Many Years Ago

Many years ago before CDs came out there were a huge number of record companies. Most of them were small. The people who ran those companies spent time LOOKING for talent to promote. They did not get wealthy. They did what they did because they liked it.

Then CDs came along, and all of the sudden every company was remastering and re-releasing every single thing that had been recorded for most of a century. Early CDs were very durable (not the crap they sell today). I remember watching in the stores when the guys behind the counter would throw a CD across the room and let it bounce off of a wall or two… they NEVER got a scratch. They sold for about the same as a CD does today (minus changes in cost of living).

BUT – with all those small companies having so much recorded material from the past – and so VERY many fans wanting everything put onto CDs, suddenly every company out there was remastering everything and putting it on to CD.
Over the course of only 5 to 6 years, more music was sold (TOTALED TOGETHER) than normally sold in 30 years. This is because people were replacing nearly everything they had ever bought, with new copies on CD. That means they sold a whole lot of remastered copies of EVERYTHING and a lot of record companies that normally had trouble breaking even were rolling in cash. This was not normal, and it was not going to continue. Those familiar with the industry knew this.

*** ENTER THE BIG CORPORATIONS ***

Now at that time that CDs came around there was a lot of buying and selling of companies in general. This included media companies. This put new people in charge of everything – people who did not understand the industry at all.
There were less than a dozen really big labels out there; ones with huge profits. A lot of their older executives retired, and were replaced with people with MBA degrees and no understanding of the music industry. The new executives never looked for new talent. They were also impossible for musicians to contact directly. They stopped paying attention to “what people wanted” and just collected their checks.

The new MBAs at the large music companies noticed the income of the small companies, and knowing NOTHING at all about the music music industry, they say them as massive profit centres. They had no idea that the massive income of the last few years was going to stop quite soon.

So these executives went out and paid huge sums for the small labels. They now owned the small companies … owned their copyrights, and right after buying them they usually closed the old place down completely – losing the wisdom of people who had worked for decades and knew how the industry really DID work. People who spent a lot of time looking for new talent.

Soon there was a feeding frenzy of companies buying up companies. When the dust settled there were very few companies, they were all massive, and none of them looked for new talent or would speak to musicians or their agents.

– This is about when the Red Hot Chilli Peppers realised they would never get anywhere unless they did everything on their own. They had a name and a large following and not one company would talk to them. So they bought an old run down church to live and play and record in, and old bus to travel in, and booked their own tours (to keep the prices SANE so that “Ticker Master” (who had a near monopoly on good music venues) could not try and extort $80 a ticket from kids who barely had the ability to scrape up $20 … and RHCP played in a lot of odd venues (places without “Ticket Master” contracts.

*** THE BOTTOM Fell OUT ***

Then, as the owners (now retired and living well) of those small record companies had expected, saled dropped in a huge way. Everyone who wanted to but all new copies on CD of Elvis, Billie Holiday and Chubby Checker had done so. Incomes plunged back to their normal tiny trickle.

The MBAs who now ran the show, and had not expected (what everyone else had expected) were angry. They lashed out at everyone. They still didn’t have anyone out there looking for talent, signing new popular acts, etc. and unlike the 1940s, 50s, 60s (etc) there was no human being inside of “Time Warner AOL Cthulhu” who ever spoke to any musician. They on longer had slush piles of tapes. What they had instead were very large pay checks, and several rings of people paid specifically to keep the musicians away from them; a big wall of bureaucracy that kept everyone with talent from having any chance to be heard by the only people left who had the ability to get them published.

*** THEN THE INTERNET ***

Then the internet came along as a popular thing. People started to share files of the music they liked. A whole lot of them WANTED to pay for them, but there was no way to do that because the new R.I.A.A. vehemently refused to sell anything in the new downloadable form. They killed NAPSTER with court fees (even though NAPSTER technically won the cases).

