Cory Wolff

PUTTING IN WORK: The music business is over

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In the 1890s, there were traveling vaudeville shows that went from city to city, performing and singing songs for the public to enjoy. Of course, it’s the 1890s, so the only way for them to hear their favorite songs again is if they play them themselves. A few days after seeing a show, they would go to the music store to buy the sheet music and play it on their piano at home. In that time, sheet music sold just like records and albums today, and the companies that sold the sheet music did very well.

Around the turn of the century, a new invention called the piano roll became available for sale. These were literally rolls of paper with perforations in them that triggered the piano to play a certain key. Just like sheet music, you could go to the music store to buy a roll for a certain song, except this time the piano would play it automatically.

When this happened, the people in the sheet music business said, “We’re done for. The music business is over.”

Well, clearly, this didn’t happen. Congress created the Copyright Act to ensure that the publishers of the sheet music received royalties on each piano roll sold. The sheet music and piano roll businesses flourished.

In the 1930s, the United States was faced with the Great Depression. Like many industries, the music business took quite a hit. The vaudeville shows couldn’t afford to go out on the road. The musicians couldn’t afford to go out on tour. Yet, there was still a need for music.

Up to this point, radio had primarily done news broadcasting. Wanting to increase their listener base and noticing the demand for music, they started to bring bands into the studio to perform. The bands would come in and perform a set live on the radio for everyone to hear.

Why would anyone want to buy the sheet music or records when they can hear it for free on the radio? Again, the sheet music and record companies said, “We’re done for. The music business is over.”

Radio proved to be an extremely powerful promotional tool for the record companies, and their sales increased! Fans would hear the music on the radio and decide to own the record.

Let’s fast-forward to 1999, when record sales hit a peak of $14 billion due to a technological innovation known as CDs. This was a new technology where digital music was first introduced. The compact disc provided superior sound, and with some excellent marketing behind it, it caught on like wildfire. The music industry loved CDs because of their sound quality, but more importantly, because of their profit margins. CDs had a markup of more than three times that of a cassette. This new product cost them between $2 and $4 each, which they would then sell for $20.

Record companies were flush with cash – more cash than they had ever seen in the industry.

And then the music industry gods said, “Let there be Napster.”

As we all know, Napster was a peer-to-peer file sharing service that allowed users to download and share music for free. Virtually any song you could think of was on there, and you didn’t have to pay. The file sharing service became so popular that it amassed 70 million users in less than a year.

Record companies saw that this was a pretty big hit to their business and, naturally, freaked out. Once again, they said, “The music business is over.”

Napster was sued by the RIAA and shut down, but this had shown that people wanted to download music. They loved the Sony Walkman and CD player, but they also loved the convenience of music at their fingertips. This is when Steve Jobs stepped in to create the iPod and iTunes. iTunes didn’t have the same markup as CDs, but it turned out to be a pretty good compromise for both record companies and consumers.

Some people say that the music business is dying and that it will end soon. Record sales are declining steadily as mass culture turns to streaming services. I don’t think this is bad for the industry; I just think that we’re in a weird transitional period.

The compact disc created such profits that the decline looks worse than it is. I can see why people would freak out. The truth is that musicians can still make money. It’s just like any other business. When you see one revenue stream isn’t working, you figure out other ways to make money. Live performance revenue is up, vinyl is doing better than anyone expected, and the business will be just fine.

Putting in Work: The Beauty of Music & Business is a bi-weekly column filled with thoughts, inspirations, and experiences from a music marketer born and raised in Scranton. Let’s step our game up together.

  • I agree that there is a large shift happening in the music industry, and the RIAA is still trying to figure out just exactly how to gain back profits and control (TSwift being the only musician to go platinum this year is a good example that the majors still don’t have their shit together). Mainstream labels popularized CDs (CD sales were slow at first- you needed new equipment to play them, cassettes were still cheaper, overall resistance to change) back in the early 90s by refusing to buy back any unsold cassettes and vinyls- meaning that when music stores had a surplus of unsold White Snake 7″, they weren’t able to send them back to the label and be compensated. However, they could buy as many CDs as they wanted to resell, and be compensated for any leftovers. I’m surprised that the RIAA didn’t monopolize file sharing back in 1999 (thank goodness they didn’t, I can see what a ripple effect this would of had, not just for musicians, but even forward to net neutrality), however I wouldn’t be surprised to see these efforts more clearly in the future (added costs to distributors like CDBaby and Tunecore to artists).
    I think musicians need to realize that they’re apart of this wacky shift in the music industry. The 3 major labels that control the popular radio airwaves are looking for “entertainers” more than real musicians- but this isn’t necessarily a bad thing. In fact, it’s kind of exciting. Now smaller labels are able to have a greater impact and work with a new business model. They’re able to be supportive of their artists, and focus more on touring, marketing, merch, which is ultimately where musicians of today should look to make money.

    • Cory Wolff

      Very well said! CDs became popular because of a well thought out and executed marketing strategy(mainly by Sony), that allowed the labels to charge $20 per CD. They loved it!

      I’ve read some things over the years about the RIAA and the decisions they made in the 90’s. Most notably, suing Napster instead of working with them. If they decided to work with Napster, they most likely would have figured out a much more beneficial setup and would have come close to monopolizing file sharing. In my opinion, it’s a good thing that they totally blew it because I like the direction the industry is heading. Yea, streaming sucks, but soon they’ll figure it out.

      Taylor Swift and her team aren’t doing anything revolutionary. They -along with the rest of the majors- are starting to use a windowing strategy that the film industry has used for years. Like you said, it’s an exciting time in music!