Music Industry
posted by the MusicMan, June 8th 2008
The music industry is the business of music. Although it encompasses the activity of many music-related businesses and organizations, it is currently dominated by the "big four" record groups, also known as "the major labels"/"the majors" — Sony BMG, EMI, Universal and Warner — each of which consists of many smaller companies and labels serving different regions and markets.
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Usage
When the term music industry is used in a narrow sense, it refers only to the businesses and organizations that record, produce, publish, distribute, and market recorded music (e.g., music publishers, recording industry, record production companies). This corresponds to the International Standard Industrial Classification (ISIC) that includes sound recording and music publishing activities (J-59).
When the term is used more broadly, it refers to a range of sub-industries that come from a number of different industrial classifications, including Information and Communication (which includes sound recording and music publishing activities), programming and broadcasting activities (e.g., radio stations), education (e.g., music training schools), Arts, entertainment and recreation, and manufacturing and retail sales (e.g., of musical instruments). In this broader sense, the term usually also encompasses not-for-profit organizations such as Musicians' Unions and writers' copyright collectives and performance rights organizations.
History
Until the 1700s, the process of composition and printing of music was mostly supported by patronage from the aristocracy and church. In the mid-to-late 1700s, performers and composers such as Wolfgang Amadeus Mozart began to seek commercial opportunities to market their music and performances to the general public. After Mozart's death, his wife (Constanze Weber) continued the process of commercialization of his music through an unprecedented series of memorial concerts, selling his manuscripts, and collaborating with her second husband, Georg Nissen, on a biography of Mozart.
In the 1800s, the music industry was dominated by sheet music publishers. In the United States, the music industry arose in tandem with the rise of blackface minstrelsy. The group of music publishers and songwriters which dominated popular music in the United States was known as Tin Pan Alley. In the early 20th century the phonograph industry grew greatly in importance, and the record industry eventually replaced the sheet music publishers as the industry's largest force.
Just as radio and television did before it, the advent of file sharing technologies may change the balance between record companies, song writers, and performing artists. Bands such as Metallica have fought back against peer-to-peer programs such as the infamous Napster, and the arguments for and against technology to circumvent them - digital rights management systems - remain controversial.
With the re-launch of Napster as a legally licensed download site in 2003 (in the US), along with the advent of Apple Computer's iTunes online music store in the same year, the major record companies have begun to embrace digital downloading as the future of the music industry.
Both Napster and Real's Rhapsody, with the support of the majors, are promoting a digital music subscription service. This may lead to a fundamental change in the way music is consumed, as a utility that "flows" into a person's house rather than as a commodity that is bought one-by-one. Music may well become purchased 'like water' (Leonhard, 2004), in that people will pay for their monthly consumption of music.
Business structure
The music industry is made up of various elements, including:
- Musicians
- Musical ensembles
- Musicians' Unions
- Composers and songwriters
- Publishers
- Writers' copyright collectives and performance rights organization like ASCAP and BMI (or MCPS and PRS respectively for the UK)
- Record producers
- Record labels
- Record distributors
- A&R
- Royalties
- Business managers
- Band managers
- Tour promoters
- Bookers
- Roadies
A record company is an entity that manages sound recording-related brands and trademarks which consist of their owned labels; their owned and licensed master recordings; and various related ancillary businesses such as home video and DVDs.
Labels may comprise a record group which is, in turn, controlled by a music group. As such, a larger umbrella label may have a number of sub-labels releasing music.
Music publishers exist separately (even if sharing the same ultimate holding company or brand name), and they represent the rights in the compositions - i.e. the music as written rather than as recorded.
Record companies and record labels that are not under the control of the Big Four music groups and music publishers that are not one of the Big Four are generally considered to be independent, even if they are part of large corporations with complex structures. Some prefer to use the term indie label to refer to only those independent labels that adhere to criteria of corporate structure and size, and some consider an indie label to be almost any label that releases non-mainstream music, regardless of its corporate structure. According to US Market Research Firm NPD Group, iTunes recently surpassed Wal-Mart as America's largest music distributor.
A record distributor is a company (often a record label) that works with record labels to promote and distribute their records, either in their home market or overseas.
