Record label deals and economics

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Music Industry in Learn More. Read the Report. Thus, natural lakes are neither depletable nor excludable. National defense is another example. One extra person being born does not increase the cost of national defense.

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National defense is non-depletable. The government could not get people to pay for defense voluntarily. This is because a given person would still be protected, whether he paid or not, so long as national defense was provided to anyone in the country. National defense is also non-excludable. Ensuring that public goods are provided in adequate amounts is one of the great problems of economics. Not addressing this problem can mean that too few public parks are developed. It can mean that countries are not sufficiently defended from attack.

All of those occurrences would make the world a much worse place to live in. Public goods are, just that — good. They have value for people. Rules of supply and demand do not apply, at least not in any normal sort of way. Government is the most common solution for the public good problem. The government simply buys what it thinks will be a sufficient quantity of the public good, using tax money to pay for it.

But it could be really great — pardon me while I digress a little here.

RIAA Accounting: Why Even Major Label Musicians Rarely Make Money From Album Sales | Techdirt

There could be a government agency that would determine which musicians would receive what level of subsidy. Government control of the music production and compensation processes is clearly not the answer that independent musicians are looking for. Some observers charge that no intervention is necessary.

They contend that musicians should make music solely for the love of making music, not for the sake of profits. Consider first the cost of equipment, the value of time and labor. More importantly, consider all the people — recording engineers, marketing experts, record label employees, booking agents — who work to facilitate the making and playing of music. Those people need to get paid. Who pays them? The musicians. If musicians made no money from their recordings, the cost of their time goes up.

The difference in money earned between music and some other day job increases. It becomes too expensive to make music. More of them would have to get day jobs, or work even more time at their current day jobs.

Andy Allen: Record Label Economics

The economic force in this case is irresistible and undeniable. No one wants to impose a scarcity of music. Yet, if the market system is left to handle the public good that is recorded music, that scarcity of music will occur against the wishes of individuals. The public debate about what the music industry should do about this problem has generally not addressed the issues in these economic terms. The free market mechanism does an extraordinarily poor job in handling public goods. It has been trying to use free market capitalism to make profits on a good that is becoming more and more like a public good.

It should now be apparent that an unfettered, unregulated, and unobserved market mechanism will serve recorded music — and the artists who produce it — very poorly. The good news is that concerned people — such as the independent artists and labels that will lose most of their revenues if the price of recorded music approaches zero — have some economic reasoning to call upon. Either its natural state as a non-depletable resource or its tendency to be non-excludable must be counteracted.

It will necessarily have some aspects of a public good and some aspects of a regular consumer good. These guidelines, based in economics, represent the beginning, not the end to this discussion. Clearly, the process of understanding music as a product is somewhat distasteful.

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But understanding it as a special type of good, one whose value is not measured adequately in dollars and whose exchange should not be left to a market without some special rules, is very empowering. It can frame the discussion and define the search, as everyone who loves music scrambles to imagine a way in which both the artists and the consumers can always get what they want. Peter DiCola. Sunday, July 16, Related Campaign:. On Artist Compensation.

Up Front Policy Priorities for Comments of Arts Organizations on Net Neutrality. In a way, this may be considered political as well. Similarly, limited financial resources and an appeal to small audiences are regarded as typical for artists, organizations and participants in such autonomous art fields. Characteristic of cultural producers within autonomous art fields is that often they are rich in cultural capital, but lack economic capital Bourdieu Picture 3.

Statement from Laterax Recordings, illustrating how internet distribution provides opportunities for reaching niche markets, that majors would ignore. Image is reproduced with kind permission of Laterax Recordings. Like their British and American colleagues, they show moral motives. In addition, such a motive can also be considered as symbolic resistance Strachan Despite their small-scale production orientation, they do aim to influence the taste dominance of the mainstream music industry.

It is therefore a combination of aesthetic and moral motives, aimed against the dominance of the majors in the public sphere Ibid. Jorg of the Laterax label makes the following comment:.

The Economics of Recorded Music

And from then on everything is under control and ready to make as much money as possible. But we think the other way around. Our releases are meant to be very cool, authentic music. From that moment we try our best to find an audience, because we think our music should be heard by everyone. Jorg, Laterax Recordings, see picture 3. Dutch label staff gives their bands the time and space to focus on artistic or creative development. Dutch micro-independents regularly organize label-related events, offering their bands opportunity to perform see picture 4.

These may be considered as local promotional fora, as pointed out by Hesmondhalgh a. They explain they have to be fully dedicated, in order to promote a band, otherwise the collaboration has no chance of success. Staff will only invest time and effort in music that is very close to their personal preferences. In short, these micro-independents only release music they fully support, which refers to the autonomous nature of these record labels and the autonomous behaviour of their staff or owners.

We can also observe a Bourdieusian link between restricted autonomous small-scale music production and a disinterest in the economic value of that cultural product Bourdieu Almost all interviewees indicated that making money was never a consideration for starting their micro-independent. Picture 4: A label related event by Subroutine records. Image is reproduced with kind permission of Subroutine Records. Owners and staff of micro-independents acknowledge that releasing indie-genres will not generate big returns.

For this reason, personal fulfillment is mostly regarded as success see picture 5. Also, Dutch micro-independents get symbolic rewards by way of recognition for their artists or releases Crane , Bourdieu For them it is particularly rewarding when their artists or bands get positive reviews and that the public responds positively to these artists, as Cedric of the Snowstar label explains:.

