| |
||
The Internet and the Decentralisation of the Popular Music Industry: Critical Reflections on Technology, Concentration and Diversification |
|
|
|
|
||
| |
Introduction: digital distribution and empowerment? |
|
| Computer and Internet technologies are enhancing the ability of independent artists and labels to promote, market and distribute music more cheaply and widely. Many have suggested that the benefits of online digital distribution will reduce the barriers to entry in the music industry for independent labels and artists, allowing them to reach consumers more directly by bypassing the gate-keeping powers of major labels, major label distributors and traditional media channels.[1] |
1 |
|
| Accordingly, some have argued that with the Internet the music industry will be decentralised or ‘democratised’ as independent labels and new actors in the music industry (e.g., music downloading services, digital distributors and online independent labels) displace major record labels and decrease their control over music markets. Marcus Breen’s[2] optimistic appraisal of new technologies is one of the most explicit examples of this perspective but similar perspectives have been expressed in the academic literature and have been ubiquitous in the popular press. Although Internet technologies do have some potential to decentralise the popular music industry, I believe these claims have been grossly overstated. |
2 |
|
|
|
||
| There is a conflation in academic and popular discussions of the Internet between possibilities and actualities.[3] As Eamonn Forde has cogently argued, utopian interpretations of the impacts of Internet technologies simplify the complexity of current developments in the popular music industry.[4] More broadly, these interpretations fail to recognise the complex social nature of technologies and the ways in which cultural, economic and political contexts inform the uses and impacts of technologies. |
3 |
|
| A more nuanced understanding of the history and organisation of the music industry and its current trajectory indicates that major labels are currently repositioning themselves in ways that maintain or enhance their gate-keeping powers. The continued importance of traditional formats and media as well as the major labels’ privileged ability to control, utilise and access emerging networks through preferential access to financial, technological and human resources, helps them maintain or enhance their power in the music industry and mitigate the decentralising potential of the Internet. |
4 |
|
| In this article, I argue that the development and popularisation of new technologies ultimately tends to reinforce existing social hierarchies and relations. Although increasingly accessible technologies typically destabilise established social relations, vast inequalities in access to technologies, capital and social networks inhibit a more far-reaching and lasting destabilisation. Furthermore, this persistence of concentration within the music industry and the specific ways in which it is organised tend to limit the possibilities of diversification of music genres and the ethnic and national diversification of participation in the industry. |
5 |
|
| In articulating these critiques, the overarching goals that guide this study are twofold: 1) To argue for the need for more sophisticated approaches to understanding the relationship of technologies to culture in popular music studies and ethnomusicology and to explore the political economy which shapes the nature of this relationship; 2) To support the validity of some elements of the ‘cultural imperialism’ thesis in understanding the history and current trajectory of the music industry. Despite its simplistic formulation and application among some music scholars, the basic tenets of the ‘cultural imperialism’ thesis provide a powerful tool for understanding and critiquing the contemporary music industry. Foregrounding political economic analysis of the music industry in discussions of technology and culture is essential to transcending some of the limitations of existing scholarly discussions of new technologies.[5] |
6 |
|
| It is important to note that my analysis in this article focuses on the popular music industry in the restricted sense that it is commonly understood within the ‘West’. That is, my analysis focuses on the most formally organised aspects of the international music industry and does not focus on the multitude of popular musics that circulate in more ‘informal’ markets. I focus my gaze on the popular music industry in this rather restricted sense, because it is typically the implicit or explicit referent in the discussions of ‘decentralisation’ that are the focus of my critique. I also focus on this aspect of the music industry because it is the most profitable, the most globalised and there exists a greater wealth of quantitative and qualitative information that allows for analysis of patterns of concentration and diversification. |
7 |
|
| By focusing my analysis on this aspect of the music industry I do not mean to imply that only those musics that are the most profitable and salient to those in the “West” are important or meaningful. Indeed those musics that are conventionally considered to comprise the ‘popular music industry’ are not necessarily the most popular or culturally significant from a global perspective. |
8 |
|
| Outline |
||
| This article is divided into four main parts: 1) a discussion of the historical relationship between technology and decentralisation in the popular music industry; 2) a discussion of the impacts of digital distribution on patterns of control and concentration in the popular music industry; 3) a discussion of the implications of market concentration for musical diversity; 4) a concluding discussion about the relationship between technology, decentralisation and ‘democratisation’. |
9 |
|
| This article begins with a brief discussion of the relationship of new technologies and decentralisation in the history of the music recording industry, where I argue that technology has played an important role in facilitating decentralisation in certain periods, but that such decentralisation can only be understood through viewing technology as part of broader socio-economic networks and not an outcome of technology in and of itself. |
