Introduction To Music Industry Fundamentals Marketing Essay

In the last ten years, the way in which the music industry functions has undergone some drastic changes. From Vinyl and compact disc sales to the introduction of digital formats such as mp3 and AAC in the late 1990's, music is accessed and consumed in a very different way to the traditional structure set out by record labels. The idea of a record label signing an artist and releasing a physical product has been overshadowed by emergence of digital media with 27 per cent of all music sales now being digital in 2009, up from 21 per cent in 2008 (IFPI) while global music sales fell by 7 per cent. With record sales down, a new emphasis has been made by many record labels on 360 deals where a record label will take a percentage of the overall income of an artist, including merchandise and ticket sales from live shows. This is in high contrast to the way that record deals used to work although the main framework of the music industry and revenue streams remain the same.

The basic concept of the recording industry is that a record label will have an artist and repertoire, or A&R department, who will scout musical talent and attempt to sign an artist or composer to a recording contract, wherein the label will fund the production and manufacture of records from the artist. This can be anything from a one off album/ single deal to a long term agreement depending on the contract. The artist will typically go into a professional recording studio to produce an album (product). They will then give this to the record company who will in turn liaise with artwork designers, duplication and pressing plants to get the product manufactured and/ or distribution companies who will get the product into stores and to the consumer in both physical (Compact Disc/ Vinyl/ Mini Disc/ Tape etc.) and digital (mp3/ AAC downloads) formats. The record company will also have a marketing department who will try and get the product seen and heard.

The money generated from the wholesale price or "published price to dealer" (P.P.D.) of the product will then be split between the record label, artist and composers. The artist will roughly take a 20 per cent cut of the P.P.D. and the composer 8.5 per cent. The label will then take the rest to cover the costs incurred by the production, marketing and distribution of the product and with any luck profit.

Although some record labels will have their own in house recording studios, the majority of them will work independently and for a set price paid in advance based on the time spend in the studio, commonly an hourly rate. The revenue from this is then used to pay the safe and the day to day running of the studio as a business. The studio will typically have a producer, studio engineer and mastering engineer overseeing the project, although mastering is done as a separate process, due to its précised nature. The producer will work with the artist to discover what kind of sound, feeling and direction that the artist is looking for in the music while adding creative input to the proceedings. The producer will control the recording sessions and mixing process, with the studio engineer working directly with the producer to create the environment for everyone to work in. This can involve everything from setting up microphones and equipment to making tea. Once the mixing has been completely the mastering engineer will ensure that all the levels are correct and that the product is ready for distribution.

A distribution company acts as the go between for the record label or in some cases artist and retail outlets that sell the music. This involves the distribution company agreeing to sell and manufacture a product for the record label, in return the distributor will have exclusive rights to the artist and or label. This is called a manufacturing and distribution agreement (or M&D deal). The distributor will pay for the manufacture and release of a product and negotiate to get the product into shops as a wholesaler. For this kind of agreement the distribution company will pay for the manufacture, which will act as a loan against the record company and take a 20- 25 per cent cut of the profits (1) as well as a distribution fee of around 20 per cent (1) on average to cover the costs of shipping, admin and profit. The burden of cost in this case will be with the record company, if the product is unsuccessful, sometimes owing the distribution company money if sales are not as predicted. Other kinds of distribution deals are the direct or simple agreements, where the record company has already manufactured the product. These are typically short term contracts, usually one album and the distribution company will take a higher cut of between 28- 33 per cent of the profits. (2)

For a distribution company to enter into a contract with an artist, the distribution company needs to have some evidence that it is a worthy investment on their part. Showing what the artist has done in terms of press and advertising in their career so far. This will be taken care of by the record labels marketing department. The Marketing department will try and get as much exposure for the artist as possible, such as, getting CD and live reviews, interviews and adverts into magazines as well as submitting tracks for free CD's that often accompany magazines. Using industry contracts, called "plugger's" to get plays on local or national radio and if the artist/ composer does not have a publishing deal, try and attain synchronisation deals in TV and film. In addition to all of this, marketing will manage the official website and maintain social networking websites like MySpace, and facebook on behalf of the artist.

