Reebee Garofalo, "From Music Publishing to MP3: Music and Industry in the Twentieth Century" American Music (Fall, 1999)  The full article can be obtained via http://www.findarticles.com.

Technological Advances and Structural Change

The concept and equipment for magnetic recording were first patented by the Danish engineer Valdemar Poulsen in 1898, but it was the Germans who perfected it. The German magnetophone developed by Telefunken and BASF used plastic tape coated with iron oxide, which could be magnetized by amplified electrical impulses to encode a signal on the material. Playback simply reversed the process. Aside from the obvious technical advantages of editing, splicing, and better sound reproduction, magnetic tape recording was also more durable, more portable, and less expensive than the existing technologies. The Nazis used the new technology to increase propaganda broadcasts during World War II, but there was no immediate application to the music industry, as the studios and manufacturing plants of Deutsche Grammophon (now owned by Seimens) in Berlin and Hanover had been destroyed by saturation bombing. As Germany rebuilt after the war, Deutsche Grammophon became the first company to use magnetic tape exclusively. Among the spoils of the war, magnetic tape was one of the items that was "liberated" from the Nazis. In the United States, the main beneficiary was the Minnesota Mining and Manufacturing Company (3M), who came up with a tape that surpassed the sound quality of the German product and marketed it under their Scotch Tape trademark. Simultaneously, tape-recorder manufacturers were able to reduce recording speeds from thirty inches per second (ips) to fifteen ips and then to seven-and-a-half ips, without seriously compromising sound quality. The amount of material that could be recorded on a standard tape thus quadrupled. The advantages of tape were immediately apparent to recording companies and radio stations, who invested in the technology as soon as it became available.

The same year that the transistor was unveiled, a team of scientists working at CBS labs under the leadership of Dr. Peter Goldmark and William Bachman invented "high fidelity." Developed out of their interest in classical music, this breakthrough yielded the "microgroove" or "long-playing" 33-rpm record (the LP), which increased the number of grooves per inch on a standard record from eighty-five to three hundred. Not to be outdone, RCA responded with a similar product that played at 45 rpm. In what became known as the "battle of the speeds," the competition between the two giant firms produced vinylite discs of excellent sound quality and maximum durability. The 45, whose size caught the fancy of jukebox manufacturers, soon became the preferred configuration for singles. The LP became the industry standard for albums. Because these records were lighter and less breakable than shellac-based 78s, they could be shipped faster and more cheaply. Particularly because of these technological advances, records emerged as a relatively inexpensive medium, which held out the very real possibility of decentralization in the recording industry.

Two policy decisions in the United States also had implications for the further development of popular music and the music industry. Owing to a shellac shortage during the war, which caused a cutback on the number of records that could be produced, the major U.S. labels made a strategic decision to abandon the production of African American music. This decision, coupled with technological advances favoring decentralization, created the conditions in the 1940s under which literally hundreds of small independent labels--among them Atlantic, Chess, Sun, King, Modern, Specialty, and Imperial--came into existence in the United States. Another important policy decision--leading to the development of television--enabled these fledgling labels to gain a permanent foothold in the industry. The concept of transmitting images over distances had been around since the nineteenth century. As early as 1926 John Logie Baird experimented with a mechanical television system that became the basis for the BBC's first televisual transmissions. The current system of electronic television was first proposed by Scottish inventor A. A. Campbell-Swinton in 1908. It was developed in earnest in the United States at Westinghouse by Vladimir K. Zworykin, a refugee from the Bolshevik Revolution, using a cathode-ray tube invented by Karl Ferdinand Braun in Germany in 1897. In 1935 RCA decided to sink $1 million into the development of the new medium. One year later the BBC began its first regular public television broadcasts.

Television became a viable consumer item in the United States in the late 1940s. By 1951 there were nearly 16 million television sets in operation and RCA had already recovered its initial investment. Television signaled the death knell for network radio, as the new visual medium quickly attracted most of the national advertising. Interestingly, this had the effect of strengthening local independent radio, which emerged as the most effective vehicle for local advertisers--at a time when the number of radio stations in the United States had doubled from about 1,000 in 1946 to about 2,000 in 1948.

The relationship between local radio and record companies also contributed to a major structural change in the music business. In the era of network radio, music was performed live by studio orchestras. In its search for cheaper forms of programming, however, independent radio turned to recorded music. The dawn of a new age was apparent when WINS in New York announced in 1950, over the strong objection of the American Federation of Musicians (AFM), that it would be programming records exclusively from then on. Since recorded music was now the rule for radio, record companies routinely supplied free copies of new releases to deejays in the hope that they could turn them into hits. Eventually, this practice cemented the reciprocal arrangement between radio and record companies that has defined the music industry ever since: inexpensive programming in return for free promotion. Records became not only the staple of all radio programming but also the dominant product of the music industry as a whole, eclipsing sheet music as the dominant medium for music. Record companies thus displaced publishing houses as the power center of the music industry. Further, with technological advances favoring decentralization in recording and a climate of experimentation in radio, it became possible for small independent labels to challenge the few giant corporations that had monopolized the music business until this time. The stage was set for the emergence of rock and roll.

