mediaculture10e

The Business of Sound Recording

For many in the recording industry, the relationship between music’s business and artistic elements is an uneasy one. The lyrics of hip-hop or alternative rock, for example, often question the commercial value of popular music. Both genres are built on the assumption that musical integrity requires a complete separation between business and art. But, in fact, the line between commercial success and artistic expression is hazier than simply arguing that the business side is driven by commercialism and the artistic side is free of commercial concerns. The truth, in most cases, is that the business needs artists who are provocative, original, and appealing to the public, and the artists need the expertise of the industry’s marketers, promoters, and producers to hone their sound and reach the public. And both sides stand to make a lot of money from the relationship. But such factors as the enormity of the major labels and the complexities of making, selling, and profiting from music in an industry still adapting to the digital turn affect the economies of sound recording (see “Tracking Technology: The Song Machine: The Hitmakers behind Rihanna,” on page 138).

Music Labels Influence the Industry

After several years of steady growth, revenues for the recording industry experienced significant losses beginning in 2000 as file-sharing began to undercut CD sales. In 2013, U.S. music sales were about $7 billion, down from a peak of $14.5 billion in 1999, but relatively stable since 2010 (file-sharing peaked in 2005, having since declined). The U.S. market accounts for about one-third of global sales, followed by Japan, the United Kingdom, France, Germany, and Canada. Despite the losses, the U.S. and global music business still constitutes a powerful oligopoly: a business situation in which a few firms control most of an industry’s production and distribution resources. This global reach gives these firms enormous influence over what types of music gain worldwide distribution and popular acceptance.

Fewer Major Labels and Falling Market Share

FIGURE 4.2 U.S. MARKET SHARE OF THE MAJOR LABELS IN THE RECORDING INDUSTRY, 2013 Data from: Nielsen SoundScan, 2013. Figures are rounded.

From the 1950s through the 1980s, the music industry, though powerful, consisted of a large number of competing major labels, along with numerous independent labels. Over time, the major labels began swallowing up the independents and then buying one another. By 1998, only six major labels remained—Universal, Warner, Sony, BMG, EMI, and Polygram. That year, Universal acquired Polygram; and in 2003, BMG and Sony merged. (BMG left the partnership in 2008.) By 2012, Universal gained regulatory approval to purchase EMI’s recorded music division, and then only three major music corporations remained: Universal Music Group, Sony Music Entertainment, and Warner Music Group. Together, these companies control about 65 percent of the recording industry market in the United States (see Figure 4.2). Although their revenue has eroded over the past decade, the major music corporations still wield great power, with a number of music stars under contract and enormous back catalogs of recordings that continue to sell. Despite the oligopoly in the music industry, the biggest change has been the rise in market share for independent music labels.

The Indies Grow with Digital Music

The rise of rock and roll in the 1950s and early 1960s showcased a rich diversity of independent labels—including Sun, Stax, Chess, and Motown—all vying for a share of the new music. That tradition lives on today. In contrast to the three global players, some five thousand large and small independent production houses—or indies—record less commercially viable music, or music they hope will become commercially viable. Often struggling enterprises, indies require only a handful of people to operate them. For years, indies accounted for 10 to 15 percent of all music releases. But with the advent of downloads and streaming, the enormous diversity of independent-label music became much more accessible, and the market share of indies more than doubled in size. Indies often still depend on wholesale distributors to promote and sell their music, or enter into deals with one of the three majors to gain wider distribution for their artists (in the same way that independent filmmakers use major studios for film distribution). Independent labels have produced some of the best-selling artists of recent years; examples include Big Machine Records ( Taylor Swift, Rascal Flatts), Dualtone Records ( the Lumineers), XL Recordings (Adele, Vampire Weekend), and Cash Money Records (Drake, Nicki Minaj). (See “Alternative Voices” on page 143.)

