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UK Supply of Recorded Music

(Still a highlight from the British 1994 report on recorded music by the Ministry of Mergers and Competition, wrapping up a lot of nice stuff still left)

This chart is pure awesome: number of album (and singles) titles released per year and number of albums (singles) sold per title per year (1986-1992) in UK. See the increase in album titles and the fall of sales per album. Single titles were stagnant and sales declining.

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The top 200 albums in 1993 commanded 55% of the total album market

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Genres and popularity

  • When the repertoire being generated by artists is in line with the tastes of a wide range of consumers, sales are buoyant. Fashions with narrower appeal such as `punk rock’, which to an extent in its day represented a reaction against the prevailing taste, and some current forms of dance music tend to be short-lived and have limited appeal and so will be unlikely to lead to a sustained increase in sales. When consumers have become bored with a genre of music, total sales will tend to fall off until the arrival of the next genre reignites consumer interest. There are, however, some categories of music (for example, classical and main stream rock) for which demand remains relatively constant.
  • Social factors are also important. Where youth culture is oriented towards participation in music-making or attending music-related events (as it was to a considerable extent in the 1960s and early 1970s), it is more likely to generate both a stream of popular products and a buoyant demand for them than if there are strong alternative attractions-for instance, playing computer and video games. Peer group pressure will influence the directions in which disposable income is spent as well as on the type of record that is purchased.

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Age

  • Musical preferences vary with age. Older age groups have a distinct preference for classical and MOR music, though they also like pop music. Dance music (not to be confused with music for ballroom dancing) has a strong appeal only for the youngest age group. Pop music retains its appeal for all generations, while rock appeals to all but the oldest age group.

Labels

  • Independents are often the source of innovation in the market. For instance,`punk’, `heavy metal’ and `glam-rock’ were all developed by the independent sector and then embraced by the majors.

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Impact of radio

  • We were told that the growing quantity of music broadcast on radio has moved towards becoming a substitute for record sales, with a consequent negative impact on such sales. Consumers who want to hear a particular kind of music are increasingly likely to be able to find a radio station that concentrates on it. This can reduce the incentive to buy records, while the growing facility for high-quality home taping may reduce the necessity for such purchases. We were told that these effects had been reinforced by the removal in 1988 of the restriction on independent radio stations which limited them to nine hours of `needletime’ per day. We have been told that this trend is likely to accelerate when high-quality digital broadcasts are introduced.

Costs of releasing an album

The major record companies told us that the initial costs for releasing an album generally lie in the following ranges depending on the stature of the artist:

  • artists’ advances: £25,000 to £1,000,000;
  • recording costs: £80,000 to £300,000 (including producer’s advance against his royalties of £20,000 to £50,000);
  • video produced in conjunction with a single: £40,000 to £150,000;
  • artwork and photographic costs: £20,000 to £25,000;
  • advertising, marketing (excluding losses on singles): £30,000 to £250,000; and
  • tour support: £30,000 to £100,000.

The advance, the recording costs, and normally half of the video costs are recoupable from artists’ royalties (should there be any) but the remaining costs are not recoupable

Music Publishers

  • The role of the music publishers in relation to artists has changed considerably. Prior to the mid-1960s they provided a link with the record companies by suggesting that a recording star should record a cover version of a particular song. This role has changed since the 1960s with the emergence of the composer who is also a recording artist. We have been told that this has been reflected in the increased negotiating power of the composer vis-à-vis the music publisher. Traditionally, the music publisher acquired rights in the composition by taking assignment of the copyright from the composer in return for royalty payments. Increasing awareness on the part of the composer’s lawyer or manager of the value of the copyright, and the increase in the number of composers performing their own material, have led to a diminished role for publishers and to their being granted only limited duration copyright licences which can be for as little as five years. At one time industry practice was to divide income attributable to the copyright 50:50 between composer and publisher. A division of 75:25 or 80:20 in favour of the composer is now more common.
  • Only 13 of BMG’s 53 current artists are signed with BMG Music Publishing. Of the last 30 contract (re)negotiations carried out by EMI only four of the artists were signed with EMI Music Publishing

The recording

The typical events leading to the recording of a first album by a newly-signed pop artist are as follows. The artist spends the initial months writing and developing material or choosing songs written by other composers. The artist will usually make `demo’ tapes of the material to ensure that it will be satisfactory when recording begins. When the artist has written or chosen sufficient songs to make up an album, the artist and the record company’s A&R team select a producer and, if required, session musicians for the recording.