The eruption of rock and roll in the 1950s changed the popular music landscape permanently and irrevocably, signaling the advent of broader social change to come. It was a pivotal moment for a number of reasons. Economically, the music enhanced the fortunes of "untutored" artists, upstart independent record companies, and wildly eccentric deejays, turning the structure of the music business on its head. The vintage rock-and-roll years coincided with a period when the fortunes of the U.S. music industry nearly tripled; revenues from record sales climbed from $213 million in 1954 to $603 million in 1959. In this expansion, rock and roll jumped from a 15.7 percent share of the pop market in 1955 to a 42.7 percent share in 1959. During the same time period, independent record companies went from a 21.6 percent share of the pop market in 1955 to a 66.3 percent share of a pop market that was roughly three times larger in 1959. Rock and roll was clearly a threat to established music business interests economically. But it was a threat to the whole society culturally and politically.

Despite various efforts to tame the music in the late fifties, rock and roll became even more highly politicized in the 1960s, as baby boomers came of age and the music became identified with radical youth movements throughout the world. By this time the music associated with the "British Invasion," its name now shortened to "rock," had made a major contribution, elevating the music to the status of art, even as it became more closely linked with alternative and oppositional tendencies. A whole new broadcast medium--FM rock radio--and a burgeoning rock press opened up to accommodate these new sounds. But, just as the radical movements of the sixties depended in part on the affluence provided by imperialist practices, popular music was inextricably bound to the capitalist interests that produced it. "From the start," said Michael Lydon in 1970, "rock has been commercial in its very essence.... [I]t was never an art form that just happened to make money, nor a commercial undertaking that sometimes became art. Its art was synonymous with its business."(30) The 1960s may have been experienced by artists and audiences as a period of political awakening and cultural development, but for the music industry it was a period of commercial expansion and corporate consolidation. Far from disappearing, as the activists of the 1960s would have had it, capitalism simply became hipper. There was a new wisdom among corporate executives in the music industry. As it became clear that the key to profitability lay in manufacturing and distribution, record companies began contracting out most of the creative functions of music making. Far from resisting the creative impulses of offbeat artists or upstart independent labels, the major companies now signed acts directly, made label deals, entered into joint ventures, or contracted for distribution.

There ensued a period of unprecedented merger mania. Steve Chapple and I identified three types of mergers: horizontal, vertical, and conglomerate.(31) In reality, of course, such ideal types were often hybrids as in the amalgamation of Warner-Reprise, Elektra-Asylum, and Atlantic in the creation of the Warner Communications empire. By the early 1970s a couple of dozen associated labels--in addition to extensive holdings in film and television, Mad magazine, sixty-three comic books, and a piece of Ms. magazine--were operating under the new corporate umbrella. CBS integrated vertically to control production and marketing from recording to retail sales. In addition to its own labels, recording studios, pressing plants, national distribution, and a publishing division, CBS, Inc. owned the Columbia Record and Tape Club, Pacific Stereo and the Discount Records chain, Fender Guitars, Leslie Speakers, Rhodes Pianos, and Rogers Drums. In Britain EMI had acquired an analogous set of holdings.

Meanwhile, the predominance of electronics firms in the music field created an issue, which seemed particularly antithetical to the prevailing ideology of popular music--namely, the connection between music and the military. Advances in electronic communication had always developed according to their military applications. It was no different in the sixties and seventies. The connection became apparent to the Rolling Stones when they discovered that their label had channeled profits from their records into precisely this kind of research and development. Said Keith Richard: "We found out ... that all the bread we made for Decca was going into making little black boxes that go into American Air Force bombers to bomb fucking North Vietnam.... That was it. Goddamn, you find you've helped to kill God knows how many thousands of people without even knowing it. I'd rather the Mafia than Decca."(32) While popular music maintained a strong connection to the women's movement and the antinuclear movement throughout the 1970s, it was a time when the idealism of the sixties began to fade. Adding to the loss of innocence, it was here that the popular David and Goliath tale of small independent labels successfully challenging the majors for market share ended. While the indies may still have entered the business to fill a void in the market, their larger function became providing research and development for the majors. When Robert Stigwood's RSO label and Neil Bogart's Casablanca demonstrated from the bottom up that a fortune could be made in disco, PolyGram simply stepped in and acquired a controlling interest in both labels. Warner engineered a similar acquisition when Seymour Stein's Sire demonstrated the commercial potential of new wave. Far from being in competition with the majors, the independents had now become part of the same corporate web.