Cedric, Snowstar Records. Picture 5: Snowstar Records compilation CD, a promotional tool, illustrating motives of personal passion and broadening the diversity of music. Image is reproduced with kind permission of Snowstar Records. The research shows that micro-independents primarily release music in order contribute to broadening the provision of contemporary music. Their releases can be specified as indie-genres, or non-mainstream music styles. Releasing precisely these indie genres may be conceived as a way of classifying, of distinguishing themselves from the major record companies or the mainstream music market DiMaggio Commercial or financial success is not considered important by micro-independents, however most of our respondents do want to break even in order to keep their companies going.

This may be interpreted as a moral motive to oppose the dominance of the majors, a form of symbolic resistance Strachan There are many similarities between the business operations, the structure and working practice of these organizations. Furthermore, the motives to start up or take part in a record label are in many ways similar. The examined independents are all embedded in both local and international network structures, often genre-specific. Also, they value forms of collectivism and profit sharing, which again distinguishes them from the majors.

Overt political oppositional motives were virtually not found. Dutch DIY-independents do not have a mission to combat the dominant hegemonic system of the major music industry or to democratize the music market. A key difference is that British DIY-independents more often explicitly aim to compete with, or even overthrow the majors. The size and global dominance of the British cultural industries, in contrast to the Dutch, can play a part in this.

Also Hesmondhalgh described the strong aesthetic and political fervor of British indies in the punk and post-punk era, which has its roots in the — perhaps more strongly politicized - British society. This may have to do with the fact that the United Kingdom has profounder political and social divisions than the Netherlands Russell In the British situation there may be a stronger urge to compete against dominant cultural, political and economic elites. Both Strachan as Hesmondhalgh register the mission among staff of British micro-independents to compete with the major recording industry.

Dissatisfied with the capitalist and corrupt mainstream industry, they have the determination to transform and democratize the music market. A salient difference with our research results is that such goals are completely absent among the Dutch DIY-independents. On the other hand, it is not clear to what extent the political motivations are still present today among staff of British micro-independents. In the contemporary music marketplace they are well positioned to capitalize on their lean organizations, their network structures and their digital as well as non-digital distribution networks.

Such an observation suggests direct competition between majors and independents. Micro-independents, however, appear to operate not so much on that shared marketplace, but on a parallel market. This parallel market logic is underscored by both the usage of distinctive non-mainstream genre classifications as well as their denial of the economy Bourdieu as displayed by the respondents in our research. Their primary motivation is the love of music and their contribution to the diversity of taste. Rewards are mainly symbolic, voiced in terms of pride and recognition.

Nevertheless, as Hesmondhalgh rightly points out we cannot fully explain alternative independent music production as a Bourdieusian subfield of restricted small-scale production. As we have shown in this contribution, micro independents are inextricably bound to the field of mass cultural production. Only due to the overall growth of musical supply, technological innovations, audiences and the access to music, have micro-independents been able to establish themselves as a viable subset of the recording industry.

Previous research into independents is virtually all from the United Kingdom or the United States. Because these studies are done from an Anglo-Saxon perspective, there is little comparison with DIY cultures in other countries. Subsequently, the establishment of micro-independents in other countries may well be grounded in different motives. Despite the fact that there seem to be many similarities between Dutch and British micro-independents and their staff, we hope to have shown for instance the absence of political motives among Dutch micro-independents.

Moreover, we can expect the dominance of Anglo-Saxon music in the global music market to influence the position of local DIY-micro-independents in most countries. Future research may shed light on those uncharted territories. Furthermore, we may expect that differences in different countries might vary consistent with the size and influence of creative or cultural industries, its relation to politics and cultural policy, local art worlds as well as linguistic, socio-economic and cultural-economic factors. Geoforum 31 4 : Becker, Howard S.

Art Worlds. Berger, Peter L. Boeije, Hennie. Boeije, and J. Amsterdam: Boom Onderwijs. Bourdieu, Pierre. The Field of Cultural Production. Oxford: Polity Press. Braun, Virginia, and Victoria Clarke. Calvalho, Hester. NRC Handelsblad 4 April. Choi, Hwanho. The New Wave of Independent Labels.

The New Economics of the Music Industry

Cox, Raymond A. Felton, and Kee H. Crane, Diana. Beverly Hills, CA: Sage. Crossley, Nick. De Meyer, Gust, and Alex Trappeniers. Lexicon van de Muziekindustrie. Werking en Vaktermen. Leuven: Uitgeverij Acco. DiMaggio, Paul. Frith, Simon. Gelder, and S. London: Routlegde. Frith, W. Straw, and J. Cambridge: Cambridge University Press. Handke, Christian. Hamlen Jr, William A.

Hesmondhalgh, David. The Cultural Industries 2 nd edition. London: Sage. Hibbett, Ryan. Hijmans, Ellen, and Fred Wester. Wester, K. Renckstorf, and P. Alphen aan den Rijn: Kluwer. Hitters, Erik, and Miriam Van de Kamp. Kasaras, Kostas. Kruse, Holly. Leurdijk, Andra, and Ottilie Nieuwenhuis. McKay, George ed.

London: Verso. Moore, Ryan. Negus, Keith. Punk Record Labels and the Struggle for Autonomy. Lexington, KY: Lexington Books.