10 |
|
| Drawing on this historical perspective, I then engage in a detailed analysis of the implications of digital distribution for major labels, independent artists, independent labels and emergent actors in the music industry (i.e., music downloading services and digital distributors). My analysis focuses especially on patterns of concentration and on the ways in which the power relations between established and emergent actors in the music industry have been and are being affected by new technologies. In this section I argue that digital distribution does indeed offer the potential for a relative decentralisation, but that such decentralisation is less marked than some have argued and that it is likely to be of a transient nature. My argumentation draws upon an analysis of the trend in the music industry during the 1990s towards ‘flexible’ organisation (i.e., a shift away from production to distribution, licensing, promotion and marketing), in which certain aspects of the music industry have become decentralised while others have become increasingly concentrated. I examine the continuities of this historical trend with current changes, rather than assuming some radical technologically-induced rupture in the structure of the music industry. |
11 |
|
| In the third part of this article, I address the relationship between diversification of musical genres and styles and industry concentration. I emphasise that there is no clear inverse relationship between market concentration and diversification, as has been commonly argued, but that diversification is still limited by the current organisational structure of the music industry and the ways in which resources are allocated. Although limited diversity is not an inevitable outcome of high concentration, concentration tends to narrow the possibility of diversification by enhancing the gate-keeping power of particular locales, ethnicities and classes and their ability to manage musical diversity. I close my discussion with some speculation about the implications of digital distribution for marginalised musical cultures and explore some of the myths and realities of ‘world music’, the globalisation of the music industry and the role and implications of technologies in these phenomena. |
12 |
|
| In the concluding section of this article I articulate a broader critique of the relationship of technologies to ‘democratisation’ and decentralisation. I argue that discourses that equate technological innovation with ‘democratisation’ help disguise and justify the expansion of inequalities and the reproduction of existing social hierarchies. |
13 |
|
| Part 1: Historical interrelations between technology and decentralisation |
||
| Introduction |
||
| In this part of the article, I will discuss the two major periods of decentralisation in the history of the popular music industry and then examine the role of technologies in these processes, exploring how factors such as market growth, socioeconomic inequalities and the organisation of the industry limit the extent and permanence of decentralisation made possible by technological innovations. |
14 |
|
| Peter J. Alexander has argued that new technologies that lower the cost and scale of production have ‘induced periods of deconcentration in the music recording industry by facilitating the entry of smaller new, product innovating firms’.[6] According to Alexander there have been two significant periods of de-concentration in the history of the music recording industry, the later half of the 1910s and 1950s, both periods in which their were significant innovations in production, playback and manufacturing technologies.[7] Alexander argues that in both these periods new, smaller companies competed effectively with established companies through offering innovative products with the aid of new technologies that lowered costs and scale.[8] |
15 |
|
| Technological innovations in record manufacturing from 1900-1910 cheapened manufacturing and recording by permitting the mass reproduction of records. Previously performances had to be recorded repeatedly in order to produce substantial numbers of albums, thus greatly limiting the potential of distributing recorded musics on a larger scale. These changes combined with the expiration of important patents in 1914 to foster decreased market concentration.[9] |
16 |
|
| The second major period of decentralisation accompanied the development of tape recording. With the adoption of magnetic tape recording in 1948, there was a remarkable growth in recording companies from about 1949 to 1954.[10] Magnetic tape made recording cheaper and more portable, facilitating access to and use of recording technologies. Tape technology also reduced costs indirectly by reducing the necessary studio time to create recordings. Prior to the development of tape recording, almost all recording studios were owned by record companies, but tape recording made it cheaper to record music and promoted a dramatic growth in the number of independent studios during the 1950s and 1960s.[11] Accompanying the expansion of studios was a decentralisation of control over music markets, with independent labels supplanting the power of established labels from about the late 1940s until the early 1960s.[12] |
17 |
|
| Contextualising technological innovation |
||
| Although I agree that technological innovations have played a key role in these periods of deconcentration, I think Alexander overemphasises the role of technologies in these processes. Although, Alexander’s discussion of decentralisation demonstrates an awareness of the ways in which multiple contextual factors influence decentralisation, he tends to overemphasise the central role of technologies in abstraction from social contexts. This is especially evident in his concluding speculations about the potential impacts of digital distribution. |
18 |
|
