The recording industry dates back to the invention of the first sound recording device by Thomas Edison in 1877. The phonograph, as it was originally called, was a relatively simple, cylinder based, mechanical instrument that could have easily ended up as yet another novelty item, perhaps relatively useful and profitable as a business dictation device, but not much more. And indeed, many considered it as such in the beginning. But its ability to capture and preserve not just speech, but music as well, changed all that, and transformed our music culture and the music industry forever. Music was not confined to a particular time and place any more, but could now be encapsulated in an object, a cylinder, and a disc later on, and reproduced anywhere, anytime. This object could be bought and sold and, as such, it becomes a new revenue source in the music industry. The music business thus grows another branch, and in addition to live music and publishing, adds the recording industry to its system. The first record companies were directly associated with the creation and the development of the sound recording and reproduction devices they used in their businesses. The Edison Phonograph Co., the American Graphophone Co. (later Columbia), and the American Gramophone Co. (later Victor) are among the first such record companies. As their company names imply, they used three different types of recording and reproduction devices existing and being developed at the time: a cylinder based phonograph (developed by Thomas Edison), a cylinder based graphophone (developed by Alexander Bell, Chichester Bell, and Charles Tainter), and a flat disc based gramophone (developed by Emile Berliner). By the early 1900s the practicality of the Berliner’s gramophone and its disc records prevails in the market, and all the other record companies adopt it as the standard. With those early technical differences removed and the general standards established, the recording industry begins its rapid expansion and transformation of the American musical culture and business. Recordings become the way music and its stars enter the homes and the hearts of the millions across the country, and made music itself ubiquitous. A recording became the mainstream mode of artistic expression and communication, as well as a major source of income for many artists and companies. Led by the cumulative experiences of over more than 100 years long history, the recording industry have developed structures, components, strategies, methods, and practices used in the industry today, which are the focus of this module. But before we consider all that, let’s look at how the recording industry became what it is today. We already mentioned that the early development of the industry was marred with the problem of technical standards and compatibilities between different recording and reproduction systems. Edison had it’s phonograph cylinders, Columbia its graphophone cylinders, incompatible with Edison’s, and Victor its flat disc gramophone records. As long as each pulled its way, they were splitting the market and stifling its growth. As hard as it was for Edison and Columbia to concede the war of standards victory to Victor, they realized that it was necessary to accept the market’s obvious preference for the disc records and move on with the business. Since these first record companies were, as we said, directly involved with the development, production, and sales of the sound recording and reproduction devices, the initial growth in the industry comes from getting the public to buy and accept these strange new mechanical devices as part of their home environment. It was all fine and interesting, even amazing, to hear this inanimate object sing and play music in some public place or a store, but to pay money for it and take one home, and have its huge horn become a part of your living room décor, that was another thing. The Victor’s record player called Victrola was introduced to the U.S. market in 1906 and it immediately became the best seller in the industry. Mostly because with its lid closed and doors shut, it didn’t look like a machine. It looked like a nice, polished wood cabinet, perfectly fit to become a part of a living room without being too obtrusive. The horn was folded downwards into the cabinet, hidden by the cabinet doors, and it remained out of site and out of mind. The doors could be opened to increase the volume of the playback if desired, and the lid only had to be opened when the record was being changed. In 1907, 7,000 units were sold. By 1913 Victor was selling 250,000 Victrolas per year. By 1917, over half a million per year. At the prices between 150 and 300 dollars per unit, depending on the model, or 4 - 8,000 dollars in today’s value, that represented some serious income. By comparison, the upright pianos at the time were priced in the 500-dollar range, and the grands in the 1000-dollar range, which is around 13,000 and 26,000 dollars today respectively. Victrola was obviously much cheaper, and you didn’t have to take piano lessons to play it. Hmmm…Cheaper, convenient, contemporary, cool, plays music by itself at the drop of a needle, and did I mention no more piano lessons and practicing? I’ll have one of those, please. Of course they flew out of the stores and Victor gained a fortune. Naturally, the competition in the market developed quickly. Just a year after Victor introduced Victrola, Columbia introduced it’s version they called the Grafonola. Up to this point Columbia was known for its cylinder player known as the graphophone, thus the name of their new disc player - the Grafonola. It’s early model names such as the Symphony Grand and the Symphony Upright, used a marketing term reference to the grand and upright pianos that were ubiquitous in the middle-class living rooms at the time, suggesting that Grafanola could be a replacement for pianos. Edison followed the Victrola trend as well, and introduced it’s version in 1911, called the Edison Diamond Disc Phonograph. But of course, being Edison, meaning a star inventor by this time, hardheaded, and