TRACKING TECHNOLOGY

The Song Machine: The Hitmakers behind Rihanna

by John Seabrook

On a mild Monday afternoon in mid-January, Ester Dean, a songwriter and vocalist, arrived at Roc the Mic Studios in Manhattan for the first of five days of songwriting sessions. Her engineer, Aubry Delaine, whom she calls Big Juice, accompanied her. Tor Hermansen and Mikkel Eriksen, the team of Norwegian writer-producers professionally known as Stargate, were waiting there for Dean.

Most of the songs played on Top Forty radio are collaborations between producers like Stargate and “top line” writers like Ester Dean. The producers compose the chord progressions, program the beats, and arrange the “synths,” or computer-made instrumental sounds; the top-liners come up with primary melodies, lyrics, and the all-important hooks, the ear-friendly musical phrases that lock you into the song. “It’s not enough to have one hook anymore,” Jay Brown, the president of Roc Nation, and Dean’s manager, told me recently. “You’ve got to have a hook in the intro, a hook in the pre-chorus, a hook in the chorus, and a hook in the bridge.” The reason, he explained, is that “people on average give a song seven seconds on the radio before they change the channel, and you got to hook them.”

Today’s Top Forty is almost always machine-made: lush sonic landscapes of beats, loops, and synths in which all the sounds have square edges and shiny surfaces, the voices are Auto-Tuned for pitch, and there are no mistakes. The music sounds sort of like this: thump thooka whompa whomp pish pish pish thumpaty wompah pah pah pah. The people who create the songs are often in different places. The artists, who spend much of the year touring, don’t have time to come into the studio; they generally record new material in between shows, in mobile recording studios and hotel rooms, working with demos that producers and top-line writers make for them to use as a kind of vocal stencil pattern.

As was the case in the pre-rock era, when Phil Spector–produced girl groups led the hit parade, many of the leading artists of the post-rock era are women. Rarely a month goes by without a new song from Lady Gaga, Katy Perry, Beyoncé, Kelly Clarkson, Ke$ha, Rihanna, Nicki Minaj, or Pink near the top of the charts. But the artist who best embodies the music and the style of the new Top Forty is Rihanna, the Barbados-born pop singer. At twenty-four [in 2012], she is the queen of urban pop, and the consummate artist of the digital age, in which quantity is more important than quality and personality trumps song craft. She releases an album a year, often recording a new one while she is on an eighty-city world tour promoting the last one. To keep her supplied with material, her label, Def Jam, and her manager, Jay Brown, periodically convene “writer camps”—weeklong conclaves, generally held in Los Angeles, where dozens of top producers and writers from around the world are brought in to brainstorm on songs. After an album comes out, she may release remixes, like her recent ill-advised collaborations with Chris Brown, to give singles a boost. She has sold more digital singles than any other artist—a hundred and twenty million.

Rihanna is often described as a “manufactured” pop star, because she doesn’t write her songs, but neither did Sinatra or Elvis. She embodies a song in the way an actor inhabits a role—and no one expects the actor to write the script. In the rock era, when the album was the standard unit of recorded music, listeners had ten or eleven songs to get to know the artist, but in the singles-oriented business of today the artist has only three or four minutes to put her personality across. The song must drip with attitude and swagger, or “swag,” and nobody delivers that better than Rihanna, even if a good deal of the swag originates with Ester Dean.

Source: Excerpted from John Seabrook, “The Song Machine: The Hitmakers behind Rihanna,” New Yorker, March 26, 2012, www.newyorker.com/reporting/2012/03/26/120326fa_fact_seabrook.

Kevin Winter/Getty Images

Making, Selling, and Profiting from Music

INDIE LABELS are able to take chances on artists like Majical Cloudz, an indie pop duo from Montreal signed to Matador, an independent label based in New York. Majical Cloudz gained exposure by touring in summer 2014 with Lorde, who has a contract with Universal, the largest major label. Tim Mosenfelder/Getty Images

Like most mass media, the music business is divided into several areas, each working in a different capacity. In the music industry, those areas are making the music (signing, developing, and recording the artist), selling the music (selling, distributing, advertising, and promoting the music), and dividing the profits. All these areas are essential to the industry but have always shared in the conflict between business concerns and artistic concerns.

