Motown Records to Streaming: Journey of the Music Industry

Music industry is over.

We keep on hearing this over and over again. But is it really over? Well, to find out, let’s dig deep into the history of the music industry.

Early Years

The music industry is more than 100-years old and the first progress came about in the 1890s. Back then, travelling shows were popular and a good source of entertainment for music fans. The big problem was – they had no ways to enjoy music at their houses.

Therefore, in the early 1890s, a new configuration called “Sheet Music” started to gain pace. It was a printed form of musical notes and song’s lyrics with beautiful a cover picture depicting a musician’s art form.

Fans bought sheet music from nearby stores and were able to play and sing their favourite songs. Thus, re-living a live show experience. Sheet music business saw a great 10-15 years run before an exciting innovation took over it by surprise.

In the beginning of 20th century, music lovers found a home in a new product. It was called “Piano Roll”.

Perforation on the paper of a piano roll makes piano keys to go up and down to play music.

Unlike sheet music, where fans had to play songs themselves on an instrument using musical notes on the sheet, they could now play music without having to know any instrument. With no skills required to use a piano roll, it soon became the most used form for listening to music.

Printing companies, who were selling sheet music, thought their business is over as everyone would prefer a piano roll over a sheet music to play songs.

They even asked the government to get involved in the copyright act to make sure they get paid every time a piano roll is sold. This change in fans’ behaviour i.e. from buying sheet music to piano roll made printing companies focus on music publishing (many of the publishing companies we know today, were in printing sheet business).

Fortunately, piano roll didn’t kill their business. As a matter of fact, it thrived on sales of piano rolls.

Beginning of Recording Industry and The Great Depression

An early entrepreneur in recording industry was Harry Pace. He was a partner of W.C. Handy. In the early 1920s, he saw a market for black female blues singers and started a company in Harlem called “Black Swan Records”. Many people think that Motown is the first black-owned record company but it is Black Swan Records.

During this period recordings became quite popular. Mamie Smith, Ethel Waters and few other black blues singers were the first mega recording stars as a result of selling records in the early 1920s. After seeing this trend, publishing companies thought their business is over as no one was going to buy piano rolls when they could buy records and play music whenever they wanted to.

But they were wrong. Sale of records helped publishing companies to expand at scale.

The great depression in 1930 put brakes on the music business. People could not afford tickets to live shows nor could they buy records. Recording and publishing companies as usual thought that their business was now over. But they didn’t know that a new technological innovation was ready to help them.

It was the Radio. Initially, radio was broadcasting only news, but in the 1930s, radio stations decided to bring musicians into their studios and let them play their music. This made recording companies think that they are doomed because no one is going to buy records anymore as music is freely available via radio.

But they were completely clueless. Radio promotions helped recording companies to sell even more records around the country and helped radio stars to become recording stars.

World War II and Its Impact on Music Business

World War II hurt the recording industry by restricting the use of brittle material which is used to make a record (the black disc). In addition to that, most of the males were away fighting. Again many people thought that the music industry was over.

But once again technological advancement helped in reshaping the music business. Armed Forces Radio Station (90 stations in total) was created to spread music all over the world so that soldiers in their off-time can listen to music and relax.

This led to a global expansion of music. It was a huge boost for the recording industry as not only soldiers but normal music fans around the world were able to access music through this medium, which resulted in exponential sales of records in years to come.

When these soldiers came back home from war, the demand for musical instruments exploded. These males wanted to learn music to play in bands and to play Jazz because of their exposure to music on AFRS during wartime.

They were helped by the government program that paid for veterans’ tuition for college or higher educational training. But, during this period music education was given only in conservatories and was limited to classical music.

Lawrence Berk saw an opportunity and founded Schillinger House in 1945. He, in 1950, changed its name to Berklee (Berklee College of Music), the most prestigious college for music education today, after his son Lee Berk. And we all know how big an impact Berklee has on today’s music business.

It has given us so many entrepreneurs and world-renowned musicians like John Mayer, Quincy Jones, Charlie Puth and many others.

Rise of Music Entrepreneurs, Advancement in Television and Invention of Jukebox

By mid 20th century, a number of new innovations and entrepreneurs were ready to help the music industry especially the recording business. One of them was Ahmet Ertegun. He loved blues and jump blues (a danceable form of blues) and started a record company in New York with a partner called Atlantic Records. Another was Art Rupe, who started Speciality Records.

They both were the part of a new wave called R&B (rhythm and blues) music and recorded great blues and R&B singers such as Ray Charles, Little Richard, and Larry Williams.

This period also saw technological advancements in television. In the beginning of radio, voice actors used to come on a radio channel to voice their parts out to tell a story. So, when television came, people in radio business were concerned because they thought that that type of programming would transfer over to television.

In fact, it did. And this led to a void in the radio market. The slots were then filled by radio stations by playing records to a greater degree than ever. This shift in radio business helped recording artists reach out to a wider audience, which resulted in an increase in record sales.