The recording companies did not like the internet. They had no clue how rich they could get off of it by selling singles at $2 a piece (with no expensive art work, no cost in pressing CDs, etc). Also they were still very unhappy that the cash had stopped rolling in (from the time when everyone replaced their music) and wanted somebody to blame.
– so they blamed the Internet… it was all that piracy (it had to be)
Streaming music live to people became more common on web sites. However there also was no mechanism in place to deal with royalties associated with COMMERCIAL web sites, with people listening to music, sot that cash went to those who owned the copyrights and royalties to the musicians. Many streaming companies tried very hard to create a way to do this, but the RIAA resisted them and said NO; I do not mean they said NO to one certain way of paying them…ie “this is our RIAA method”. The RIAA said no completely.

Meanwhile a huge number of independent musicians put their music straight up online, having never pressed to to a CD.
To combat file sharing and streaming, the TIAA companies went utterly nuts. They said *NO* to every offer concerting royalties for file downloads and streaming…. while aty the same time complaining that they get no money from Internet based music.

They also did these things….

1) they created and heavily funded an organization that was essentially a CARTEL crossed with a political lobby group. This was the RIAA (note that monopolies and cartels, price fixing, and industry wide standard contracts, are all technically illegal). They used it to lobby politicians, and grease politicians hands so they they could change the way copyrights worked. They also used to to work as a single large force – with the musicians on the other side of the line.
The big companies continued to buy each other out. Time Warner eventually owned the vast majority of teh worlds media content.

The RIAA companies also came up with a new standard contract. In this contract business was done very differently than in any other form of business anywhere. Imagine that as the person who contracted out to write some software documentation, you were required to pay for EVERY expense associated with making the software…. IMAGINE THIS – McDonald’s does not make its employees pay for the cost of the advertising they CHOOSE to run on TV. Image the person on the grill had to pay for it.

This is pretty close to what they did.

This new RIAA contract system would leave a whole lot of musicians not only broke – but owning MILLIONS to the record companies which LEGALLY not allowed to record anything … not ever again.

The new RIAA contract said that all the expenses associated with selling an album, came out of the musicians ROYALTIES (their tiny cut) instead of out of the gross profits form that album or the entire company (like any normal business). So the tiny royalty the band got (about 2 cents for the entire band off of each CD sold, to split with their agents) had to cover costs that the band had no say in. They did not hire anyone to advertise anything but they had to pay for it. This included recording costs, advertising expenses, meetings, etc (all of it) instead of coming out of the GROSS INCOME of the company. This is how they really did use that new method.
– the cost of creating and pushing a new album, recording, mastering, etc… cost of studio musicians… (all that) came out of the musicians cut … AS WELL AS, the cost of the executives choosing to advertise the new album during half time at the superbowl. It often involved hitting the musicians royalties up for the costs associated with a meeting – BUT

– that meeting just HAD to take place in the most expensive hotel and restaurant in Hawaii…. so they hired a private jet to take them to Hawaii, and booked and entire floor, and had dinner in 5 star restaurants – as a handful of people sat around a table (who all worked on the same floor of the same building normally) and occasionally mentioned something about the new album.

So for a few weeks they would live for a few weeks in the most expensive hotel in Hawaii, eat at their most expensive restaurants … rent a yacht, lie on the beach, and while there they would occasionally discuss business (claiming it all as a business expenses – one that would come out of the musicians royalties). Even the clothing they wore while in the restaurant (after all you MUST dress right for such a high end place) came out of the musicians royalties; brand new $5000 to $10,000 suits that they wore as they sat around the table, drinking champaign that cost $3000 a bottle.. ad once in a great while talking about which color to print the new albums name in on the CD cover.
A whole lot of artists were not that savvy about cash.

Most musicians in that era felt very lucky to get noticed by a big label and signed.
They had no clue that signing that RIAA contract left them OWING the record company millions… or that the contact also meant (as an exclusive 3 or 5 album deal) that if that company chose not to record their stuff EVER again, they (the musician) would NEVER get to record and sell their music EVER again…. not until the last of those 5 albums were done.

Thus it has been ever since.

Disclaimer – This well written piece about the music industry was an anonymous post on a music blog. We don’t know who the original author is but they did a great job.