| Technologies did indeed facilitate decentralisation in these periods, but only because various social, economic and political conditions permitted it. My point is not to diminish the important role of technology, but to note that it is only one element in a broader process of socio-technical change. As various music scholars[13] and scholars in the field of science & technology studies[14] have emphasised, technologies never exist outside of social relations and networks. It is beyond the scope of this study to engage in a detailed discussion of the causes and consequences of decentralisation in the periods discussed by Alexander, but I would like to make a few brief observations that are important in my subsequent assessments of the decentralising potential of Internet technologies in today’s music industry. |
19 |
|
| Market growth |
||
| One crucial contextual factor to consider when assessing the decentralising potential of particular technologies is market growth. Market growth was significant during the periods discussed by Alexander and I believe this growth was fundamental in the realisation of the decentralising potential of new technologies.[15] Under conditions of growth there are more opportunities for new actors and those on the margins of the industry to exploit. Without growth it is more difficult for new actors to displace established players, regardless of the availability of potentially decentralising technologies. For example, during the 1950s and 1960s the rapid expansion of a market for sound recordings combined with the reduction of financial barriers to engaging in recording to decentralise music recording/production.[16] Decentralisation during this period would have been much more unlikely if the development of tape was not accompanied by a monumental expansion of the market.[17] |
20 |
|
| Although market growth may make deconcentration more likely, it is important to underscore that even under growth concentration can be increased. Growth can open up spaces for independents and emergent actors, but growth combined with technological innovation can also facilitate accumulation of power and capital among those larger, established operations that benefit from economies of scale and/or maintain important gate-keeping functions. |
21 |
|
| Broader organisation of the music industry |
||
| In addition to market growth, the decentralising potential of technologies is also mediated by the ways in which the music industry is organised and the ways in which the different aspects of the music industry (i.e., production, manufacturing, distribution, promotion and marketing) are controlled and interrelated. A more loose integration or lack of concentration in multiple aspects of the music industry facilitates decentralisation more broadly. |
22 | |
| For example, decentralisation in the 1950s and 1960s was not wholly attributable to the development of tape and market growth. Decentralisation would have been unlikely if the development of tape was not accompanied by a timely decentralisation of promotional channels and the existence of decentralised distribution channels. In the 1950s, radio networks diversified from a single national market directed at a mass audience, towards more specialised niche markets directed at more targeted audiences (i.e., specific ethnic groups, ages, classes and regions) and shifted towards programming with more local content and advertising.[18] These changes were crucial in allowing the growing number of independent record companies to effectively promote their music.[19] Decentralisation during this period was also favoured by a lack of concentration in distribution. Although major labels had their own distribution networks in the 1950s, independent distribution systems were still significant in the music industry.[20] |
23 |
|
| The flip side of this is argument is that technologically-facilitated decentralisation in one aspect of the music industry may not lead to industry-wide decentralisation if other aspects of the music industry remain tightly controlled and exclusive. This was evident with the popularisation of multi-track recording technologies around the late 1960s. These innovations fostered a marked decentralisation in music production and studio ownership, but music industry concentration was on the rise during the same period, as major labels began consolidating distribution channels and reorganising the ways in which music was produced. In fact, it seems that the initial introduction of tape recording had a more limited decentralising effect on music recording/production than the subsequent development of multi-track recording technologies,[21] further supporting my argument that the development of tape was not the only or primary reason for decentralisation in the music industry during the 1950s. |
24 |
|
| A similar phenomenon occurred with the development
of cheaper and more powerful digital music technologies during the 1980s
and 1990s (e.g., |
25 |
|
| Increased accessibility versus universalisation |
||
| Another important observation to make in thinking about the relationship between technologies and decentralisation is that we must be careful to distinguish between increased access to technologies and the universalisation or ‘democratisation’ of access. Even in the periods of decentralisation discussed by Alexander, empowerment of new actors was still conditioned by socio-economic disparities in access to technologies. |
26 |
|
| The period of decentralisation starting in the late 1910s was accompanied by a greater quantity and variety of available recordings. Around the early 1920s the primacy of ragtime music recording was displaced by a more varied repertoire of music. Catalogues of available music diversified with the proliferation of new recording companies, including the appearance of the first ‘race’ records.[22] |
27 |
|
| Similarly, during the 1950s and 1960s, with the various changes in technologies,
market size, radio programming and industry concentration, the music
industry became more diverse, with African-American and other minority
musics becoming more heavily recorded, promoted and distributed.[23] Lowered production costs and the increasing purchasing
power of minorities led to the growth of minority-oriented independent
labels. Labels like Sun, Phillips, Chess and |