Making the Music

Labels are driven by A&R (artist & repertoire) agents, the talent scouts of the music business, who discover, develop, and sometimes manage artists. A&R executives scan online music sites and listen to demonstration tapes, or demos, from new artists and decide whom to sign and which songs to record. A&R executives naturally look for artists they think will sell, and they are often forced to avoid artists with limited commercial possibilities or to tailor artists to make them viable for the recording studio.

A typical recording session is a complex process that involves the artist, the producer, the session engineer, and audio technicians. In charge of the overall recording process, the producer handles most nontechnical elements of the session, including reserving studio space, hiring session musicians (if necessary), and making final decisions about the sound of the recording. The session engineer oversees the technical aspects of the recording session, everything from choosing recording equipment to managing the audio technicians. Most popular records are recorded part by part. Using separate microphones, the vocalists, guitarists, drummers, and other musical sections are digitally recorded onto separate audio tracks, which are edited and remixed during postproduction and ultimately mixed down to a two-track stereo master copy for reproduction to CD or online digital distribution.

Selling the Music

Selling and distributing music is a tricky part of the business. For years, the primary sales outlets for music were direct-retail record stores (independents or chains) and general retail outlets like Walmart, Best Buy, and Target. Such direct retailers could specialize in music, carefully monitoring new releases and keeping large, varied inventories. But as digital sales climbed, CD sales fell, forcing direct-retail record stores out of business and leaving general retail outlets to offer considerably less variety, stocking only top-selling CDs.

As recently as 2011, physical recordings (CDs and some vinyl) accounted for about 50 percent of U.S. music sales. But CD sales continue to decline and now constitute about 35 percent of the market. In some other Top 10 global music markets, such as Japan and Germany, CDs are still the top format, and the cultural shift from physical recordings to digital formats is just beginning.

Conversely, digital sales—which include digital downloads (like iTunes and Amazon), subscription streaming services (like Rhapsody and the paid version of Spotify), free streaming services (like the ad-supported Spotify, Rdio, YouTube, and Vevo), streaming radio services (like Pandora and iHeartRadio), ringtones, and synchronization fees (payments for use of music in media like film, TV, and advertising)—have grown to capture almost two-thirds of the U.S. market and 39 percent of the global market.21 About 40 percent of all music recordings purchased in the United States are downloads, and iTunes is the leading retailer of downloads.

Subscription and streaming services have been a big growth area in the United States and now account for about 21 percent of U.S. music industry revenues. The difference between a streaming music service (e.g., Spotify) and streaming radio (e.g., Pandora) is that streaming services enable listeners to stream specific songs, whereas streaming radio services allow listeners to select only a genre or style of music.

The international recording industry is a major proponent of music streaming services because they are a new revenue source. Although online piracy—unauthorized online file-sharing—still exists, the advent of advertising-supported music streaming services has satisfied consumer demand for free music and weakened interest in illegal file swapping. There are now about 450 licensed online music services worldwide.22 Spotify, one of the leading services, has more than twenty million licensed songs to stream globally, with over twenty thousand songs added every day. Spotify carries so many songs that 20 percent of them have never been played.23 Another service, Forgotify, creates playlists composed of these neglected songs.

Dividing the Profits

The digital upheaval in the music industry has shaken up the once-predictable sale of music through CDs. Now there are multiple digital venues for selling music and an equally high number of methods for dividing the profits. Although the digital download and streaming market has now surpassed physical sales, for the sake of example, we will first look at the various costs and profits from a typical CD that retails at $17.98.

The wholesale price for that CD is about $12.50, leaving the remainder as retail profit. Discount retailers like Walmart and Best Buy sell closer to the wholesale price to lure customers to buy other things (even if they make less profit on the CD itself). The wholesale price represents the actual cost of producing and promoting the recording, plus the recording label’s profits. The record company reaps the highest revenue (close to $9.74 on a typical CD) but, along with the artist, bears the bulk of the expenses: manufacturing costs, packaging and CD design, advertising and promotion, and artists’ royalties (see Figure 4.3 on page 141). The physical product of the CD itself costs less than a quarter to manufacture.