Producers, who are generally self-employed, direct rehearsals and the recording process in the studio. They have different musical styles and acquire reputations for certain types of music. The A&R man and the artist will together select a producer with the appropriate skills to maximize the artistic and commercial potential of the artist. The producer normally has a contract with the record company and receives an advance (typically £20,000 to £50,000 per album) and royalties (typically at a rate of 2 to 4 per cent of the notional retail price used to calculate artists’ royalties). The royalties are remuneration for work carried out and are only payable once the advance has been recouped. The artist, along with the producer and the A&R man, makes the final selection of the material, studio, amount of time to be spent in the studio and the musicians to be used.

In the recording studio the backing tracks of the rhythm sections, including drum, base, and rhythm guitar (ie those that do not include lead vocals or lead instruments), will be recorded first with the additional help of a sound engineer. The next stage is to record the vocals and add `over-dubs’ such as the lead guitar or keyboards. In the case of new artists, the A&R man will be closely involved. More experienced artists may organize much or all of the recording themselves and indeed may become producers of other artists (eg Dave Stewart of the Eurythmics). The average time spent in a recording studio to record an album is between six and eight weeks and costs may range from £80,000 to £300,000.

In the final stage all the component tracks are mixed together by a mixing engineer (who might be the producer) to give the final `sound’ and to form a master recording. The recording may be remixed several times before all the parties are satisfied. Sometimes more than one mix of a recording may be produced since, for example, a different mix will be better for the dance version than that for the main release. Up to four re-mixes may be recorded for each single. For an album with five singles this can mean 20 re-mixes.

Manufacture of records – Formats

When the pop music industry took off in the 1960s, vinyl recordings dominated the market, having taken over from the brittle 78 rpm records in the late 1950s. Reel-to-reel tapes were available for pre-recorded music in the 1950s and 1960s but never became major sellers. In the late 1960s stereo recordings were introduced and for some time recordings were issued in both mono and stereo versions. Once stereo LPs had become established, record companies tried to introduce quadraphonic LPs but this format did not develop the wide public appeal needed to establish it as an alternative format. In addition, four- and then eight-track tape cartridges became available in the mid to late 1960s but the sales peaked at just under 6.2 million units in 1974 and then fell away sharply; the cartridges were eventually removed from the market.

Cassettes were introduced in 1967 but were slow to become successful. One of the key advantages for the consumer of the cassette format was that for the first time the consumer had the ability to copy recordings, whether from vinyl or from pre-recorded cassette, and build up a music library at a fraction of the price at which recorded music was on sale. This was, and remains, illegal in most circumstances. There was steady growth in the sales of this format until 1984 followed by a rapid expansion in sales arising from improvements in the sound quality of tapes and the growing importance of portability in consumers’ choice of formats, as a result of the growing number of in-car players and the fashion for personal stereos. The sales peak for cassettes occurred in 1989 and there has since been a decline in the format.

The introduction of the CD in 1983 was followed by massive investment by the industry in promoting this format which offers improved sound quality, durability and convenience to the consumer. Cassettes and CDs have to a considerable extent displaced vinyl although a few listeners still prefer the latter’s sound reproduction quality.

Location

The progressive replacement of vinyl by cassettes and, later, by CDs will have greatly reduced the importance of transport costs in the economics of record supply. Cassettes and CDs are much less fragile than vinyl and have a higher value:weight ratio, both of which tend to reduce the relative unit cost of transport. Many of the larger record companies employ manufacturing facilities which are located a considerable distance away from the market being served.

Nevertheless, some companies clearly believe that for certain time-sensitive product, especially singles, it is important that the location of manufacturing should not be very far from the market to be served, in order to facilitate rapid response to perceived changes in demand for particular records. EMI, for instance, has a policy of sourcing chart product, whether singles or albums, as close to the source of demand as possible, while back catalogue may be sourced from more remote plants.

Marketing and promotion

  • Record companies use marketing and promotion to help ensure that an individual artist is established in the consumer’s mind and that there is the maximum exposure of each record release. The ultimate aim is to ensure the sales of albums. The returns from marketing and promotion may take time to accrue. For example, a campaign to raise the profile of an artist may not only boost sales of the current album but all future albums.
  • The sales success of a new release is dependent on consumers being able to hear the recording. The record companies estimate that fewer than 10 per cent of albums are bought by consumers who have not heard the music before. However, in order to achieve playing time in the first place and in order to exploit any playing time that is achieved, it is also necessary to promote the recording. It must be promoted to retailers, to persuade them to stock it, to the media, to draw the recording to the public’s attention, and directly to consumers. The process is complex and mixes various elements in different degrees depending on the characteristics of each artist and recording. These elements include: media exposure in the form of airplay and comment on radio, television and in the press; live performances and touring; personal appearances in dance clubs; advertising in the press, on radio and television, and on posters; in-store promotion and retail co-operative advertising; and direct mail.

