The Record Business 1965-2015


Growing up in the sixties and seventies music was everywhere, it was all we talked about. It was the invitation; want to come over and listen to the new Creedence Record? Meet me at the record store?

Status in those days was the guy who had the best stereo and the best record collection. Fans saved their money and purchased records whenever they could.

It was a shared experience, it was communal. People would hang out and listen to music, pass around an album cover, read the liner notes and talk about who played on the record. Music videos would not appear until the eighties and social networking was what happened in the aisles at record stores.

Peer-to-peer file sharing was a ninety minute cassette tape recorded in real time, filled with songs from your favorite artists. Making great 'mix' tapes, that earned you bragging rights, was an art form that took time to master. This is why sharing music in those days wasn't much of a threat to record sales. It took so damn long to make copies.

When I worked in a record store in Berkeley in the early seventies, it wasn't unusual for customers to purchase five LPs and take chances on new artists. Often customers would ask for recommendations based on the artists they were following. In my store we had a contest every day to see how many copies of a record we could sell when we played it in the store.

The introduction of the CD.

By the early eighties the record labels began transitioning away from relatively inexpensive LPs to CDs. Compact Discs were expensive, costing more than twice as much as records. Customers who bought multiple records and once took a chance on new releases, bought fewer titles. The CD was the mother lode of profitability for the record companies. They weren't only far more profitable, but people began replacing and repurchasing their music collections.

Unfortunately, the labels rode that horse into the ground. Their focus became more about short term profits as opposed to making the investment to develop new talent. The CD is one of a handful of technology products that never came down in price. Even when the price to produce CDs dropped dramatically as demand spiked and more production facilities were built.

The strategy of keeping profit margins high would eventually backfire two decades later as a generation saw piracy as a justifiable payback for greedy record labels and their overpriced music.

Video Killed the Radio Star.

The other major game changer in the eighties was MTV, launched on August 1, 1981. Within a very short time traditional radio found itself in heavy competition with MTV, as cable television became available in more households. The radio promotion guys working for the labels discovered that having their band's video added to heavy rotation on MTV was like getting airplay on every radio station in the country.

Not surprisingly, MTV became the dominate force for breaking acts and transforming music into music videos, expanding music's popularity by creating even more super stars.

The Record Business meets Wall Street.

Music was now big business with massive profits from compact discs and promotion from MTV. By the nineties the music business was beginning to attract the attention of Wall Street. A business once dominated by music people, was now attracting lawyers and power brokers from other businesses filling high level creative decision making positions.

Respected industry leaders, like Mo Ostin, who had built Warner Brothers Records into one of the most respected and successful record companies would be forced out after twenty-five years as CEO in 1994. The man who forced Ostin's resignation, Robert Morgado, who had no experience in the record business, would be fired six months later and Warner Brothers would never regain its former glory.

The Telecommunications Act of 1996.

In 1996 the music business would suffer another setback. The Telecommunications Act of 1996 allowed broadcasters, who up until then could only own a handful of radio stations, were allowed to purchase as many stations as they could afford.

A buying frenzy ensued with corporations like Clear Channel buying up hundreds of local radio stations, eventually stripping them of their individuality. Thousands of program directors and DJs who once "added" songs and created playlists that reflected the taste of their local audience disappeared.

Fewer, emerging local artists got airplay and listeners starting complaining that all radio sounded the same.

Napster and the age of artist exploitation.

If you were a college kid and everyone was talking about a new way of getting free music on your computer would you think: "No I'm not going to do that, how are the bands going to make any money?" Hell no. Are you kidding, they flocked to it.

For this generation of Internet users Napster was like finding a bag full of money in the trunk of your car. Students loved the idea of free music and were surrounded by friends who would gladly show them how to use it. Most young people saw nothing wrong in downloading songs for free from Napster. Many believed that they were simply sharing the music; to them stealing a CD from a store and downloading songs for free were totally unrelated.

On the surface it made sense. The record labels perceived by many as corporate gate keepers, manipulating who got a shot at stardom and keeping the lion's share of the money. Piracy was going to give every band a shot at stardom and create opportunities for all musician to get exposure and find new ways to make money. They didn't see it as stealing, they believed they were actually helping new bands. Unfortunately, piracy turned out to be a financial disaster for most artists.

Things were happening so fast that Napster's founder, Shawn Fanning, was being celebrated as a visionary of sorts, a liberator of music. Even the mainstream media didn't know what to make of of Fanning or Napster. He ended up on the cover of Time Magazine and was a presenter at the MTV Video Music Awards in 2000.

But it wasn't just the media that didn't know how to react to Napster. When Lars Ulrich of Metallica learned of Napster he scoured the site for his bands songs. Ulrich found all of Metallica's songs available as free downloads. He also found an unreleased, unfinished track, "I Disappear" from the upcoming Mission Impossible II soundtrack. He went ballistic.

Not only did Metallica sue Napster, But Ulrich and Roger McGuinn, one of the founders of the Byrds, spoke before Congress about Napster's unauthorized abuse of Copyrighted Songs. Reading the fifteen year old transcripts of Ulrich's testimony before Congress is nothing less than a revelation:

"We have to find a way to welcome the technological advances and cost-savings of the Internet. However, this must be done without destroying the artistic diversity and the international success that has made our intellectual property industries the greatest in the world. Allowing our copyright protection to deteriorate is, in my view, bad policy both economically and artistically."

The response to Ulrich from the pirate community was so vitriolic and mean-spirited against this successful, wealthy artist it is still burnished into people's memories, even today it is folklore. It was a powerful warning as if someone had stuck Ulrich's' head on a spike just outside the city limits with a sign that said "If you're a musician and speak out for your rights, this is what's going to happen to you."

Ultimately, many of Metallica's fans would turn against them; fellow musicians took notice. Every time an artist would speak out against piracy the negative backlash would be so intense that artists became afraid to say anything, lest their fans turn on them.

After just two years, Napster was ordered to shut down on July 27, 2001, but shutting down Napster wasn't the end, it was just the beginning:

"What Napster has really done is educated the marketplace that this is a great application, and this is how people would like to hear music in the future," said Gene Hoffman of eMusic. In 2012 it was estimated that nearly a quarter of all internet bandwidth is used for hosting sharing and acquiring infringing material.

In 2014 a House Judiciary Subcommittee began hearings on copyright, their first formal review of copyright in nearly forty years.


In 2003 Steve Jobs finally convinced the record labels that unless they unbundled albums and sold songs for $.99 on iTunes they could not compete with piracy. The music industry that had gone from selling singles in the fifties to selling albums in the sixties, found itself back in the singles business again.

Ultimately, the combination of piracy and the decline in album sales would take their toll and the record business would lose more than half of its' value over the next fifteen years.

Interactive Music Streaming.

The music business is now facing a new challenge that further threatens the financial stability of an already hobbled industry. Some question if these streaming services, like Pandora and Spotify, can even be profitable. Pandora has been in business for a decade and has never shown a profit.

More importantly, musicians and songwriters are questioning if they can make a living in a business where selling their music is in rapid decline and payouts from streaming their music pays so little.