28 |
|
| Despite the enhanced opportunities for minority artists and labels in these periods of deconcentration, the diversification of music benefited the music of white artists, labels and studios more than it benefited socially, economically and geographically marginalised groups.[25] Quite significantly, the diversification and musical innovations promoted by the former were partially based on the appropriation of the music of the latter groups (e.g., jazz-influenced dance band music and R&B-influenced rock music). The privileged social position and access to technologies and resources allowed white artists and labels to more successfully record, promote and distribute their appropriative musical innovations compared to black and other minority artists. Black and other minority artists were more likely to be recorded than in the past, but ownership of recording technologies was much more limited and minority artists typically had highly exploitative relationships with those who recorded the music (e.g., artists often did not hold copyrights to the music recordings or compositions). |
29 |
|
| As James P. Kraft has argued in his analysis of changes in technologies, labour and industry organisation in the first half of the 1900s, ‘the benefits of technological advances in the entertainment business were spread unevenly, according to power relations among the groups most affected by such advances’.[26] Although technologies can facilitate the reorganisation of the industry and open up new opportunities for those outside of it, those already in the industry, those from other industries with significant financial, technological and social resources and those from privileged socio-economic positions and geographical locations are best poised to exploit new opportunities. |
30 |
|
| Decentralisation and reconsolidation |
||
| Another essential observation to make is that even when decentralisation has occurred it has been temporary. Persistent inequalities in access to capital, technology and social networks have eventually led to the reestablishment of concentration and tend to counteract any decentralisation during the initial disruption of social relations facilitated by the introduction of new technologies. |
31 |
|
| For example, the decentralisation of the late 1910s was short lived. During the early 1920s the number of small independent companies began to decrease—although some of the established independents grew in size and importance—and by the end of the decade, various factors led to renewed concentration. Horizontal mergers as well as the previously discussed ‘imitation’ and appropriation of the musical innovations of independent labels by major companies helped reconsolidate major label control.[27] The introduction of commercial radio broadcasting (1920) had also caused a significant drop in record sales (until about 1933) by diminishing the value of recorded music through providing music of better sound quality that was essentially free of charge.[28] This combined with broader economic trends (i.e. the depression) to undermine record sales, enforce the popularity of radio and foster consolidation. Lastly, concentration of promotional channels—which had close financial ties with recording companies—also seems to have contributed to increasing music industry concentration.[29] |
32 |
|
| The post-World War Two deconcentration of the music industry was more lasting than that of the late 1910s, but it too gave way to reconsolidation. Starting in the mid 1960s, concentration was re-established, primarily through horizontal integration. At this time, major record companies began buying successful independent distributors and increasingly contracted out music recording/production through joint ventures and distribution contracts (rather than recording musics in their own studios). This trend accelerated in subsequent years, taking off especially in the early 1980s.[30] |
33 |
|
| In summary, there is no simple formula to assess the impacts of technologies on industry concentration, but attention to socioeconomic inequalities and patterns in market growth, as well as to socio-technical trends in all aspects of the music industry chain (i.e., production, manufacturing, marketing, distribution and consumption) and the relative importance of each of these in a given historical and geographical context, is essential for more accurately assessing the decentralising potential of specific technologies. Music technologies, their impacts and implications can only be understood through a detailed understanding of the contexts in which they are used, appropriated and signified. |
34 |
|
| Part 2: Digital distribution and decentralisation |
||
| Introduction |
||
| So what are the implications of these observations for understanding the impacts of digital distribution? Based on the current organisation of the music industry and the historical lessons illuminated above, my main thesis is that decentralisation in response to the Internet is likely to be more limited and transient than some scholars, journalists, music makers and consumers have argued. |
35 |
|
| For one, unlike the late 1910s and 1950s, we are not currently under a period of significant market growth in the music industry, which makes a more significant decentralisation unlikely. Attention to the broader aspects of the music industry rather than simply on digital distribution in abstraction from its wider context also indicates a diminished decentralising potential. The fact that traditional forms of distribution, promotion and marketing continue to be the primary source of revenue for the music industry and that major labels tightly control traditional forms of licensing, distribution and marketing, further diminish the decentralising potential of the Internet. In addition, it seems likely that the privileged access of established actors in the music industry to capital, social networks, technology and knowledge allows them to most adeptly acclimatise to new forms of distribution, licensing, promotion and marketing. |
36 |
|
