Music industry

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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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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 organisations.

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.[1]

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 iTunes, 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.

The music industry is made up of various elements, including:

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.

The music groups coordinate the production, licensing, and copyright protection of sound recordings & videos and maintain contracts with recording artists and production companies as well as provide a distribution structure for their various owned and non-owned labels.

Record companies sign, market, publicize, develop and promote as well as provide sales support to the larger distribution companies for their releases and artists.

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.

US music market shares, according to Nielsen SoundScan (2005)
US music market shares, according to Nielsen SoundScan (2005)

Nielsen SoundScan reported that the big four accounted for 81.87% of the US music market in 2005:[2]

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%
World music market sales shares, according to IFPI (2005)
World music market sales shares, according to IFPI (2005)

The global market was estimated at $30-40 billion in 2004.[3] Total annual unit sales (CDs, music videos, mp3s) in 2004 were 3 billion.

According to an IFPI report published in August 2005,[4] 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%

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%

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 RSA 0.02-0.45% < 0.1%
19 New Zealand 0.19-0.29% < 0.1%
20 Denmark 0.10-0.25% < 0.1%

all figures in millions

COUNTRY UNITS VALUE CHANGE
Singles CD DVD Total Units $US Local Currency Units Value
1 USA 14.7 300.5 11.6 326.8 4783.2 4783.2 -5.70% -5.30%
2 Japan 28.5 93.7 8.5 113.5 2258.2 239759 -6.90% -9.20%
3 UK 24.3 66.8 2.9 74.8 1248.5 666.7 -1.70% -4.00%
4 Germany 8.5 58.7 4.4 71 887.7 689.7 -7.70% -5.80%
5 France 11.5 47.3 4.5 56.9 861.1 669.1 7.50% -2.70%
6 Italy 0.5 14.7 0.7 17 278 216 -8.40% -12.30%
7 Canada 0.1 20.8 1.5 22.3 262.9 325 0.70% -4.60%
8 Australia 3.6 14.5 1.5 17.2 259.6 335.9 -22.90% -11.80%
9 Spain 1 17.5 1.1 19.1 231.6 180 -13.40% -15.70%
10 Netherlands 1.2 8.7 1.9 11.1 190.3 147.9 -31.30% -19.80%
11 Russia - 25.5 0.1 42.7 187.9 5234.7 -9.40% 21.20%
12 Mexico 0.1 33.4 0.8 34.6 187.9 2082.3 44.00% 21.50%
13 Brazil 0.01 17.6 2.4 24 151.7 390.3 -20.40% -16.50%
14 Austria 0.6 4.5 0.2 5 120.5 93.6 -1.50% -9.60%
15 Switzerland ** 0.8 7.1 0.2 7.8 115.8 139.2 n/a n/a
16 Belgium 1.4 6.7 0.5 7.7 115.4 89.7 -13.80% -8.90%
17 Norway 0.3 4.5 0.1 4.8 103.4 655.6 -19.70% -10.40%
18 Sweden 0.6 6.6 0.2 7.2 98.5 701.1 -29.00% -20.30%
19 India - 10.9 - 55.3 79.2 3456.6 -19.20% -2.40%
20 Denmark 0.1 4 0.1 4.2 73.1 423.5 3.70% -4.20%
Top 20 74.5 757.1 42.8 915.2 12378.7 -6.60% -6.30%

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.[5]

  • Krasilovsky, William; Shemel, Sidney: This Business of Music, Billboard Books, ISBN 978-0823077236
  • Lebrecht, Norman: When the Music Stops: Managers, Maestros and the Corporate Murder of Classical Music, Simon & Schuster 1996
  • Imhorst, Christian: The ‘Lost Generation’ of the Music Industry, published under the terms of the GNU Free Documentation License 2004
  • Leonhard, Gerd: Music Like Water - the inevitable music ecosystem
  • The Methods Reporter: Music Industry Misses Mark with Wrongful Suits
  • Music CD Industry - a mid-2000 overview put together by Duke University undergraduate students
  • d’Angelo, Mario: Does globalisation mean ineluctable concentration ? in The Music Industry in the New Economy, Report of the Asia-Europe Seminar, Lyon, 25-28 oct. 2001, IEP de Lyon/Asia-Europe Foundation/Eurical, Editors Roche F., Marcq B., Colomé D., 2002, pp. 53-54.
  • d'Angelo, Mario: Perspectives of the Management of Musical Institutions in Europe, OMF, Musical Activities and Institutions Sery, ParisIV-Sorbonne University, Ed. Musicales Aug. Zurfluh, Bourg-la-Reine, 2006.

  1. ^ Dear Constanze The Guardian
  2. ^ Paul Cashmere (2006-01-05). Universal Is The Biggest Music Company of 2005. Undercover (Australia). Retrieved on 2006-05-27.
  3. ^ According to the RIAA the world music market is estimated at $40 billion, but according to IFPI (2004) it is estimated at $32 billion.
  4. ^ IFPI releases definitive statistics on global market for recorded music
  5. ^ BUSINESS AND PROPERTIES The Seagram Company Ltd.

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