Until now, there has not been much literature on the recording industry in the former Czechoslovakia.  Particularly the history after the 1950s is not mapped at all yet. However, there are two books about the early music industry in the Czech lands that stand out in scope and in depth of detail: “Fonogram I” and “Fonogram II” by Czech record collector and sound industry historian Gabriel Gössel. The following short series of four articles is thus a look into the history of early gramophone industry in the Czech lands as described in these two volumes.

The first part deals with the very beginnings of a Czech recording industry before World War I, a time span when the Czech lands – Bohemia and Moravia – still belonged to the Austrian-Hungarian Empire.

The Czech Recording Industry Before World War I

The Czech recording history can be traced back to 1891, when Czech performers were recorded on Edison cylinders in Berlin. Later that year an agent of Edison’s company presented these records at the Provincial Jubilee Exhibition in Prague. However, none of them have survived and no names of the performers are known.

After that, it took some ten years for the technology to break through on a larger scale. Meanwhile, some first inventions in field of sound recording were patented by Czech inhabitants. The very first patent in this area was obtained by two inhabitants of Prague in the German Reich (imperial patent no 86584) for a “phonograph with a steady motion of the recording device, adapted for receiving [means: recording] in three different ways” in 1895 (Gössel 2006: 10). In 1900, Heinrich J. Rumler, who was also a member of prestigious International Union of Phonographic Science in Berlin, took out patents on a “device for a revolving carrier a of phonograph cylinder (…)” and on a “phonograph with several switchable cylinders” (Gössel 2006: 11). A few years later in 1903, a certain Emanuel Cervenka presented in Prague a new way of recording by inscribing rays of light that fell on a rotating photographic [glass] disc. Soon his invention received acclaim in the Phonographische Zeitschrift and later that year Cervenka also presented his invention before the Royal Academy in Berlin with the then German crown prince as an extinguished guest. Since Cervenka was not able to clarify some questions on the machine’s functioning, his invention sank quickly into oblivion.

A browse through newspapers from the turn of the century shows that the trade with recording equipment was on the rise. Jandourek & Duffek Co. was selling Edison’s Kinetoscope (a machine for screening pictures with sound accompaniment from cylinders) at the Ethnographic Exhibition in Prague in 1895. In 1896, probably the same machine was presented under the name Kinemato-fonograf and then again as Fono-kinematograf in 1904. Alongside, newspapers were filled with announcements of established foreign and domestic companies that widened their range of products from music instruments and music boxes to phonographs and gramophones. The number of sales agents rapidly increased and almost everyone could claim to be a general or official supplier of a given company.

In this thriving business field, there were several salesmen who can be considered prominent. One of them was Max C. Steiner. A “K & K Hofoptiker” (Imperial and Royal Court Optician) by title, he was the first Czech importer of discs of the British Gramophone Company. In his shop in the centre of Prague he also offered Edison phonographs and cylinders. Another one was Rudolf Guth, who was a member of the Verband der Deutschen Sprechmaschinen-Industrie (German Association of Talking Machines) and a representative of Schiff & Co. in 1906. The optician and mechanic A. Rosenthal was among first Czech music cylinder retailers. He was the first Czech agent of Deutsche Grammophone (the German branch of the British Gramophone Company), who also imported the quite expensive but famous Bettini cylinders.

However, the most important early – and not only early – businessman in the Czech recording industry was Diego Fuchs. Born in 1876, he initially was a door-to-door salesman for music machines. In 1902, he opened a “Specialized Wholesale Store with Music Machines” in the heart of Prague and sold also various music-related goods such as mechanical pianos, player-pianos or “orchestrions”. As a far-sighted businessman he predicted a bright future for the gramophone business. By 1904, he became an official director of the Czech subsidiary of Odeon. In 1906, he added the official distribution for the British Gramophone Company. In 1910, he started to sell Janus-discs and shortly thereafter also records of the Arena, Elite and Patria labels. With leased machines from German Polyphon Werke he also made recordings of Czech music repertory.