| Lastly, although we may see decentralisation in the short term with digital technologies, these trends will likely be reversed as these technologies ultimately enhance economies of scale and foster concentration.[31] Unlike the 1950s, the various aspects of the music industry are more tightly controlled today suggesting that whatever period of decentralisation may occur it will be more short-lived. There may be a time lag in this process of re-consolidation, but over the medium to long term major labels are best poised to exploit the digital music market. |
37 |
|
| All this indicates that the decentralising potential of the internet is not as strong or as immediate as some have argued. I am not arguing against the possibility that some decentralisation is occurring or will occur. The Internet and digital music technologies are indeed having a significant and unprecedented effect on the social organisation of music circulation; however, whatever decentralisation is occurring is conditioned by class, ethnic and national disparities in access to technologies. Because access to technologies and the knowledge to use them most effectively are conditioned by existing socio-economic disparities, they tend to facilitate the reproduction of the multiple and overlapping centre-periphery relations (i.e. between classes, races, ethnicities, genders, nations, regions, neighbourhoods, etc.) that colour the music industry and its broader societal context. Those within the established (social, economic and geographical) centres of the music industry are best poised to capitalise on new opportunities facilitated by new technologies. |
38 |
|
| With these general observations as a guide, I will now engage in a more detailed analysis of the impacts and implications of digital distribution for various established and emergent actors in the music industry. In this part of the article I will first discuss distribution, licensing, marketing and promotion in the music industry, examining the implications of Internet distribution for changing established practices and patterns of control. Through this discussion, I argue that digital distribution is unlikely to transform existing patterns of concentration to any great extent. I then draw upon recording industry data about recent changes in market concentration to corroborate these assertions. I close this part of the article with a discussion of current changes in the organisation of the music industry as an extension of the trends towards ‘flexible accumulation’ that have been evident in the industry during the last 20-30 years. |
39 |
|
| It is essential to note that my arguments in this article focus specifically on authorised digital distribution and not unauthorised peer-to-peer (P2P) file-sharing and piracy. A more adequate and thorough treatment of the topic of the impacts of Internet technologies on the music industry would integrate the topics of piracy and P2P networks. I have opted to focus almost exclusively on authorised downloading primarily because I am concerned with the patterns of concentration and market share in the music industry.[32] While the P2P phenomenon has had implications for the music industry and its financial workings, its impacts on record sales are more modest than has been claimed—perhaps even negligible or positive.[33] More important for the discussion at hand, file-sharing seems unlikely to strongly affect patterns of concentration in the music industry. Although no studies have specifically examined the relationship between file sharing and market shares, unauthorised file sharing impacts both majors and independents—in both positive (e.g., promoting consumer knowledge of artists) and negative ways (e.g., displacing purchases of recordings)—and seems unlikely to have any generalised impact on the patterns of concentration in the industry.[34] |
40 |
|
| Importance of traditional distribution formats |
||
|
41 |
|
| One of the most important considerations in examining the potential impacts of Internet technologies in the music industry is that traditional forms of distribution remain firmly in place. Although the Internet has the potential to diminish the importance of physical distribution, it will likely maintain its primacy for some time to come. As Forde points out: ‘Online is simply a new distribution channel--it will not make music in a physical format redundant’.[36] Despite the rapid growth of the digital download market since about 2003, physical sales are still the dominant format[37] and the oligopolic control of physical distribution that majors have continues to be important. |
||
| With the introduction of new formats in the past, similar claims have been made about obsolescence, but formats like vinyl and tape persist alongside CDs and have been adopted in quite different ways in different locales.[38] The extent to and speed with which digital distribution may displace physical sales is difficult to assess given the infancy of digital distribution. Arguably, the replacement of CDs with audio files will be slower and less expansive than the replacement of vinyl and tapes with CDs, because it represents a more radical shift in musical consumption and experience (i.e., from a ‘physical’ to a ‘virtual’ format) and requires the acquisition of much more expensive hardware than has been the case for previous format introductions. |
42 |
|
| There are a variety of reasons for which consumer preferences for physical products are likely to persist. For some, there is a reluctance to adopt digital downloads due to the limitations on use and copying that most providers currently place. Others have eschewed digital downloading due to the poorer quality of compressed audio formats compared to existing formats.[39] There are also many consumers who are unable or unwilling to purchase a computer and acquire broadband services. Access to broadband is still limited and far from universal, even in the most ‘developed’ nations.[40] There are also those who will continue to prefer having physical copies of recordings with accompanying album art and/or continue to prefer the experience of shopping in brick-and-mortar retailers.[41] |
43 |
|
