Lewis and Universal own well over 100 well known

Lewis Baker

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The ever-changing music industry – are record
labels still relevant

I have chosen to look in
depth at the UK music industry I will be looking at the history of the industry
as a whole I will also explore a particular organization within the music
sector in this case I have chosen to take a more in-depth look at Sony music entertainment
(record label) – using a number of different resources to find statistics and
information about the company including; trade journals, magazines and
reputable music websites. I’m aiming to find information and research key areas
such as products and services provided, competitors, revenue streams and the
challenges that the music industry may face now and in the future, this will
give me a better understanding of the industry as a whole with a better insight
into my chosen organisation.

History has taught us that
music and entertainment date way back to the early days of civilisation
although a definitive date of when the first song was made or performed can’t
be known for sure many sources state that the first song ever recorded was made
in the 1860’s ”The recording of “Au Clair de la Lune”, recorded in
1860, is thought to be the oldest known recorded human voice.” (BBC News
Website) This means the first song on record was recorded over 150 years ago
since then we know that the music and entertainment industries have grown
vastly undoubtedly this is owed to technological advancements and also down to
the way we now consume music. ARC, now more commonly recognised as Columbia
records was the first record label formed in the USA dating back as early as
1887 with their first release made in 1897 (Columbia Records Website) fast
forward to the present day. The music industry has changed a lot from when it
first formed with many major labels merging under parent companies. The main
labels (major) that now operate in the UK are Universal Music Group, Sony Music
and Warner Music Group these labels have a combined market share of 68.3% with
independent labels trailing with a 31.7% share of the market. (Music Business
World) Companies House and Universal’s websites show that Sony and Universal
own well over 100 well known labels including RCA, EPIC, Virgin and Motown to
name a few – we can now begin to understand how the major labels dominate such
a large amount of the market.

Sony has managed to remain
a major player in the ever changing music industry and has continued with world
wide expansion acquiring new labels across the world with a particular focus on
the European market  ”The move effectively means Sony has acquired four
independent European distributors in little over a year: the company swooped for
both Essential Music & Marketing (UK) and Century Media (DE) for
a combined price of just under £16m” (music business worldwide) expansion and
acquisition means the creation of more jobs and with offices around the world
Vault estimated that Sony employs an estimated workforce of around
 ‘168,000 employees across the globe.

Sony still trail behind
Universal despite all their efforts reports show that in 2016 the gap in market
share between the two competitors was an impressive 9% whilst the yearly
reports for 2017 haven’t been released yet we can still begin to understand
that Sony are still playing catch up. That being said Sony managed impressive
figures in the field of radio  ”Since Radiomonitor began keeping annual
records of the UK’s radio airplay by impacts market shares back in 2011,
Universal has commanded a dominant position, notching up five successive years
as the market leader. Universal Music Group has been dethroned from its
position on top of the Top 100 radio airplay market shares for the first time
in at least five years, with Sony Music taking the No.1 spot in 2016, Music
Week analysis of Radiomonitor data can reveal. (Music Week)  


The way we consume music is
always changing with streaming and digital downloads becoming the most popular
way we now access our music, what does this mean for Sony and other major
record labels? According statistics, around 15% of UK internet users, or around
6.7m Britons, access pirated films, music, books and other material online.
(Telegraph website) showing us that the demand for instant access to music is
paving the way for digital streaming platforms to completely take over physical
products, platforms such as Spotify and Itunes have become leaders in the music
business world and now give fans a new way to consume music with more and more
songs added to these platforms everyday they are quickly becoming the go to
platform when we want to hear new music ”The
shift from downloads to streaming is highlighted by the biggest-selling singles
of this year and 2006, when Gnarls Barkley’s Crazy became the first
download-only song to top the UK charts, in a sign the digital format was
eclipsing CD sales. Crazy shifted nearly 661,000 units during its nine weeks at
UK No 1 and went on to sell more than 1m downloads”(The Guardian)
undoubtedly illegal downloads and music streaming of music will have a major
impact on the profits of the labels changing the way that companies such as
Sony now distribute their products and services to ensure they stay ahead of
the market giving the consumer what they want this will allow them to continue
to maximize their profits.