Media exposure

  • Radio airplay is a very important medium for record promotion. BBC Radio One, Capital, Virgin 1215, and some 50 independent local radio stations are usually supplied with free samples of records prior to release. Deregulation of radio in the UK has led to an increasing number of new radio stations (both regional and national), some of which target a particular musical taste (eg Kiss FM, Jazz FM, Classic FM). About 200 albums and 100 singles releases are made each week in the UK. Pop radio stations add some 20 titles to their playlists each week. The inclusion of a record on a playlist can make the difference between success or failure.
  • The record company devotes considerable effort to securing mention of a recording in the general press and specialist music press, and on radio and television, and to ensuring that the record is played on the radio and in clubs and discos. Television exposure is also a significant factor. This may involve the artist’s live performance, or the showing of video clips on BBC’s Top of the Pops and ITV’s The Chart Show, on more general shows such as Des O’Connor, or on breakfast television. The record company usually books and delivers artists and videos for the available slots. Pop acts are generally promoted in this way. Record companies often make a video of an artist performing the single that has just been released. If the single is a success and the video is considered good quality it can receive extensive airplay in television programmes that are devoted to pop music or otherwise (eg children’s programmes), thereby generating performance income for the record company. In a typical record deal, 50 per cent of the cost of a video will be expressed as recoupable from the artist’s record royalties. Videos may also be made to accompany albums (both pop and classical) and sold to the consumer.
  • Press coverage divides into two areas: specialist and general. The UK has a tradition of specialist music papers such as New Musical Express and Melody Maker. New magazines such as Q and Vox also feature music. This area of the press reviews new releases of singles and albums, and carries news, features and interviews on artists and on the music scene generally. The releases of the independent record companies in particular are featured in the specialist music press. The general press is also important for music coverage.

The role of singles and charts

  • Release of singles is the most common and most effective means of promoting a pop album. It is success in the singles chart which is particularly important because the Top 40 is the basis for playlists on radio and for pop programmes on television, and which generates demand from consumers and retailers.
  • Singles are usually not a profitable format for the record companies in themselves; they usually have a catalogue life of less than six months from release to deletion and most do not generate enough sales to cover all the costs of the promotional activity and manufacturing. However, they play an important role in establishing an artist and improving or maintaining his or her popularity. For a new artist the release of the first single generally precedes the release of the album. The main function of the single is to attract media attention to the artist by focusing on a specific song. If the single is successful and enters the charts this will generate more media interest which in turn increases the amount of exposure the record receives.
  • The album may be released after the first or second single and there is a definite correlation, although not a hard and fast one, between the chart position attained by the single and the sales of the album. For example, the sales of Tasmin Archer’s album Great Expectations reflected the impact of the success of singles drawn from it. The debut single (Sleeping Satellite) reached No 1 in the singles chart in the week prior to the release of the album. The debut album was an immediate hit, reaching No 8 in the album charts. To revive falling sales, subsequent singles were released; each time the high point of that single in the singles chart coincided with, or just preceded, a `peak’ in the album chart.

Classical music

  • Most of the features of marketing and promotion discussed so far apply particularly to non-classical records. Marketing and promotion of classical records has many of the same features: promoting and developing the artist, advertising new releases, in-store promotions. Popular works performed by well-known artists (such as Nigel Kennedy, Luciano Pavarotti or Kiri Te Kanawa) may be advertised on television, in the press and on radio (such as Classic FM).
  • An important part of the promotion of classical records which is different from that of pop recordings and partly reflects the longer life of classical catalogue items is development of the `brand’ image of the label. The label may be associated with works of critical acclaim (eg EMI Classics, Deutsche Grammophon, Hyperion) or with budget product (Naxos, Music For Pleasure). Record companies may seek to associate themselves with classical events or institutions (eg Glyndebourne, the Royal Opera House and the South Bank Centre).

Expenditure on marketing and promotion

  • According to the BPI, total advertising expenditure by record companies and retailers increased from £42.1 million in 1991 to £47.7 million in the following year. Marketing expenditure by the majors increased from 14.7 per cent of gross sales (17.8 per cent of net sales) in 1989 to 17.7 per cent of gross sales (22.3 per cent of net sales) in 1992 (see Table 8.6). This was partly in response to the decline in sales over this period. The estimate for 1993 shows a decline to 15.9 per cent of gross sales (19.9 per cent of net sales). The majors told us that over 80 per cent of their marketing and promotion expenditure is on new releases.

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