Statistics
Nielsen SoundScan reported that the big four accounted for 81.87% of the US music market in 2005:
- Universal Music Group (France based) — 31.71%
- Sony BMG Music Entertainment, inc. (Japan/Germany based) — 25.61% (13.83% Sony, 11.78% BMG)
- Warner Music Group (USA based) — 15%
- EMI Group (UK based) — 9.55%
- independent labels — 18.13%
and in 2004, 72.64%:
- Universal Music Group — 29.59%
- Sony BMG — 28.46% (13.26% Sony, 15.20% BMG)
- Warner Music Group — 14.68%
- EMI Group — 9.91%
- independent labels — 27.36%
The global market was estimated at $30-40 billion in 2004. Total annual unit sales (CDs, music videos, mp3s) in 2004 were 3 billion.
According to an IFPI report published in August 2005, the big four accounted for 71.7% of retail music sales:
- Universal Music Group — 25.5%
- Sony BMG Music Entertainment — 21.5%
- EMI Group — 13.4%
- Warner Music Group — 11.3%
- independent labels — 28.4%
Prior to December 1998, the industry was dominated by the "Big Six": Sony Music and BMG had not yet merged, and PolyGram had not yet been absorbed into Universal Music Group. After the PolyGram-Universal merger, the 1998 market shares reflected a "Big Five", commanding 77.4% of the market, as follows, according to MEI World Report 2000:
- Universal Music Group including PolyGram — 21.1%
- Sony Music — 17.4%
- EMI — 14.1%
- Warner Music Group — 13.4%
- BMG — 11.4%
- Independent labels — 22.6%
Note: the IFPI and Nielsen Soundscan use different methodologies, which makes their figures difficult to compare casually, and impossible to compare scientifically.
Total Value by Country
According to the IFPI more than 95% of the total revenue from music in 2003 was derived from the 30 major countries in the propotions shown above.
Albums sales and market value
The following table shows album sales and market value in the world in the 1990s–2000s.
| N | Country | Album Sales Share | Share of World Market Value |
|---|---|---|---|
| 1 | USA | 37-40% | 30-35% |
| EU | 30-32% | 31-34% | |
| 2 | Japan | 9-12% | 16-19% |
| 3 | UK | 7-9% | 6.4-9.1% |
| 4 | Germany | 7-8% | 6.4-5.3% |
| 5 | France | 4.5-5.5% | 5.4-6.3% |
| 6 | Canada | 2.6-3.3% | 1.9-2.8% |
| 7 | Australia | 1.5-1.8% | 1.5-2.0% |
| 8 | Brazil | 2.0-3.8% | 1.1-3.1% |
| 9 | Italy | 1.7-2.0% | 1.5-2.0% |
| 10 | Spain | 1.7-2.3% | 1.4-1.8% |
| 11 | Netherlands | 1.2-1.8% | 1.3-1.8% |
| 12 | Mexico | 2.1-4.6% | 0.8-1.8% |
| 13 | Belgium | 0.7-0.8% | 0.8-1.2% |
| 14 | Switzerland | 0.75-0.9% | 0.8-1.1% |
| 15 | Austria | 0.5-0.7% | 0.8-1.0% |
| 16 | Sweden | 0.7-0.9% | 0.7-1.0% |
| 17 | Russia | 2.0-2.9% | 0.5-1.4% |
| 18 | Taiwan | 0.9-1.6% | 0.5-1.1% |
| 19 | Argentina | 0.5-0.7% | 0.5-1.0% |
| 20 | Denmark | 0.45-0.65% | 0.5-0.8% |
Singles sales
Physical single sales in the world in the 90s-00s and digital single sales in 2005.