| As long as physical distribution continues to be important, major labels’ ownership and control of large scale distribution channels will help them maintain their privileged gate-keeping role in the music industry. Major label control of distribution channels is especially important in reaching international markets.[42] An increasing shift towards digital distribution may allow independent labels and digital distributors to displace major labels’ oligopoly on distribution, but there are various reasons to believe that this potential is limited. One important reason is that the larger catalogues and financial resources of major labels allow them to establish more favourable relationships with digital download services.[43] I will address some of these limitations later on in this article when discussing digital distributors and other emergent actors in the music industry. |
44 |
|
| Licensing |
||
| Along with distribution, major labels have privileged knowledge and channels for licensing music for various uses. Major label support is especially important in navigating the complexities of international licensing.[44] With the persistence of physical distribution, major labels will continue to have a privileged ability to navigate the complexities of licensing nationally and abroad. With the advent of digital distribution, licensing has become even more complex. Sorting out royalty payments is the most difficult aspect of online music distribution[45] and the complexities of ownership rights in different countries have made it difficult for record companies to more effectively and rapidly exploit digital distribution.[46] Although this increased difficulty is encountered by all actors in the music industry, it is likely to be most prohibitive for independent labels and artists that lack established international social networks and do not have the same financial and legal resources that major labels have at their disposal. The accumulated experience and expertise of major labels in navigating the complexities of licensing will by no means be negated by the emergence of digital distribution. |
45 |
|
| Marketing and promotion |
||
| One of the primary activities and functions of contemporary record labels is promotion and marketing. Marketing and promotion costs can be very high and are sometimes the highest costs of making a CD. To transform an album into a hit, there are considerable investments that record companies make. Marketing and promotion investments that record companies pay include a wide variety of expenses including: ‘Advertising costs, retail store positioning fees, listening posts in music stores, radio promotions, press and public relations for the artists, television appearances and travel, publicity, and Internet marketing, promotions and contests’.[47] |
46 |
|
| Although the Internet has the potential to undermine
the role of radio, television and other marketing and promotional channels,
traditional media formats continue to play a primary role in the popularisation
of music. For example, television and, especially, radio continue to
be the primary way in which consumers are informed about artists and
music in the |
47 |
|
| Although the Internet can potentially allow one to promote and market music rather cheaply, it has not made heavy investments in marketing and promotion a thing of the past. Some have argued that record companies can cut marketing costs through online digital distribution,[49] but I believe this to be an inaccurate assessment. If anything, it has escalated the costs necessary to successfully promote and market music. Marketing budgets must now be sufficient to cover traditional promotion and marketing strategies as well as novel web-based strategies (e.g., ads, webradio placements, samples on various websites and ‘viral’ marketing campaigns). Furthermore, the increasing ease with which music can be recorded, produced and distributed—due to the Internet and the increased power and accessibility of music recording/production technologies—may further fuel rising marketing costs due to a heightened competitiveness for consumer attention. |
48 |
|
| Just making music available on the Internet does not mean it will be heard and consumed. Chances of success are much greater if one places music on particular sites and can leverage the Internet in ways that successfully direct traffic to one’s website. Greater financial and technological resources allow major labels to more effectively promote and market online. For example, major labels can more easily leverage popular music downloading services to have their music and advertisements featured on their websites. Similar to the case for traditional retail, they are able to give their products greater visibility in ‘virtual’ retail spaces. Major labels also have a privileged ability to place their music on popular web-radios and other streaming content sites. They also have privileged access to marketing and data analysis that allows them to assess and devise more effective on- and off-line marketing and promotion strategies. The privileged socio-technical positionality of major labels even helps them to more successfully utilise purportedly democratic ‘user-generated’ content sites (e.g., myspace) as promotional and marketing tools. |
49 |
|
| Because of the continued need for high investments, as well as the technology, knowledge and social networks to effectively use funds for marketing and promotion, major labels will continue to be able to market and promote more heavily on both traditional channels and new media and will likely maintain their privileged position within the music industry.[50] For independent artists, the barriers to effectively promote and market music persist and are perhaps even greater than in the past,[51] despite examples of success stories that have been simplistically hyped as outcomes of Internet empowerment (e.g., Arctic Monkeys). These barriers to artistic success are especially evident for those from the poorer classes and nations who have more limited access to technological and financial resources (and may also be limited by language barriers). |
50 |
|