FIGURE 4.3 WHERE THE MONEY GOES Data from: Steve Knopper, “The New Economics of the Music Industry,” Rolling Stone, October 25, 2011, www.rollingstone.com/music/news/the-new-economics-of-the-music-industry-20111025; and Spotify, “Spotify Explained,” accessed June 7, 2014, www.spotifyartists.com/spotify-explained/.

New artists usually negotiate a royalty rate of between 8 and 12 percent on the retail price of a CD, while more established performers might negotiate for 15 percent or higher. An artist who has negotiated a typical 11 percent royalty rate would earn about $1.93 per CD whose suggested retail price is $17.98. So a CD that “goes gold”—that is, sells 500,000 units—would net the artist around $965,000. But out of this amount, artists must repay the record company the money they have been advanced (from $100,000 to $500,000). And after band members, managers, and attorneys are paid with the remaining money, it’s quite possible that an artist will end up with almost nothing—even after a certified gold CD. The financial risk is much lower for the songwriter/publisher, who makes a standard mechanical royalty rate of about 9.1 cents per song, or $0.91 for a ten-song CD, without having to bear any production or promotional costs.

The profits are divided somewhat differently in digital download sales. A $1.29 iTunes download generates about $0.40 for Apple (it gets 30 percent of every song sale) and a standard $0.09 mechanical royalty for the song publisher and writer, leaving about $0.60 for the record company. Artists at a typical royalty rate of about 15 percent would get $0.20 from the song download. With no CD printing and packaging costs, record companies can retain more of the revenue on download sales. Digital music sales also sometimes involve lucrative side deals: Jay-Z’s 2013 album Magna Carta Holy Grail was packaged as a freebie with his Samsung app, which meant Samsung “bought” over a million copies of it in advance, surpassing the album’s first-week sales of 528,000 (the Samsung deal was not counted as part of the album’s official sales).

LaunchPad

Alternative Strategies for Music Marketing

This video explores the strategies independent artists and marketers now employ to reach audiences.

Discussion: Even with the ability to bypass major record companies, many of the most popular artists still sign with those companies. Why do you think that is?

Another venue for digital music is streaming services like Spotify, Rdio, and Beats Music. Some leading artists initially held back their new releases from such services due to concerns that streaming would eat into their digital download and CD sales and that the compensation from streaming services wasn’t sufficient. One of the leading services, Spotify, reports that on average, each stream is worth about $0.007.24 Depending on the popularity of the song, that could add up to a little or a lot of money. For example, Spotify reports that similar to Apple’s iTunes, it pays out about 70 percent of its revenue to music rights holders (divided between the label, performers, and songwriters) and retains about 30 percent for itself. Spotify provided examples of what typical payouts might be for a range of albums in a single month (see Figure 4.3). For contrast, contemporary cellist Zoë Keating, an independent recording artist, reported that she earned just $808 in the first half of 2013 from 201,412 Spotify streams of two of her older recordings distributed by CD Baby.25

Songs played on Internet radio, like Pandora, Slacker, or iHeartRadio, have yet another formula for determining royalties. In 2000, the nonprofit group SoundExchange was established to collect royalties for Internet radio. (The significant difference between Internet radio and subscription streaming services is that on Internet radio, listeners can’t select specific songs to play. Instead, Internet stations have “theme” stations.) SoundExchange charges fees of $0.002 per play, per listener. Large Internet radio stations can pay up to 25 percent of their gross revenue (less for smaller Internet radio stations, and a small flat fee for streaming nonprofit stations). About 50 percent of the fees go to the music label, 45 percent go to the featured artists, and 5 percent go to nonfeatured artists.