| N | Country | Physical Sales Share | Digital Sales Share in 2005 |
|---|---|---|---|
| EU | 34-50% | 13.2% | |
| 1 | Japan | 26-32% | 1.7% |
| 2 | USA | 4-25% | 85% |
| 3 | UK | 14.5-16% | 6.3% |
| 4 | Germany | 9-12% | 5% |
| 5 | France | 4-12.5% | 1.9% |
| 6 | Australia | 1.8-4.6% | 0.48% |
| 7 | Netherlands | 1.3-1.7% | < 0.2% |
| 8 | Belgium | 0.8-1.8% | < 0.2% |
| 9 | Sweden | 0.6-0.96% | < 0.2% |
| 10 | Switzerland | 0.5-0.92% | < 0.2% |
| 11 | Austria | 0.58-0.82% | < 0.2% |
| 12 | Italy | 0.3-1.0% | < 0.2% |
| 13 | Spain | 0.3-0.7% | < 0.2% |
| 14 | Norway | 0.3-0.47% | < 0.2% |
| 15 | Ireland | 0.2-0.5% | < 0.2% |
| 16 | Canada | 0.1-0.6% | < 0.2% |
| 17 | Portugal | 0.01-1.0% | < 0.2% |
| 18 | Republic of South Africa | 0.02-0.45% | < 0.1% |
| 19 | New Zealand | 0.19-0.29% | < 0.1% |
| 20 | Denmark | 0.10-0.25% | < 0.1% |
Recorded Music Interim Physical Retail Sales in 2005
all figures in millions
| COUNTRY | UNITS | ||||
|---|---|---|---|---|---|
| Singles | CD | DVD | Total Units | ||
| 1 | USA | 14.7 | 300.5 | 11.6 | 326.8 |
| 2 | Japan | 28.5 | 93.7 | 8.5 | 113.5 |
| 3 | UK | 24.3 | 66.8 | 2.9 | 74.8 |
| 4 | Germany | 8.5 | 58.7 | 4.4 | 71 |
| 5 | France | 11.5 | 47.3 | 4.5 | 56.9 |
| 6 | Italy | 0.5 | 14.7 | 0.7 | 17 |
| 7 | Canada | 0.1 | 20.8 | 1.5 | 22.3 |
| 8 | Australia | 3.6 | 14.5 | 1.5 | 17.2 |
| 9 | Spain | 1 | 17.5 | 1.1 | 19.1 |
| 10 | Netherlands | 1.2 | 8.7 | 1.9 | 11.1 |
| 11 | Russia | - | 25.5 | 0.1 | 42.7 |
| 12 | Mexico | 0.1 | 33.4 | 0.8 | 34.6 |
| 13 | Brazil | 0.01 | 17.6 | 2.4 | 24 |
| 14 | Austria | 0.6 | 4.5 | 0.2 | 5 |
| 15 | Switzerland ** | 0.8 | 7.1 | 0.2 | 7.8 |
| 16 | Belgium | 1.4 | 6.7 | 0.5 | 7.7 |
| 17 | Norway | 0.3 | 4.5 | 0.1 | 4.8 |
| 18 | Sweden | 0.6 | 6.6 | 0.2 | 7.2 |
| 19 | India | - | 10.9 | - | 55.3 |
| 20 | Denmark | 0.1 | 4 | 0.1 | 4.2 |
| Top 20 | 74.5 | 757.1 | 42.8 | 915.2 | |
| COUNTRY | VALUE | ||
|---|---|---|---|
| $US | Local Currency | ||
| 1 | USA | 4783.2 | 4783.2 |
| 2 | Japan | 2258.2 | 239759 |
| 3 | UK | 1248.5 | 666.7 |
| 4 | Germany | 887.7 | 689.7 |
| 5 | France | 861.1 | 669.1 |
| 6 | Italy | 278 | 216 |
| 7 | Canada | 262.9 | 325 |
| 8 | Australia | 259.6 | 335.9 |
| 9 | Spain | 231.6 | 180 |
| 10 | Netherlands | 190.3 | 147.9 |
| 11 | Russia | 187.9 | 5234.7 |
| 12 | Mexico | 187.9 | 2082.3 |
| 13 | Brazil | 151.7 | 390.3 |
| 14 | Austria | 120.5 | 93.6 |
| 15 | Switzerland ** | 115.8 | 139.2 |
| 16 | Belgium | 115.4 | 89.7 |
| 17 | Norway | 103.4 | 655.6 |
| 18 | Sweden | 98.5 | 701.1 |
| 19 | India | 79.2 | 3456.6 |
| 20 | Denmark | 73.1 | 423.5 |
| Top 20 | 12378.7 | ||
In its June 30, 2000 annual report filed with the SEC, Seagram reported that Universal Music Group was responsible for 40% of worldwide classical music sales over the preceding year.
Music industry organizations
- Recording Industry Association of America aka RIAA
- American Federation of Musicians aka AFM
- American Federation of Television and Radio Artists aka AFTRA
- American Society of Composers, Authors, and Publishers aka ASCAP
- Broadcast Music Incorporated aka BMI
- SESAC
- Alliance of Artists and Recording Companies aka AARC
- Recording Artists' Coalition aka RAC
- Musicians' Union
- SoundExchange
- Country Music Association
- Harry Fox Agency
- Academy of Country Music aka ACM
- MCPS
- Performing Right Society
- National Academy of Recording Arts and Sciences aka NARAS
