Music Business Handbook and Career Guide Part 5

Music Business Handbook and Career Guide Part 5: The Recording Industry

Record Labels Chapter 15

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?

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.

Development of Recorded Music Late 1800 s early inventions 1900 – 1920 s record sales begin, “commercial” jazz 1930 s Great Depression , jukeboxes 1940 s singles, jukeboxes, one-stops, LPs 1950 s TV, rock and roll, rack jobbing, stereo sound 1960 s social turmoil, retailing, Beatles, major labels 1970 s indie labels, singer-songwriters, crossover recordings 1980 s technological change, CDs, video 1990 s home recordings, DAT, electronic delivery of music 2000 s piracy and P 2 P file sharing, legal downloads, 360 deals

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

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

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

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

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

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

Record Company Structure

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”

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

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

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

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

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

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

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

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

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

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

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

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

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?