The invention of the jukebox in the early 1950s changed the music industry as well. It enabled people to go into a restaurant, drug store, put a coin in the machine and play any record of their choice. It made live musicians feel that they were displaced because instead of bringing bands into clubs, a club could now use a jukebox to play music.

It also made record companies feel that if people can go out and play any music they want to listen to, maybe that would cut down their record sales.

It didn’t happen to be true because under the surface, bubbling up was a new market for music listeners. Baby boomers, born to soldiers who came from war, who were coming to age in mid-1950s and had a sizeable income, were bought into this new form of music based on blues, gospel, pop, R&B and rock and roll. As a result record industry went from a total of $200M industry in 1954 to over $600M business in 1958.

Motown Records and Invasion of Beatles

Entrepreneurship spirit further continued in the 60s. Sam Cook, a pop and R&B singer started his own record and publishing company. Other creative talents also became interested in becoming entrepreneurs in the recording business.

A young songwriter from Detroit, Berry Gordy, decided to start his own record company in Detroit called Motown Records, which went on to become world-renowned and inspired many artists to start their own record company. Herb Alpert, a bandleader and trumpeter, decided to partner with Jerry Moss (a record executive) to start A&M records in the middle of 1960s.

The explosion of R&B, rock n’ roll and soul music through these record companies led to the British invasion in the mid-60s. The Beatles, who grew up in England hearing great blues and Motown hits, put their own spin on them and came to America and created a phenomenon like no other.

The sale of records started to take off and became very popular. Also, during this period, a new configuration arrived at the music scene called audio tapes (cassettes). People could now transfer music from vinyl records to this new type of music configuration.

They started to create their own playlists after the introduction of cassettes and also made copies for their friends and families like never before. It became a great concern for the recording industry. They thought this change in behaviour due to cassettes may slow down record sales. But again, they missed the bigger picture.

Rise and Fall of Disco Music and Sony Walkman

Through the 70s and 80s, a number of other things happened. Disco music saw a rapid growth in the early 70s but was dead as fast as it grew by 1978-79. Once again naysayers proclaimed that the music industry is dead. But the 1980s brought in more innovations that created a brand new market for the music industry.

Sony released first portable cassette player, the Walkman, in the early part of the 80s. It transformed the industry by enabling people to carry their personal playlists in their pockets. This gave music business a much-needed boost.

Then in 1981-82, MTV, a brand new music television network emerged and created a market for music videos. We can’t forget, Michael Jackson and his Thriller album, which also provided the push.

Another technological development was the compact disc (CD) that came in the early part of the 80s. CD cost was 3 times the cost of a vinyl or a cassette and many people in the industry thought people would never prefer buying a CD.

But marketing people promoted CD as a superior sound quality music configuration, which is indestructible and holds more songs compared to a vinyl or a cassette. This allowed record companies to save on the cost of loss and damage of records during transportation of records to distributors and helped them to thrive in this new era of CDs.

Golden Days of CD Business and Napster

In the 1990s, the sale of CDs took off as many people tried to replace their vinyl and cassette collections. Due to the remarkable growth of CDs in this period, many record and publishing companies became very valuable commodities and major corporations started to invest in them in a big way.

As a result record companies started to sign too many artists and were bloated with more than required number of employees. The quality of acts they were signing up was not on par as it should be to appeal to the public.

Record companies became so greedy, that they even stopped releasing singles. And if someone had to listen to that one song they really like, they had to buy an entire CD.

Record sales hit a peak in 1999 with a $14B sales figure. If you remember, in 1958, this figure was only just over $600M. By the end of the 20th century, record companies felt that their good times would never end. But they soon found it to be untrue.

At the same time, Napster arrived on the scene and burst the bubble of CD sales. It plummeted due to illegal peer-to-peer file sharing. Napster was a wrecking ball for the recording business. No one knew how to tackle it until 2003.

A New Era of Music Business

Steve Jobs came up with a new way to access and purchase music online i.e. a digital distribution concept called iTunes. He also accompanied that with a hardware (iPod), which enabled people to take their music wherever they wanted to, similar to what happened in the 80s with the Sony’s Walkman. Interestingly enough, iTunes returned singles as a dominant configuration in the music industry like it was in the 60s.

There was another technological development during the same period in the form of satellite radio (ex. Sirius radio network). They enabled people to receive radio signals via satellites in their automobiles. It also made people pay a monthly subscription fee to receive music.

We can see here a change in consumer behaviour from owning music to accessing unlimited music by paying a subscription fee. During the same period, music companies such as Pandora, Spotify and Rhapsody came into existence and created a new market for music streaming in a multi-tier format i.e. free (ad supported) and premium subscription (ad-free) models. And that brings us to today.

Once again, people are saying that music business is over but all these companies along with social networking sites (like Facebook, Twitter), crowdfunding sites (like Kickstarter, PledgeMusic) are creating new revenue opportunities both for labels and artists to reach out to the mass public.

We agree that it is difficult for artists to earn a decent living as live performance market is tough on numbers, streaming services are not generating enough revenue, time limitations on marketing and many other challenges but we have hope for this creative industry.