As stated above, it is possible to have a record contract without a publishing deal, and visa Vera. If you are a solo artist/ composer, a publishing deal can be very important. Publishers represent artists, song writers and composers and register the copyright of their material. The composer will sign over the rights to their composition to the publisher who will then in return promote and market the composition to be used in various media outlets, such as, advertising, ringtones and broadcasting. License the music for use in syncing on films and computer games and will also produce and licence sheet music. Music publishing companies can work independently or under a record label, in the former, working exclusively for contracted artists signed to that label. This can be either to promote their music for synchronisation or to provide compositions for appropriate recording artists on behalf of the composer. In addition to this publishers can promote the work of the composer/ songwriter to record labels. The publisher would then register the material and collect royalties from the appropriate collection societies, such as the Performing Rights Society and Mechanical-Copyright Protection Society (PRS for music) on behalf of the artist. The publisher will take a proportion of the royalties earned, which can be as high as 50 per cent, depending on the deal. (1)

Working parallel to the recording industry is the performance industry, which accounts for a huge amount of jobs and revenue. According to a report by Will Page and Chris Carey for PRS for music the live industry was worth 1.5 billion pounds in 2009, with ticket revenues up 5.8% to £957 million compared to 2008. With physical record sales down, it seems that consumer needs for music are changing. The live industry from a grass roots level to major touring acts and festivals function in much the same way, just on different scales. For a band or artist starting out, in order to book live shows it is advisable to contact a promoter. Although it is possible to contact a venue and self promote. A promoter will have prior knowledge of the venues and contacts in the area and in most cases will have exclusive access to some venues. The promoter does just that, promote. Their main duties are to organise live shows by booking venues and bands, advertising the shows with fliers and posters along with press in magazines, newspapers and in some cases TV and radio. Furthermore, it is the responsibility of the promoter to pay for the venue hire and the musicians, plus their own cut. This is usually in the form of a "door split" from the ticket sales. For larger scale concerts and touring bands, the band or artist will use a booking agent. Booking agents represent the artist and organise concerts with promoters. Unlike a promoter, the booking agency will sign an artist under contract to the company and work with the artist to ensure that they are playing the right kind of venues and places. They will then book the artist onto live shows, tours and festivals and work with the promoter to ensure the smooth running of the event. The booking agency will take an upfront fee from the promoter for their services and then it is the promoter's responsibility to make the event a success. There are various types of deals that the booking agency will have with the promoter depending on the show. Guaranteed fees, where the promoter will pay the booking agent "x" amount. A Versus deal, where the promoter will pay "x" amount or a set percentage, whichever is the largest and a Plus deal, which is the same as a guaranteed fees deal but with a set percentage on top of that. The booking agent will usually pay an advance to the artist managers to go on tour.

Band managers will maintain everything that I have gone over so far. It is the manager's responsibility to organise the business side and accountancy of a band or artist. They will liaise with and act as a go between with every aspect of the music industry from record companies to booking agents and negotiate the best deals for the artist. In essence a band manager will organise an artist career for them so that they can concentrate on making music. A contract will be drawn up between artist and manager detailing the obligations of both parties, the period of the contract and the how much the manager will get paid, which is generally in the region on 20 per cent of the gross income.

For larger artists the manager may delegate the touring responsibilities to a tour manager who will arrange and command the running of a tour. In order to this a tour manager will need to be highly organised and be able to man manage large groups of people. Once the promoters have put everything in place it is the tour manager's job to make sure that time schedules are kept and that the show runs properly. As well as the artists, the tour manager will be responsible for the road crew, sound engineers, lighting engineers and bus drivers as well as communicating with venue staff and any press meetings or interviews. If there is any job that needs doing on tour, the tour manager will usually be the first and last point on contact. On top of all this they will be making sure performance revenue is being collected and tour-related bills are being paid, this includes, door takings, accommodation, van hire and petrol cost, equipment hire, such as PA systems and backline and Per Diems, a daily amount paid to touring crew to cover living expenses. The band management will pay the tour manager a percentage of the touring revenue, again in the region of 10- 20 per cent. They will usually have their expenses for the tour paid for as well.

