting and back to the article. Another quick summary.......It's the nineties, the Industry is owned by 5 companies that are out to make oodles of cash. They realise that it's really expensive and risky to launch new bands and create more music, so they buy up all the copyrighted works they can get their hands on and wait for the money to come rolling in without really having to do anything!
Small problem though. It seemed that there were some really really bad people in the world who thought it was o.k to copy their music and not pay a royalty to the companies. Shock, Horror and general cries of Foul!!!!!! Check out the figures, (by the way, the IFPI is the International Federation of Phonographic Industries, kind of like a global security guard for people who make cash out of the music industry!)
-1989, the IFPA launch an attack on piracy in Singapore. Seems that the legal market for recorded music was actually only 5% of what was being spent on bootlegs. Oops! -Same story in India -1988, there were 5000 CD rental shops in Japan. IFPA reckon the industry was losing $1billion dollars in royalty payments -1988, IFPA reckon that 45 million pirate cassettes are being sold in the U.S
Right, so you've geared your whole Industry around revenue streams that are protected by International copyright, and the world doesn't want to play!! So, what do you do? Well, without going into the details,(but if you want to know how the Chinese economy can affect how much you pay for a CD, read the article!) what you do is go political. Basically you get the President of the most powerful economy in the world to threaten trade sanctions if your target doesn't play ball. You encourage Countries like Italy, where copyright law only extends for 25 years, to upgrade to the 75 year model. Super!! And best of all, you can do it from the moral high ground that is ".......the protection of the poor struggling artist"
And give or take some insightful socio-geo-political comments, that was pretty much it. Huge thank you to Dave Harker for writing the piece in the first place, click the link to read the article. So, where does that leave us now?
Well, I'll save the rest for other articles, any comments that anybody has let us know, we'll post if it's relevant. Bottom line for me?....I can't wait to read Dave Harker's article in 2005 to see how the Industry reacted to the fact that Copyright suddenly became obsolete!!!!!
