The Music Industry: A Trail of Missed Opportunities

Published by Editor on April 16, 2010

by Bob Cherry, cybergrass.com

I DOUBT if anybody today hasn’t heard of the problems of the music industry. The labels are crying about their loss of CD sales, XM and Sirius radio are hemorrhaging cash by the tens of billions of dollars. Terrestrial broadcast radio’s audience is shrinking. Mom & Pop “brick and mortar” record stores are all but extinct. Record distributors are filing bankruptcy. The scene is nothing short of a horror movie on music. The entire industry is unhealthy. To put the icing on the cake, after the music business has all but committed suicide through their greed, they decided to sue those who could have been their salvation — their own customers. Not only is the business in dire straits, it’s in serious need of a PR fix.

But how did this happen? When did the downfall start? Why, after a century of mistakes, hasn’t the industry figured out that they are repeating their failed history? Why do those high-paid CEOs, presidents and owners of the labels and the RIAA continue to take a destructive direction and do stupid things? I certainly don’t know but I can certainly illustrate all their many failures. It isn’t too hard, actually.

The basic concept of putting music into a package for the masses — a recording — isn’t new. What many don’t realize is that the music industry has never once been the innovator or inventor of any recording process, product or technology. In fact, they have done the exact opposite. They have repeatedly tried to stop the ebb and flow of technology, stifle innovation and shoot themselves in the foot by attempting to prevent every source of revenue based on recorded music. My dead pet rock is probably smarter than that.

Lets take a look at the media over the ages….

The Edison Cylinder

The Edison Cylinder is generally accepted as being the first form of a mechanical recording device. Thomas Edison invented the “phonograph” on July 18, 1877 — 132 years ago. His phonograph device wasn’t invented for music but, rather, to capture telephone messages. While his invention evolved over the years, it was eleven years later, 1888, that anybody attempted to put music on his device. It certainly wasn’t a music industry invention — far from it.

One must, however, give the RIAA credit that within another half century — the 1940s — they started to define a standard for recordings. Of course, this was the first sign of trouble. Why? Because the last cylinder recording was made over ten years before that. The RIAA was late by at least a decade.

The cylinder was gradually replaced by a new format which consumed less space and which was more durable and provided a higher quality of sound.

78 RPM records

Enter the 78 RPM record which actually took on many different forms, formats and speeds before it was finally somewhat standardized. Early playback systems used a hand-cranked mechanism to turn the platters. Later, these were replaced with electric motors. Using an odd 46:1 of a 3600 RPM motor (60 x 60) derived from a 60 Hz line frequency (50 Hz outside of the USA) for what would become a recording standard. This format seemed to be a good balance between length of content and quality, however the reason this speed was selected remains a mystery. The new flat discs took up considerably less space than their predecessor, the cylinder, and the flat round disc format would ultimately be a standard for almost all future recordings.

The earliest disc records were not 78s however. The cut in these discs started from the inside and worked its way to the outside. Many different devices used this technique including an old AudioVox machine that also used a constant velocity drive on the disc. The materials varied from hard rubber to felt and shellac and the cutting was either lateral or vertical. Eventually everything settled down to a standard that most of us are familiar with today.

But, one must remember that again, it wasn’t a music company that invented or further developed the disc format. Emile Berliner, a German-born American inventor, created the United States Gramophone Company that today is generally credited with the developing the gramophone (1887) and the record’s standard format. Berliner also had a background with telephones and the early Edison phonographs.

What started out as a toy was eventually improved with a spring-wound motor and that resulted in the Victor Talking Machine Company. Berliner received patents for his recording technology for both the discs and the players. The Victor Talking Machine Company was actually the basis for music recordings.

Later, the Radio Corporation of America (RCA), a broadcast company, purchased the Victor Talking Machine Company (1929) to put music onto records for distribution to various stations for broadcasting. The record company was born, but not by the music industry. It actually was the rebirth of the music industry as we know it today.

Open reel

Reel-to-reel recorders first made it possible to share and mix music, while preserving the fragile vinyl originals.

Open reel (reel-to-reel) tape recorders evolved from earlier wire recorders. History says that Oberlin Smith was also interested in recording telephone signals. He invented a system to magnetize a wire. This was further developed by Valdemar Poulsen ten years later. Poulsen’s “Telegraphon” was actually a device much like today’s answering machines for telephones. Obviously, the theme being the telephone and not music.

The Magnetophon as it was called was the first recording system that used tape rather than wire. It was developed by a German company, Allgemeine Elektrizitäts-Gesellschaft (AEG). The first working model was the model “K1″ which suffered from poor quality and excessive distortion. The purpose of this device was to record radio broadcasts during World War II and it was kept secret for a long time. It wasn’t until after the war that music became a primary consideration as biasing the signal to improve quality and other enhancements made it possible to actually achieve a quality musical recording.

While music was being recorded on the machine, the emphasis was to record radio broadcasts (Ampex company) in a studio for later playback on the air. It wasn’t as a primary medium to release to the public.