Under the umbrella of the tour manager will be the touring crew. Most venues will have their own loading crew who will help load equipment to and from the building. They are typically paid by the venue from the hire of the building. Depending on the size of the tour, the touring crew will take on some or all of these duties in addition to their contracted roles. The main touring crew will include front of house sound engineers who will mix the sound that the audience hears and makes sure that everything is at the correct level and volume. The front of house engineer will be assisted by a monitor engineer at the side of the stage, who takes care of the onstage sound so that the artists can hear everything. Lighting engineers will look after the onstage lighting and the artists will have technicians who will set up the equipment, tune guitars and drums and ensure the stage is set up correctly. All of these roles can be done by a single sound engineer on smaller tours. In bigger productions, there may be extra performers such as backing singers and dancers, set designers and pyrotechnic technicians, all of which will be paid out of the revenue from the tour or advance. A large proportion of touring revenue comes from merchandising. T-shirts, sweatshirts, hats, posters, CD's, stickers and almost anything else that can be printed on are sold at live shows as souvenirs.

The music industry has various governing bodies that represent each sector. The Musicians Unions represents artists and performers in all sectors of the music industry, ensuring that they get a fair deal offering "a range of services tailored for the self-employed by providing assistance for full and part time professional and student musicians of all ages". They act to members as the adjudicator between record labels, venues, publishers and everyone in between.

The Association of independent music or AIM is a trade body established in 1999 to provide a collective voice for the UK's independent music industry. AIM represents independent music companies, whether that be record companies or individual artists in the recording sector and are responsible for over 20% of the UK market, with over 800 members of all sizes and musical genres. They provide members with free general legal and business affairs advice as well as up to date news and statistics and various networking opportunities in the business.

Managers and publishers are also catered for by the music manager's forum or MMF and the music publishers association or MPA. The MMF, established in 1992, are a representative body for music managers and have over 400 members, representing over 1000 artists. MMF provide a networking forum for UK managers and artists that aims to "educate, inform and represent UK managers" (and their artists).The MPA was created in 1887 to "safeguard and promote the interests of music publishers and the writers signed to them". The idea, much like the MMF, was to create a forum for publishers to work together under the same umbrella.

Underpinning all of this are the royalty collection agencies, the PRS and MCPS, or "PRS for Music" and the PPL. The PRS collects fees on the behalf of its members for the performance for their material, whether that be live or from radio and TV broadcast or online streaming from websites such as Spotify and Last FM. For live performances the artists will submit a set list to the PRS, outlining what they played, who the composers are and how long their performance was. It is the venues responsibility to pay the PRS 3 per cent of the takings earnt, or in the case of pubs and clubs a flat fee. The composers of the music will then be paid from this provided that they have submitted the right paperwork. The MCPS will then collect mechanical rights from CD and DVD sales or whenever a piece of music is "copied or that copy is issued to the public." The MCPS/ PRS alliance was formed in 1997 but was rebranded in 2009 to "PRS for music".

Donald S. Passman - All you need to know about the music industry

http://www.mustard-mg.com/musbiz/distribution.htm

http://www.bpi.co.uk/press-area/news-amp3b-press-release/article/recorded-music-sales-revenue-stabilise-in-2009.aspx

http://www.bpi.co.uk/press-area/news-amp3b-press-release/article/new-bpi-data-shows-music-better-value-than-ever.aspx

Some nice graphs:

http://labs.timesonline.co.uk/blog/2009/11/12/do-music-artists-do-better-in-a-world-with-illegal-file-sharing/