| Although some artists may benefit from the empowering potential of the Internet, these are most likely to be established artists who do not necessarily need the marketing and promotional services of record labels as much as unknown artists.[52] Similarly, although some independent labels may successfully exploit the possibilities of digital distribution, those independent labels that are best poised to exploit new opportunities are established independent labels, as well as new independent labels established and run by those already tapped in to the social networks of the music industry. As in the past, the most successful independent labels are also likely to be bought out by major labels. While the particular ways in which Internet technologies may transform established practices may vary according to the unique nature of promoting and marketing particular markets and genres (e.g., hip hop), differential access to financial resources, promotional networks and marketing information will continue to privilege those within the established centres of the music industry even in more specialised market niches. |
51 |
|
| Music downloading services, digital distributors and decentralisation |
||
| In addition to independent labels and artists, some have argued that new actors in the music industry such as music downloading services and digital distributors have the power to replace the function and power of recording companies. As in the case of independent labels and artists, their powers to do so are limited for a variety of reasons. |
52 |
|
| Music downloading services are companies that sell audio files to end consumers on a pay-per-download basis or subscription based service (e.g., iTunes, Rhapsody, Music Match and Napster). Digital distributors (or aggregators), such as the Orchard and IODA (Independent Online Distribution Alliance), are companies that provide music for music downloading services and other content users (e.g., mobile phone companies, film, TV, advertising, video games and webradios). They often also engage in other parallel activities such as negotiating licenses, managing royalty collection, administering publishing, etc. |
53 |
|
| Contrary to some claims, most music downloading services pose little threat to established labels. Music downloading services compete most directly with retailers commercialising CDs and other physical recording formats and not record labels. As is the case with ‘brick-and mortar’ retailers, the relationship of most music downloading services to labels is more mutualistic than competitive (even if their specific financial agendas often conflict). The financial relationship between record labels and downloading services is not radically different from that between record labels and ‘brick-and-mortar’ retailers: Compared to CD sales, record labels still maintain a similar or improved level of profitability with digital distribution deals they have with music downloading services.[53] Music downloading services can also help enhance the power of major labels through giving them privileged access to more detailed and up-to-date market information. Major labels have also been able to negotiate better rates with digital distributors and music downloading services,[54] helping them maintain a competitive advantage over independent labels. |
54 |
|
| There are some downloading services, however, that potentially encroach on the traditional territory of major record labels. Those music downloading services that may compete more directly with major labels are those that distribute the music of independent artists and labels without the intermediation of major labels. These function more as hybrids between downloading services and digital distributors, rather than strictly as downloading services. Although these companies may successfully tap into some niche markets, the relatively poor visibility of their services and the lack of resources to more effectively promote and market artists limit their power. In addition, these hybrid types of companies appear to be becoming less common. Although some downloading services negotiate directly with independent labels and artists, there is a growing trend towards acquiring catalogues indirectly through digital distributors. It is more efficient and less costly for downloading services to work through digital distributors that specialise in acquiring and licensing music catalogues. For artists and independent labels, working with digital distributors rather than directly with downloading services also appears to be advantageous, because the distributors tend to be able to negotiate more favourable terms with downloading services and to place music in a variety of downloading services. |
55 |
|
| Of all the new actors in the music industry, digital distributors have the greatest potential to displace major labels, but their powers are also limited for a variety of reasons. As mentioned above, the continued role of traditional formats and media as well as the enhanced access of major labels to promotion and marketing channels and funding place most of these emerging companies at a disadvantage. Rather than directly compete with established players they have tapped into novel revenue potentials that have emerged with the development of digital distribution and the proliferation of personal computer based recording. These distributors and aggregators make their money through charging upfront fees and/or taking royalty cuts from independent artists to place their music on popular digital download services. |
56 |
|
| We must also keep in mind that major record companies are poised to buy out more successful enterprises that may compete with them. Similar to what has transpired since about the 1970s with independent labels and distributors, major labels (or their parent companies) are likely to absorb their most successful and profitable competitors. Successful distributors and downloading services ultimately represent business opportunities that allow major labels to enhance profits through ‘capturing’ new ‘revenue streams’ rather than a threat to market control. |
57 |
|