Reel-to-reel became popular to music enthusiasts later on. Even in the early 1970s, it was possible to purchase band recordings on open reel tapes. I have some in my collection that include Three Dog Night’s Live at the Forum and others. Most of these tapes were released by Ampex.

As tape systems improved, they became common as the primary music recording medium. Later, even homes had record/playback systems and a host of products entered the market from Sears Silvertone, Ampex, Teac, Akai, Roberts, Revox and more. Stereo and four-track were being sold everywhere.

More tape formats

Cassette decks -- and portable cassette players -- dramatically changed the personal music landscape.

The tape format took on different forms as they evolved. 8-Tracks, cassettes, multi-track, etc. These are all extensions of the open reel system. Cassettes were smaller and multi-track was bigger and 8-Tracks didn’t even have two reels. Philips has been a media developer for years but isn’t in the music business. They were the developer of the cassette recorder that survived for many years.

The music industry saw a threat. People were making copies of records in their own homes and worse than that, they were playing that music in their cars or Walkmen without paying for it. Some people were even making copies for their friends. This had to stop. But, again, the record industry was years late and dollars short. Once a cat is out of the bag, it is impossible to get it back in. Doing this with a skunk has disastrous results. There was no stopping the taping world. It was too late.

LP/EP Vinyl Records

LP/EP vinyl records were developed by the RCA Victor company. There was continued competition with the Edison Company and even General Electric who got into the game. Right idea but the wrong time. It was the Great Depression — 33 1/3 records were created in 1930, and a year later records were presented to the market. But nobody had any money to buy them.

The initial quality was poor as it was based on the same technology as the 78. It wasn’t until a new groove technology was developed, microgroove, that the music took off. But, was it a music company that developed this? Not really.

As LP technology, audiophile equipment, and recording equipment all grew in quality and affordability during the early 1970s, the first revolution in music was taking place. People were spending a lot of money on equipment and music. Purchases of many albums a week were not unusual. International markets opened up domestically. There was just so much music to taste and savor and the equipment to make it sound as real as the human ear could perceive.

Best of all, you could buy an album and copy it to open reel and then listen to the tape repeatedly without having to change record sides. You could mix and match and make custom party tapes that sounded almost as good as the original LP. Dolby came along and reduced tape hiss and lowered the noise floor.

The LP was king and the ability to achieve near lifelike quality came with it. And you could record it on your Teac tape deck, thus preserving your LP albums.

Recording albums was a real threat and there was no way to stop people from recording. The music industry tried but there was just no way. Thankfully, the music was still king and people were still buying tons of it. Literally.

The LaserDisc and CD

The LaserDisc was a video format that was far superior to the VHS and Beta tape formats. The LaserDisc was a unique format combining both digital and analog into a single medium. While originally developed for video use and to compete with VHS, it never really took of in the United States. It was, however, the pioneering technology for the CD or compact disc.

The compact disc was the milestone that took music from the analog domain into the digital realm for the public. The CD was actually developed for computer use by Sony to store digital data. Computer geeks quickly saw that they could put music onto them as well as data for long term storage. The music industry did see an opportunity with this format and quickly adopted it, but they didn’t create or develop it. That honor goes to Philips who pioneered the music CD as a viable format a few years after the Sony presentation of the technology.

Music recording companies and record labels were quick to embrace the CD and they saw it as not only a better format, but as one with a good profit margin, customer acceptance, and a way to resell popular titles to consumers again. Many consumers may have the LP but would again purchase the music for the portable attributes of the CD.

The music industry tried to stop the home recording of CDs to stop the copying of the music. This was just another attempt to stop the tidal wave of technology. It had failed in the past and it was destined to fail again. Rather than embrace and monetize a technology, the record industry tried to stop it. Never in the history of man had that approach ever worked. And it was destined to fail again.

Low cost quality recorders and even digital audio tape recorders (DAT) added to the open reel market and there was now a format for everybody. CD changers were available. The ability to program the CD player and then record that program was easier than trying to figure out how to set the clock on a VCR. Everybody did it. They made tapes for the car and their friends.

Here the industry became blind. The 8-track and the cassette clearly indicated that the consumer wanted a music format that played in the car, was portable, small in size and high quality. The CD fit that model extremely well. The problem was that there was a lot more going on at the same time. The digital revolution had started and nobody noticed.

Digitally distributed formats

Direct digital distribution has revolutionized radio, music, and our personal experience of music.

Music in digitally distributed formats was already being played with. Sharing, copying, and digitally storing the music into new formats was occurring and it wasn’t just by the techies in the back labs. It was everywhere on home computers, business systems, you name it. The Xerox Star was heard playing Pink Floyd in the early ’80s. PCs were playing everything. Sun 3/60 workstations even had build in audio, as did Macintosh and other computing devices. Copying music digitally and sharing it isn’t new. Digital music was on the horizon at least 35 years ago. I heard and made my first digital recordings 30 years ago.

For 20 years, the digital pot was brewing and growing and becoming ever more popular. An entire generation grew up with it before the music industry said, “Hey! Wait a dog gone minute! What’s going on here?”