not what you would call a good sport, his version was not compatible with any of the others, as he insisted that his method of cutting disc records with a vertical groove, verses the Victor’s lateral (or horizontal) groove was superior, and that everybody should switch to his method. Plus, being Edison, he cut his records with a diamond head cutter, which of course, being Edison, was the only way to cut it properly, and which, being Edison, led to his claims that everyone else’s disc records and record players were entirely inferior to his, and that buying only his disc records, though incompatible with others, was a small price to pay for such a quality. Plus, being Edison, he never stopped manufacturing and developing his original cylinder records, trying to prove to everyone that, as his invention, those were still valid too, which strained his budget even further. And another, “oh so Edison” thing, perhaps the most crucial of all, is that while Victor learned early from their music publishing colleagues that popular performers make for good marketing instruments, and consequently hired stars like Enrico Caruso to record his records and to use his name in the marketing campaigns, Edison scoffed at the practice. By the way Caruso made over 5 million dollars from Victor recordings in his career, charging as much as 4,000 dollars for a single song recording, plus 40 cents per record sold, at the time when records were sold for 1 to 1 and a half dollars each. To put it in today’s terms, that would be 58 million dollars in career earnings from recordings, getting about 100,000 dollars for a single song recording, plus 25-40 percent in sales royalties. You think Victor would allow for such a deal if Caruso wasn’t making them some serious profits? Edison, on the other hand, refused for a long time to as much as print the names of the performers he recorded, even on the records themselves, insisting that it is the quality of the sound and the composition that matters, not the performer. In one of his business memos from 1912, Edison says something along the lines of: “ We do not care for the reputation of the artists. It is not our intention to feature artists and sell the records by using their names. Those that do, engage in promotional fakery. We intend to rely entirely upon the tone and high quality of the voice.” Wow. Told you. Such an Edison thing. “So how did that strategy work out for you Mr. Edison?” “Well, not so good.” “You, don’t say.” By the late 1920s Edison controlled only 2% of the industry he invented, and is the only one of the Big Three that had to close its operations in 1929, and the Edison disc business was no more. But what a ride the recording industry in general had until that point. In 1900, 4 million records were sold. In 1909, 30 million. In 1920, 100 million. And then, the downturn. Not just for Edison, but for others as well. Edison simply made the situation worst for himself with his attitude and bad business decisions. So to be fair, it wasn’t only Edison’s policies that spelled the end for the Edison records and players. Though the Big Three - Edison, Columbia, and Victor - led the market for a long time, by the early 1920s over 150 companies were making records and record players, and were undercutting each other’s prices and affecting the market. Why so many record companies? Because it was a pretty good business. Records cost about 20 cents to make, including the newly legislated mechanical royalty payment to the publishers of the recorded songs, and including the musicians on the recording. Unless you had a star performer, in which case the math was different, as we saw with Caruso. But the sales were different too in that case. The retailer took about 15 cents from the standard record price of a dollar to dollar fifty. The rest was profits. Nice and clean and usually profitable, unless you have a total flop of a song on your hands. So the competition grew, and grew, and grew, and by the 1920s they started lowering the prices, down to 50 cents per record, competing with each other for customers, and the profit margins shrunk, and the incrementally smaller and smaller piece of the pie was available to each, and so the crisis begins to occur. More importantly, though, radio entered the picture in the 1920s as well, and seriously shook things up. Radio networks soon crisscrossed the nation, and advertising potential and income became glaringly apparent. These new funds allowed the networks’ programming to grow quickly, in diversity and quality, which in turn increased the numbers of listeners greatly, taking them away from their record players and the records market. It should be said at this point that at this time radio stations generally did not rely on records for their programming. The shows were mostly live, with live performers providing entertainment. Even when the records were used, they were not commercial records, but the recordings of the programs made for radio, produced and used internally by the industry. So radio and commercial records were, for the time, in direct competition with each other for the audience, and radio was winning. The recording industry countered with higher quality records and players, using electrical recordings, which utilized microphones and newly developed tube technology amplifiers. Being that radio sound quality was pretty low at the time, this strategy helped a bit for a while, but when the Great Depression hit, most of the record companies were not strong enough to weather the storm on their own, as records went from leisure to luxury in just a few years. Most, simply folded, like Edison, but Victor and Columbia survived. Not on their own, but survived nevertheless. The Radio Corporation of America (or RCA) acquired Victor, and the Columbia Broadcasting Company (or CBS) acquired Columbia. How predictable, isn’t it? That the medium, which expanded the most and became the most powerful at the time, acquires the medium that was, because of it, brought down to its knees. So radio both killed and saved the recording industry. Poetic.
