Industry brief: Music recording II
Part 1 3 more
As noted before, not only have the big five recording companies grown horizontally by spreading worldwide and grabbing labels in all kinds of markets, they have also expanded up and down the supply chain, from manufacturing to retailing to Internet and other retail sales. For example, Sony has been one of the largest manufacturers of compact disks for years, and BMG now has the biggest music club membership in Europe, while Sony and AOL-Time-Warner own parts of Columbia House, a major U.S. record club. And they all have their own music publishing businesses, where they control the rights to the vast majority of popular music from "Happy Birthday" to "Material Girl," and get money every time someone records an old song, plays it on the radio, or uses it in a sound track. In this way the control our whole ambient music experience.
As in all other businesses, the growth of the oligopoly in music is an attempt to exert control of our three factors. These companies don't get bigger because of some manifest destiny. They get big because only the biggest firms can control their own fates, even within the notoriously volatile music market.
Most of all they want to control shelf space. While they might fight against each other, together they determine nearly all of what gets on the shelves at music stores, at the record clubs, the online sources, and what gets played on the radio. Smaller firms can hardy get on the rack, and then can hardly get a timely resupply. Examples:
- Thanks to consolidation in the retail chains, they can have a big impact at a high level at such national companies as Borders, Tower, Sam Goody's, and few others, by offering specials and constantly managing relationships at the highest levels. (Indeed, they recently made a major court settlement based on price-fixing with the major stores.) They can influence how their recordings are displayed, they can help determine what goes on sale and when, and they can grab their share of the precious shelf space that stores command. In other words, they act the same way as Kraft, Pepsi, or Budweiser operates in the supermarket, only with even more concentrated power.
- They form an oligopsony for all musical artists in the world. They alone can guarantee international distribution for albums, especially in places like South America and Asia. They, and no one else, have the power to make sure that a hit becomes available across the world. Likewise, they alone can bring music from other countries (World Music) and give it exposure in the U.S. and Western Europe.
- They can own and manage the record clubs that are very popular way especially for college students to buy music.
- They can own their own distribution companies, so that small labels that want national exposure need the majors to get just-in-time delivery to the store shelves. Even the occasional independent hits at some point pass through the major recording companies' fingers.
- When they see a small label have a breakaway success, they can overwhelm them with cash and buy them out and the artist's contract. One area where this has happened in hip-hop, where corporate types have been happy to let those closer to street tastes to identify and consolidate the tastes of the audience, and bring up the artists until they are at a point where the majors could handle them.
- They can work with local concert promoters to set up tours with favorable conditions for the artists who they want to push. They can rearrange the beer and soft drink sponsorships that finance the tours. This fits in well with the fact that the best venues for performance in the industry are controlled by an even small number of concert promoters and bookers.
- They can have a big influence as radio play lists are decided on, especially since the radio industry is consolidating and centralizing decisions in fewer and fewer chains. This is not to say that they can force a hit or keep a loser on the air (the cruder kinds of payola are history), but they can get air time for what be overlooked otherwise or help build momentum as a hit takes off by making sure that the radio programmers know what's up. After all, the first step to getting to be a hit is getting heard. While cash payola may take place, there's no longer a need for the penny-ante variety. Big recording companies can wine, dine, and influence programmers at major chains. They also exert pressure as major advertisers for all their products, musical or not, on the same radio chains. Plus, increasingly, the decision-making more centralized. The great American story of singers like Loretta Lynn driving around the country to personally request disk jockeys to play their songs is long dead.
- Finally, they hope they can take on the whole Internet challenge or any other threat through major legal help and through the ability to put increasing pressure on governments, especially copyright violators. They may eventually take control of the online distribution industry, at least as much as they can control it. Meanwhile, their lobbying association The RIAA (Recording Industry Association of America) allows them to work in concert in spite of antitrust laws. They have already had major impact on copyright laws, and are trying to have Congress pass ever more restrictive laws governing use of copyrighted materials.
Our next installment will look at how the music industry prolongs the shelf life of its products.
10:09:47 AM 
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