The music industry relies on recorded media but, more than that, they also require a distribution network to get the media to everybody who wants a copy. Every music store in the country, and even the world, needs to get the media. Without a distribution channel, the music industry could not survive. Distribution is as important as the recording studio.

With digital music, the early days saw a wide variety of flavors used to share files: simple FTP from personal or group file servers; UseNet News as packaged files in ASCII text format; email attachments; and more. Eventually a concept was born called peer-to-peer or P2P for short. Bit Torrents came along that made use of P2P. Underground networks were born. Within that 20 years, sharing went from a few in the know to an entire generation of people who grew up and never knew of brick and mortar stores. They only knew that they could get their music “on the ’Net” and that they could do it for “free.”

By the time the record industry opened their eyes and saw what was really going on, well, it was too late again. Time after time, they were always too late. They failed to monetize distribution just as they failed to monetize copying and home recording. As unbelievable as it appears, the music industry fired another round at themselves in their attempted suicide. I find it hard to believe that they repeatedly made the same mistakes, in the same way, and the same thing happened every time — and then, they did it again. Unbelievable.

So downloads were happening. The music industry again tried to stop the tsunami. What they should have done was prevent the earthquake that caused it. The music industry turned down almost everybody who attempted to license or buy the right to provide digital downloads legally. They sued anybody and everybody who attempted to tread on what they perceived as their turf. The only avenue open to the consumer was the illegal and free market that did not benefit the music industry, but the music big wigs continually, for over a decade, refused to open the door to legal and legitimate distribution of digital media. They lost billions if not trillions of dollars in their futile attempt at stopping technology. That technology only grew in size and force.

It wasn’t even a music company that figured out the game. It was Apple Computers — a computer company — that figured out how to monetize the ’Net. Once again, those paid to lead the music industry failed at their job. Steve Jobs was the clear winner here. His iTunes and iPods and iPhones and iBooks and… led the charge to the digital revolution. Even then, the music industry attempted several times to shut him down, bully him into higher prices and much more greed. The music industry almost killed their golden goose. If it wasn’t for the will power of Apple, they would have lost even more money.

Mobile music and ringtones are another avenue that was developed and marketed by non-music recording companies. Others created the technology, distribution, pricing model and marketing without music industry help. The only thing the music industry did was to put up roadblocks. How silly!

The problem is that none of these technological advances was directly created by the music recording industry for the industry. In fact, in almost every case, the music industry tried to abort the development of a technology that would bring them revenue. Make no mistake, the music industry bigwigs have shot themselves in the foot so many times that it is no wonder they can’t go anywhere today.

The music industry has thrown away hundreds of billions of dollars in their greed. Whenever a model came up that could make them money, they said “no” unless they could make even more money. That turkey don’t fly and that dog don’t hunt.

Where now?

Now we are solidly in the digital age. New formats continue to evolve. Technology costs are declining and capabilities and quality are increasing. So, let’s see where we really are today.

Artists are recording in their own studios using equipment that is superior to the finest studios of a decade ago. Some home-produced works have even earned Grammy awards!

Artists like Radiohead and Leftover Salmon are selling their albums themselves over their own Web sites without any hard media. They are the producer, distributor, and retailer of their music. They do their own marketing and promotion and they’re making millions. No label. No studio. No CDs — nothing that the traditional market holds dear.

New distribution channels are evolving through social networks. Promotion and pointers to a Web site are all that’s needed. A lot of what the labels used to provide isn’t necessary anymore. iTunes, CD Baby, home Web sites, etc. are the new distribution and sales outlets for the digital generation. The artists are leaving the record labels behind.

Music can be sent to broadcasters as attachments to email or via special accounts to bypass e-commerce, allowing stations to get the latest music, right now, anywhere in the world. There are no padded envelopes or mailers, no postage required and, for the consumer, no delay in getting the music.

One can’t help but wonder what the music world would look like today if the record industry had said “yes” to licensing Napster and Grokster. The landscape would most certainly be different if they had adopted P2P for their distribution network and monetized it. If the music industry had the vision, foresight and intellect to grasp what was happening, they would all be in a better financial position and would never have had a reason to sue their customers.

Will they learn? Who knows? Their time is running out as they are hemorrhaging cash and customers faster than they can create new music those customers want to hear. Will they embrace the new technologies or fight them? Have they learned?

One thing is certain; today’s music business environment and paradigm doesn’t resemble the past in any way, form or manner. They will either adapt or die. Just as the dinosaur of the past is gone, the record industry may become extinct too. If it does, the music will continue — with or without them.

Read more at cybergrass.com

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Readers' Comments

1. Don Steiny on April 17th, 2010 2:04 pm

   Why don’t you tell ‘em what you really think? :) I love your no punches pulled style and your great research. Thanks Bob.

2. Marcia Yrineo on June 22nd, 2010 8:04 pm

   Great research. Interesting start to finish. Also visited your cybergrass.com and love it!

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