Lecture 3: Factors Shaping the Art Work: The Role of the Market

A. Cultural Production Industry

        1. "profit seeking firms producing cultural products for national and international distribution"

        2. major features:

                a. a large, unpredictable audience (w/ whom the distributors have no contact)

                b. enormous quantities of goods to be sold

                c. float an enormous number of ideas

                        i. test marketing; cautious advertising

                d. provide artists with a small chance of finding an audience

                e. the conventions between producers and public are unreliable and unpredictable

    A. Records and Radio

            1. recording industry (esp. prior to rise of music television (including c&w tv): making and selling 

             new records

                    a. radio = marketing tool

            2. With birth of television, radio fragmented into targeted audience programming

                    a. demographics: rock, classical and jazz, c&w

            3. radio's power: distributive gate-keeping

                    a. air play = success

                    b. record-makers tailor their products to fit

                    c. market success is a function of meeting programmers' requirements

    B. Changes in Country Music/Radio

            1. 1959: CMA formed

            2. 1961: 81 "C&W only" stations; end of 1965: >> 250

            3. end of 1968: >> 500; 1974: 1,016

            4. Consequences:

                    a. pop/rock announcers & programmers out of work

                    b. shortage of C&W announcers & programmers

                    c. converted c&w announcers and programmers import pop conventions:

                            i. hits; changed formats; reduced play lists

                            ii. "cross-over" styles ("countrypolitan")

        5. KEY: changes in distributor conventions --> changes in artistic conventions

    A. Relationship between Market Structure and Innovation

            1. Two views:

                    a. concentration (oligopoly) --> innovation?

                    b. competition --> innovation?

    B. cycle of concentration and competition in pop music (1948-1973)

            1. 1948-1955

                    a. 4-firm concentration: 4 companies controlled 75% of the record market (RCA, Decca,

                    Columbia, Capitol)

                    b. 8-firm concentration: accounted for almost every hit record during the period

                    c. vertical integration (control of production process from raw materials through

                    distribution)

                    d. copies; unsated demand: homogeneity

        2. 1956-1959 (rock and roll, 1955)

                a. # of firms w/ hits tripled; # w/ just one hit quadrupled

                b. Big Four's hits cut in half (74-34 hits)

                        i. vertical integration was broken up

                        ii. Supreme Court; more companies; radio

                c. # of records produced increased by 1/2

                d. # of hits increased by 2/3

                e. simultaneous covers disappeared

        3. 1959-1963 -- 40 firms in the market

                a. four firm concentration = 1/4; 8-firm = ca. 1/2 (v. 75 & 100% in 1948-1953)

                b. very slow period of growth industry-wide

        4. 1964-1969 -- a period of new innovation (THE BEATLES, etc)

                a. BUT, coupled with reconcentration

                        i. 8-firm concentration increased 14%; 4-firm increased 61%

                        ii. record sales doubled -- $1.6 billion

                        iii. music industry surpassed all other forms of entertainment for the 1st time

                b. mergers (WB bought Reprise; UA, Liberty; Paramount, Dot)

        5. 1970-1973: Reconcentration Continues at a rapid clip (BUT diversity also remains high) (?)

                a. 4 and 8 firm concentration rates continue to increase: 36 and 27% respectively

                b. # of firms having hits dropped by 61%

                c. WHY? Mergers and conglomerates: companies w/in companies

                        1. different labels, performers, producers, genres, songs

                        2. all owned by one company

                        3. the various divisions compete with one another

I

Paul Lopes, "Innovation and Diversity in the Popular Music Industry, 1969 to 1990" ASR, 57 (Feb, 1992): 56-71

A. (HR: does high market concentration ---> reduced innovation, inc. homogeneity of products?

        1. oligopolization cont'd throughout the 1970s & 80s

                a. b/w '69-90, pop singles market

                    i. 4-firm concentration from 46.5% ---> 81%

                    ii. 8-firm concentration " 66% ---> 97%

                b. same time, album market

                    i. 4 firm: 54.5% ---> 80.5%

                    ii. 8 firm: 80.5% ---> 96%

    2. 1980s: recession in music biz --> greater oligopolization

            a. a number of major indies went belly-up

            b. 6 companies (WCI, CBS, RCA, MCA, Capitol- EMI, Polygram): "virtually all recorded music in the U.S."

B. "Open System of Production"

    1. again, companies w/in companies; independent subdivisions w/in firms

            a. AND contractual arrangements in which smaller co's rely on larger for production, distribution

    2. Ratio of Firms to Labels

            a. pattern: fewer firms (consolidation): MORE labels

            b. eg, WCI: its labels = Reprise, Atlantic, Electra, Asylum, Island

                i. WCI's market share (every year except 1983) = largest among the majors

    3. consolidation was accompanied by innovation

            a. % of new artists has gone up steadily since 1981-82 (by '89-90 = 49.3% of singles, 39.1% of albums on the charts)

            b. New Wave -- 1st on charts, 1978 (Costello); by '83 = 43% album, 50% singles (top 100)

            c. Rap -- 1st on charts, 1984; by '90 = 31% albums; 28% singles

C. Radio/TV: Distribution

    1. earlier, radio made new styles possible (FM)

    2. esp. for New Wave, MTV made commercial success possible

            a. MTV (1981): joint venture, WCI and AmEx

            b. target = 18-24 market

            c. radio formats had become very restrictive

    3. MTV tapped unsated youth market (as had radio in 50s and 60s)

    4. BUT, MTV = conservative

            a. opened up: Heavy Metal; VH-1 (alt. channel)

    5. late 1980s, black music video stations; also MTV

D. Radio/TV --> industry concentration

    1. restricted air time for independents

    2. indies = big incentive to align with "majors"

E. Retail, Distribution and Innovation

    1. "rack jobbers" vs. direct branch distribution

    2. sharp increase in record stores (1979 = 45% of retail market; 1985 = 61%; 69% by 1988)

            i. great incentives to offer variety of music

            ii. got their stock from branch distributors of the majors

 

A. high market concentration does not have a single, predictable effect

    1. Key= the nature of the market itself

B. popular music industry is loosely segmented -- target audiences, advertising

C. open system of production and development works well

D. when geared toward an undifferentiated mass market (a la prime time TV, or pop music in the 1950s)

E. a closed system (which acts to reduce risk) will produce a homogeneous, standardized product

 

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