Sony as a world wide brand
is more than just a record label with business ventures in various fields and
sectors including, electronics, film production and Mobile communications. As a
whole Sony must continually revise the products and services they offer to
ensure they can remain profitable, surprisingly the company actually make a
lose on sales of their playstation consoles ”CEO
of Sony Computer Entertainment, Andrew House, said that he believes PlayStation
4 losses won’t come close to the losses Sony took on the PlayStation 3. The
losses on that console totaled $3.5 billion in 2007 and 2008, largely due to
the $599 price-tag and lack of compelling software”(Forbes) meaning
other areas of the Sony brand must remain profitable to subsidies losses
remaining profitable overall. Revenue streams that allow the music side of
things to make money include PRS, live performances, and merchandise. like many
other labels Sony had to take capitalize on the popularity of streaming
“Spotify, after months of tough talks the Swedish music service has struck a
licensing deal with Sony Music, the record label behind acts like Beyonce and
Adele, according to people familiar with the matter. The agreement follows
similar deals this year with Universal Music, the largest music company, and
Merlin, which represents more than 20,000 independent labels, as Spotify
strives for a stronger financial footing before a public listing.As part of the
deal, Sony has agreed to trim Spotify’s royalty payments in exchange for restricting
new albums to Spotify’s paying customers for two weeks, according to a source.”
(The Drum)

Sony now faces many key
challenges, the growth of social media and online blogs has meant that artists
are now able to build up a fanbase and connect with fans directly without the
need of label distribution, with many music industry professionals such as
radio presenters, bloggers, and journalists on Twitter artists can line up
their own PR and marketing campaigns whilst remaining independent taking full ownership
of their own career and keeping more of the profits made from the music they
make and sell a recent news article from The Independent suggests that urban
artists have now decided to remain fully independent due to the lack of
interest from labels  ”The recent success
of artists like Skepta, JME and Wiley has led to a resurgence in independent urban music,
They proved that rappers can have successful careers without the backing of a
major label.The growth in technology has helped too. Now artists can stream
their music to millions and if they convert just a small percentage into paying
fans, they’ve got a credible income. It’s a positive move in many ways. It gets
young people off the streets and allows people from lives of hardship to make a
change, while inspiring people in the process.” (Independent article)

In the past a recording artist
could simply release a few hit songs and when placed on an album with other
tracks that didn’t do so well or weren’t as popular consumers had no choice but
to buy the whole album to have access to the songs they wanted, now with access
to digital download stores fans are now able to access their favourite singles
without having to buy the whole album at the fraction of the price meaning fans
save money whilst labels lose out financially.

Music has become ever more
disposable young people today tend not to care about owning an album or song
for life but are happy to play/listen to it just a few times until they are
bored meaning artists now have to constantly release new music for fans to stay
engaged with their music we can begin to see this type of behaviour if we look
the success of platforms like Youtube ”According
to those who oppose the service, YouTube is slowly killing the music industry,
one tiny cut at a time. It is anti-artist and anti-copyright, they claim.
Meanwhile, every major artist has a channel on YouTube and wouldn’t dream of
releasing a new record without YouTube involved in its launch. Although many have a
conflicted relationship with YouTube, there is a generational conflict dividing
the field. Those in the “old” music industry wants to keep things the way they
always were, nailing down copyright in every way possible. Yet around them a
“new” business is emerging – prescient and whip-smart artists, managers, labels
and media organisations – who see YouTube as a facilitator of a creative
renaissance rather than a death sentence.” (Guardian Article) this means
labels must ensure they are utilizing popular platforms when considering music
release campaigns this in turn will keep consumers engaged with the artist and
their music.

Forbes suggests that ”Running a record label has
always been high-risk with an unknown reward. Labels spend as much as 15.6% of their revenue on artist
development—a higher percentage than what technology, software, aerospace,
healthcare and pharmaceutical industries spend on R&D. The risks are
not unlike what one would take at a venture capital firm, except the
startups are human beings who carry unique, abstract artistic capital. For
record labels, technological change has created more questions than
answers. Are they even relevant anymore? Which tech trends and
tools matter for their bottom line, and which ones are just
“hype”? Should labels’ historical roles stay the same in the
wake of disruption, or should these roles also disrupt themselves? The research I have conducted in this report has
shown me that the music and creative industries are constantly changing every
day companies must capitalize on the latest trends changing business models to
ensure they remain current and able to give consumers what they want. The Music
industry has changed a great deal and technological advancements have meant
labels have had to change the way they make a profit – the physical CD is no
longer big business therefore revenue streams have had to come in from other
places. With the growth and popularity of the internet and social media many
artists are now able to remain independent in many cases cutting out the record
label as the middle man, however with reports suggesting major labels are still
making a profit maybe artists do need a label for the know-how and big budget
campaigns that couldn’t be achieved on their own. Record labels could be deemed
a sustainable business model for the time being as long as labels are able to
embrace change and not remain stuck in there ways, artists and labels now have
a greater range of options when considering output of their music and must
choose methods that work for them through trial and error.