The Economics of Sound Recording

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Sound recording is a complex business, with many participants playing many different roles and controlling numerous dimensions of the industry. Songwriters, singers, and musicians create the sounds. Producers and record labels sign up artists to create music and often own the artists’ work. Promoters market artists’ work, managers handle bands’ touring schedules, and agents seek the best royalty deals for their artist-clients.

Ever since sound recording became a mass medium, there’s been a lot of money to be had from the industry—primarily through sales of records and CDs. But with more and more music available for digital download, the traditional business model has broken down. Control of the industry became concentrated in the hands of a few giant music labels like Time Warner, even as independent production houses began cropping up. Then illegal downloading presented a particularly difficult hurdle for the industry. Money comes in today primarily from sources other than CD sales—such as download fees and touring. In fact, North American ticket sales from tours and concerts rose 7 percent from 2007 to 2008, generating $4.2 billion (average ticket price in 2008: $67).8 In the end, industry players and musical artists must rethink how they’re spending money and using their time to remain commercially viable (see “Converging Media Case Study: 360 Degrees of Music”).