Finally, video services like YouTube and Vevo have become sites to generate advertising revenue through music videos, which can attract tens of millions of views (see “Case Study: Psy and the Meaning of ‘Gangnam Style’” on page 142). For example, Beyoncé’s 2014 video for “Drunk in Love” drew more than 166 million views in just five months. Even popular amateur videos that use copyrighted music can create substantial revenue for music labels and artists. The 2009 amateur video “JK Wedding Entrance Dance” (reprised in a wedding scene in TV’s The Office) has about 87 million views. Instead of asking YouTube to remove the wedding video for its unauthorized use of Chris Brown’s song “Forever,” Sony licensed the video to stay on YouTube. At the rate of $1 per thousand video plays, it ultimately generated about $87,000 in ad revenue.

MY MORNING JACKET
Though fewer rock bands have found enormous success following the digital turn, this classic-rock-influenced band has built a large mainstream following. Even bigger bands, though, can sometimes make more money licensing their songs to ads than from record sales. My Morning Jacket’s songs have appeared in ads for Coors and in several movies. Al Pereira/WireImage/Getty Images

There aren’t standard formulas for sharing ad revenue from music videos, but there is movement in that direction. In 2012, Universal Music Group and the National Music Publishers’ Association agreed that music publishers would be paid 15 percent of advertising revenues generated by music videos licensed for use on YouTube and Vevo.

CASE STUDY

Psy and the Meaning of “Gangnam Style”

by Michael Park

South Korean musician Psy (aka Park Jae-Sang) became a pop-cultural sensation in the fall of 2012 with his viral Internet meme “Gangnam Style.” The video has now generated over two billion views, making it the most popular YouTube video ever. Within a few months of the video’s release, Psy was making appearances on national talk shows, such as The Today Show, Ellen, Chelsea Lately, and even an appearance on Saturday Night Live. Never before had a Korean pop (“K-pop”) artist reached such epic crossover success, despite dozens of music acts from Korea and Asia making the attempt.

Although Psy’s crossover appeal is largely unprecedented, his overwhelming popularity has many Koreans both gratified and puzzled.1 The K-pop music industry is primarily made up of young and attractive singers who often flaunt their sexuality. Psy, however, is a comedic performer who is significantly older (mid-30s), portly, and without the leading-man looks that have come to dominate the K-pop scene. Without question, the “Gangnam Style” music video is visually seductive, with its colorful setups, its catchy melody, and Psy’s signature horse dance. As a seasoned comedic performer, Psy offers wacky juxtapositions, and the video has been the subject of exhaustive parody by mainstream and user-generated media. Unbeknownst to most viewers, the video and the song’s lyrics offer a subversive message: Psy’s scathing critique of materialism and conspicuous superficiality run amok in Korea’s trendiest district—“Gangnam” (“south of the river” in Korean).

On one hand, it is possible to conclude that Psy’s crossover success represents greater social acceptance of Asian men who have historically been absent or marginalized in mainstream media representations. However, Psy and his physicality in the video also evoke one of the stereotyped roles that mainstream media has situated Asian men in: the emasculated and clownish Asian male. The celebratory reception of Psy’s “Gangnam Style” indicates that in order for Asian males to find popular appeal in the audiovisual realm, they too must negotiate with a “codified visual hierarchy” where consumers will only accept caricatured images of Asian men.

On The Ellen DeGeneres Show, it becomes clear that Psy’s value as a guest is centered on his comical dance; he is relegated to an object of humor who elicits laughs with his minstrel performance. Psy teaches Britney Spears and Ellen his horse dance before performing the song for the audience. Ellen fails to properly introduce Psy, and the audience and viewers learn nothing about him, nor are the song’s lyrics or subversive message inquired about. On Saturday Night Live, Psy’s comical horse dance and minstrelsy are further exploited in a sketch featuring host Seth MacFarlane. The point is clear: the comical dance moves and wacky visuals are consumed as silly entertainment and comic relief. Psy never speaks a word except for “Oppa Gangnam Style.” Like his debut on Ellen, Psy stands as a recognizable prop, eager to entertain with his comical physicality. On Chelsea Lately, Psy makes an appearance in a bit that has him galloping his signature horse dance while performing menial office tasks, such as stomping on cardboard boxes, dusting office portraits, and stapling papers. Throughout the skit, he never speaks; he never even blurts out “Gangnam Style” while performing his dance.