| Although major label involvement in music downloading services and digital distribution companies has thus far had an erratic history,[55] I think this is largely due to the current infancy and volatility of authorised digital distribution markets and the financial difficulties of the music industry. As the digital download market grows and the organisation of digital distribution and downloading stabilises it is probable that there will be further integration between major labels and successful music downloading services, digital distributors and independent labels, allowing major labels to reassert their gate-keeping power in the digital era. Digital distributors will be a more likely priority than downloading services[56] because of the existing competencies of the music labels (in distribution and licensing), the problem of catalogue limitations of major label involvement in direct retail[57] and the apparently low profitability of current music downloading service models.[58] |
58 |
|
| As in my discussion of independent labels and artists, I am not arguing against the possibility that new actors are displacing major labels to some extent. Again, I am simply contending that the degree and permanence of this displacement is smaller than many have prophesised or hoped. As argued previously in regards to independent labels, although some emergent actors (i.e., digital distributors and download services) may rise to prominent positions in the music industry, these are most likely to come from within the music industry itself. These ‘new’ actors may not be as new as they seem at first glance: Within the music industry there is a constant reshuffling of staff and the emergent enterprises in the music industry are often established by and comprised of people formerly with major labels or more established ‘independent’ labels. Those that are poised to benefit from the socio-technical restructuring of the music industry are those that already have privileged access to knowledge, capital, technology and social networks. Many new web-based music companies have a significant portion of their directors and staff drawn from major labels and other established actors in the music business. This is not a surprising phenomenon, especially considering the reduction of staff at major labels as a cost-cutting measure in response to the industry’s recent financial crisis and/or corporate mergers. |
59 |
|
| Some successful new actors may also come from outside the music industry. These are most likely to come from or receive the backing of computer and communications technology industries (e.g., Apple computers). Successful new actors are also overwhelmingly from privileged social backgrounds and locales. Their privileged access to knowledge, technology and capital poises them to best exploit whatever new opportunities that have emerged through technologically facilitated decentralisation.[59] |
60 |
|
| Current trends in concentration and decentralisation |
||
| Although Internet technologies are definitely contributing to a significant process of reorganisation in the music industry, it seems that general historical patterns of concentration may not be undergoing a radical transformation. Recent research on concentration in the music industry appears to corroborate my more tempered assessment of the impacts of the Internet on music industry concentration. |
61 |
|
| Research based on International Federation of the Phonographic Industry (IFPI) data suggests that independent labels have recently diminished the market power of major record labels. Independent labels’ share of worldwide sales increased from 22.5% to 25% from 1999 to 2002.[60] IFPI data for 2004 indicate a further increase up to 28.5%.[61] These figures indicate that indeed there has been a deconcentration within recent years.[62] |
62 |
|
| Research by Blanchette on the |
63 |
|
| Authorised digital distribution has only become a significant phenomenon since
2003, making it difficult to detect any clear patterns between digital
distribution and market concentration. Although some of the IFPI figures
on global market share imply that some degree of decentralisation may
be occurring, they indicate that it is fairly modest and is nowhere
near the major periods of decentralisation in the music industry discussed
by Alexander.[67] Data for the |
64 |
|
| We must also keep in mind that whatever changes in concentration that did transpire during this period are not wholly, or even mostly, attributable to the direct impacts of file sharing and online distribution. Other factors such as general economic trends, changes in consumer behaviour and changes in industry organisation influence these trends. For example, changes resulting from label responses to financial crisis may affect market share trends, such as reductions in the number of releases and artist signings, or in promotional and marketing budgets for artists. |
65 |
|
| We must also be cautious about the representativeness of the data. For example, changes in the sources of IFPI data, the methods of compilation and the number of countries for which data are available in different years may affect figures on market share, possibly making the extent of independent market share globally more or less apparent. It is also possible that levels of concentration are less than these figures indicate, due to the under-representation of independent record sales in US and international data.[68] Especially considering the growing ease with which independent artists and labels can produce and circulate music outside of major retailers, the historical problem of under-representation in the marketing data of industry analysts, record labels and record label associations may be heightened in recent times. |
66 |
|
| Whatever the limitations and inconsistencies of current data and the difficulties
of meaningfully interpreting them in a definitive manner, it is clear
that major record labels still maintain an oligopoly on music marketing,
promotion and distribution and that the Internet has not promoted a
radical decentralisation of the music industry as many have envisioned.
The most current data indicate that major labels control 88.6% of the
|
67 |
|
| Certainly the music industry is undergoing a period of reorganisation where established business models and forms of organisation are transformin |
