A Brief Overview of the Music Business
The following is an overview of the music business, the way in which it has evolved and how its various sectors interact to work as a whole. This has been put together in order to provide those attending the Note for Note industry roadshow with a nutshell biography of the industry and its key players, in order for them to better grasp what each of the parters’ role is, and what this means as part of the wider-ranging process which enables music, in all its forms, to be produced and brought to market.
Note for Note – The Music Industry Explained: Industry Roadmap
Serious business:
Imagine a world without music and you will realise it’s a fundamental part of our lives. It’s something we encounter daily, both in our working lives and leisure time, and is as essential a part of our culture as the written word. As something that is both inherently desirable and necessary for a full life, it’s a valuable commodity, and traded as such the world over. The music industry worldwide in 2006 was worth a staggering 30 billion pounds. The UK is Europe’s largest music market, and the world’s third largest, making up for 10.4% of world record sales in 2005. It’s also the world’s 4th largest music publishing market, again making for 10% of world wide revenues, and is second only to the USA as a source of repertoire. The British music industry is big business, and its size, complexity and high profile can often help to foster misconceptions and a lack of understanding about it’s various sectors and the way in which they work together as a whole. We’re here today, as representatives of those sectors, to tell you how these components interact to make the industry work, and why the industry developed as it did.
New Technology and Changing Models:
At present the industry is going through a period of great change. The advent of the digital download market has meant re-thinking our business models and finding new sources of revenue, as well as new ways in which to protect our interests. It’s tempting to see such periods of change as deeply negative, as harbingers of doom, but the industry has gone through many such periods, and has continued to flourish over the decades.
The development of the music as an industry was itself a fundamental change in the way consumers accessed music, brought about by the desire of composers and performers in the 18th century to free themselves of the restrictions on their work that were imposed by the princes and bishops who sponsored them. In realising that people were willing to pay for the privilege of hearing or playing their music, they sold their works in print and charged for their performances, and thus bought their artistic freedom.
Piracy (in particular the use of peer-to-peer software) is today’s hot potato, but it has been an equally pressing issue at various times in the industry’s history. In the 19th century, it was the sale of sheet music (which was by then the dominant format – with pianos in every middle-class home) that was under threat because of the massive number of cheap, illegal copies in circulation. Music Publishers and the songwriters and composers they represented struggled hard to suppress their production and circulation, and over the years succeeded in putting in place measures that safeguarded their business.
In the early twentieth century the development of the market for recordings was at first perceived as a threat to sheet music sales by publishers, and to the popularity of live performance by performers, but it was soon incorporated into their business models and became simply the largest of a variety of sectors that made up the industry. Publishers still licensed people to use the songs and the record companies got the performers to make the records as well as perform live.
When the use of broadcast radio first became widespread, it was this time perceived as a threat to record sales of all things, rather than a way in which to promote them.
The copying of song recordings later became the issue of the day, with the advent of reel-to-reel tape and later the cassette tape. The industry again adapted to these new formats, incorporating them into its business model and ensuring these developments grew the legitimate music industry rather than presenting a threat to it via piracy. The same thing is now happening with the market in online downloads, as record labels adjust to the demands of consumers and publishers embrace these alternative revenue streams.
Live performance, print music, licensed mechanical recordings; these practices and formats have endured despite the challenges they were forced to meet, and though the industry has changed over the years it has always survived, often growing stronger in the process.
The Value of Music:
As long as people want music and see it as something of inherent value, the industry will continue to exist. The speed at which new technologies develop and consumers’ preferred consumption trends change pose great challenges to the creators and writers of the industry in protecting their rights whilst adapting to the changes. But it’s not just about how people get music; the existence of affordable means to make broadcast quality material and market it from home means that the cost of entering the market is minimal; anyone can now write a song, make a record and promote their music online. Culturally, this can only be a good thing, It is often forgotten that writers and performers make their living from the use of their work, and copyright must be respected if we are to ensure that the rights of creators are protected. If we want consumers to respect the value of music, then it is essential that they understand something about how the industry that produces it works, and why it works in this way.
Who are the Music Industry?
• Writers and composers create the material, publishers license that material for use by record labels and other users (such as broadcast media – TV, web). This content is what is referred to as the musical “work”.
• Record companies get the performers to record the material, whether they are the ones who have written it or not, and market the records. This output is what is referred to as the “sound recording”.
So as you can see there are two creators involved when it comes to putting out a record – the writer (often via a publisher) and the recording artist (often via a record company).
They may be one and the same person, but there is a clear distinction to be made between the two separate roles in the process. If the song is in copyright, the rules of which are different for the musical work and the sound recording, both the writer and artist are able by law to control the use of their copyright to a certain extent, and to charge people for the use of it.
In most cases, the royalties earned through the use of these rights are collected and passed back to the writers and artists by collection societies.
In addition, each sector is also represented by a trade association, which lobbies to government and other sectors of industry on their behalf, and generally seeks to protect and promote their interests.
Exactly who are these people?
Here today are representatives from across the industry, who will be explaining to you what it is they each do, how they do it, how their business affairs overlap or are related, and how their activities might interest or benefit you.
To put this all in context before we begin, here is the “roadmap” of a song:
• The writer creates one musical work, which is recorded by an artist and is sold as many sound recordings.
• The writer’s interests are looked after by a publisher, and the artist’s by a record company.
• Both publishers and record companies are represented by trade associations, who lobby on their behalf and provide them with information services and a forum for discussion. In the UK, it is AIM and the BPI who represent record companies, and the MPA who represent music publishers.
• Collecting societies manage the flow of royalties from user to creator. In the UK, it is the MCPS-PRS Alliance who royalties for use of musical works, and PPL who do so for sound recordings.
So, let’s say Lennon and McCartney write a song, and all four Beatles record it. EMI Records are their record company, and will help them make and sell the record. Their publisher, which is now SonyATV Music Publishing, will be the ones who license people to use the musical work (including their record company). Lennon and McCartney will receive royalties for the use of the musical work, which will be collected for the by MCPS-PRS, but Harrison and Ringo won’t. However, for the use of the recording, each of the Beatles will receive royalties, which in this case would be collected by record companies. So, if someone decides to cover the song, only royalties on the work will be collected, and George and Ringo will receive nothing. If someone decides to use the recording, even if it’s only a sample, all four Beatles who performed the sound recording will receive royalties.