Psy’s “crossover success” into America’s mainstream cultural imaginary, coupled with the absence of prototypical male K-pop artists (e.g., Rain, Se7en, or Big Bang), who display high fashion and flaunt hyper-sexuality, bolsters the assertion that a codified visual hierarchy operates in the audiovisual space as well. While Psy’s popular appeal and celebrated reception in the American cultural imaginary are unprecedented, his image and physicality are tightly aligned with popular constructions of Asian men that define Asian masculinity as synonymous with emasculation and comic relief.

Source: Adapted from Michael Park, “Psy-zing Up the Mainstreaming of ‘Gangnam Style’: Embracing Asian Masculinity as Neo-minstrelsy?” an award-winning paper presented at the Association for Education in Journalism and Mass Communication conference, Montreal, Canada, August 2014.

Ozan Kose/AFP/Getty Images

Alternative Voices

JUSTIN BIEBER began posting videos of himself singing on YouTube when he was only twelve. By the time he was fifteen, his YouTube channel had over a million views and he caught the attention of a music executive. Signed to a major label (Island Records) in 2008, Bieber is now a certified sensation, with multiple hit songs and legions of teenage female fans, who have caused at least three stampedes at various appearances. ChinaFotoPress/ChinaFotoPress via Getty Images

A vast network of independent (indie) labels, distributors, stores, publications, and Internet sites devoted to music outside of the major label system has existed since the early days of rock and roll. The indie industry nonetheless continues to thrive, providing music fans access to all styles of music, including some of the world’s most respected artists.

Independent labels have become even more viable by using the Internet as a low-cost distribution and promotional outlet for downloads, streaming, and merchandise sales, as well as for fan discussion groups, regular e-mail updates of tour schedules, and promotion of new releases. Consequently, bands that in previous years would have signed to a major label have found another path to success in the independent music industry, with labels like Merge Records (Arcade Fire, She & Him, the Mountain Goats), Matador ( Yo La Tengo, Sonic Youth, Pavement), 4AD ( the National, Bon Iver), and Epitaph (Bad Religion, Alkaline Trio, Frank Turner). Unlike artists on major labels who need to sell 500,000 copies or more in order to recoup expenses and make a profit, indie artists “can turn a profit after selling roughly 25,000 copies of an album.”26 Some musical artists also self-publish CDs and sell them at concerts or use popular online services like CD Baby, the largest online distributer of independent music, where artists can earn $6 to $12 per CD. One of the challenges of being an independent, unsigned artist is figuring out how to sell one’s music on iTunes, Amazon, Spotify, YouTube, and other digital music services. TuneCore, founded in 2006, is one of many companies (including CD Baby) that have emerged to fulfill that need. For less than $100, the company will distribute recordings to online music services and then collect royalties for the artist (charging an additional 10 percent for recovered royalty fees).

LaunchPad

Streaming Music Videos

On LaunchPad for Media & Culture, watch a clip of recent music videos from Katy Perry.

Discussion: Music videos get less TV exposure than they did in their heyday, but they can still be a crucial part of major artists’ careers. How do these videos help sell Perry’s music?

Some established rock acts, like Nine Inch Nails and Amanda Palmer, are taking another approach to their business model, shunning major labels and independents and using the Internet to directly reach their fans. By selling music online at their own Web sites or selling CDs at live concerts, music acts generally do better, cutting out the retailer and keeping more of the revenue themselves. Artists and bands can also build online communities around their Web sites, listing shows, news, tours, photos, and downloadable songs. Social networking sites are another place for fans and music artists to connect. MySpace was one of the first dominant sites, but Facebook eventually eclipsed it as the go-to site for music lovers. In addition, social music media sites like the Hype Machine and SoundCloud; music streaming sites like Blip.fm, Rhapsody, Grooveshark, and DatPiff; Internet radio stations like Pandora, Slacker, and 8tracks; and video sites like YouTube and Vevo are becoming increasingly popular places for fans to sample and discover new music.