The industry flourished outside Prague too. “The first specialized shop for speaking machines in Moravia” was run by Karel Jarousek in Brno. Since 1906 he had issued his own quarterly catalogue-bulletin that was delivered to all customers. In West-Bohemian Plzen the trained organ maker Jakub Konrady ran a repair shop for music instruments since 1889. At the beginning of the 20^th century he started to build table gramophones and to sell records. He mainly distributed the low-budget Omega-label with “Czech folk repertory” but also provided on-demand distribution of Odeon and Fonotipia products.

By the end of the first decade of the 20^th cenrury, most of the foreign record companies had already entered the market for Czech recordings. Kalliope had offered Czech repertory since 1908. Beka was growing fast, especially after the launch of a national series of Czech recordings around 1907. Many of the recordings in Czech language were released on its sub-labels Svatopluk, A.B.C., and Record or Scala. In 1908, a Gramophone Company’s recording engineer cut about 100 records in Brno, which were subsequently released on the Gramophone Concert Record label. Meanwhile Czech recordings found their way also to America, mostly being made of matrices from Prague.

Not only gramophone discs enjoyed economic success, but also the manufacture of cylinders flourished. Light brown soft wax cylinders with Czech repertory were marketed as Apollo Records and appeared on the market already in 1901. Around 1904, the first commercial cylinders were sold by Edison, Columbia, and the domestic Cechia company. On Edison the first Czech version of a music piece was published in 1902, when a sextet from the Smetana opera “Bartered Bride” was recorded. Czech performers were issued shortly thereafter in few waves: a dozen of titles in 1904 and in 1905, respectively; then from 1906-1907 and in 1909 with folksy repertory. The German subsidiary of Columbia Graphophone released the first Czech material with the then famous Kmoch brass band of Kolin in 1905. Recordings of opera singers and orchestral pieces followed, but most of the recordings were comic songs, usually performed by cabaret singers. Columbia Graphophone quit manufacturing cylinders in 1912, but no Czech recordings can be identified after 1907.

Domestic Cechia label started with five records of a National theater bass singer, but otherwise offered the usual light music repertory. It trumpeted itself as the first Czech plant for phonographic cylinders with solely Czech and Slavic repertory. Its operations can be documented until the beginning of World War I. The same year, yet another domestic enterprise, the Silesia-based Electra label started to manufacture cylinders in a new factory located in Vysocany by Prague. It is very likely that the company was managed by the aforementioned Diego Fuchs. Its repertory was half Czech, half German but most of it was folksy: Its catalog comprised of potpourris of popular songs, marches delivered by “Sokol” brass bands and comic songs by cabaret singers. When production of Electra ceased in 1908, all records were taken over by Cechia.

Shortly after the Czech cylinder production was established, the first local disc pressing plants were opened. In 1907, Erhardt Jäckel established a manufacture of Janus-discs in his log cabin in the small town of Smrzovka. It was not really a plant though, and its operations did not last very long. In 1910, Deutsche Grammophon Gesellschaft opened its plant near the North-Bohemian town Usti nad Labem.  In the years before, the discs were imported to Austria-Hungary from the record plant in Hanover. Thus, they were subject to high import duties. Therefore, it seemed to be more efficient to DGG’s director Joseph Berliner to build a plant inside the Austrian-Hungarian Empire. The Austrian Gramophone Company was incorporated as the owner of the new plant. Gramophone Concert Record discs (sold for 2-4K) and Gramophone Monarch Record discs (sold for 4-16Kronen = crowns) were manufactured. As a consequence of the increasing competition a budget label, priced at 1-2K, was launched in 1911.[1] The factory employed up to forty workers on ten record presses. The discs were supplied throughout whole Central Europe – at least until 1912 when a new plant of the Gramophone Company was built in Poland.

In 1911, a second plant went into operation, when Kalliope built a pressing facility in Obergrund nearby Podmokly. On eight presses the workers produced mostly discs for the Rena label and records for private customers. A main customer was the Berlin businessman Herman Maasen. In 1902, Maasen became the European representative of Zonophone company. In 1904, he headed the Austrian-Hungarian subsidiary of International Talking Machine Company (Odeon discs)[2], and in 1912 he established the Record Werke Herman Maasen (RWHM) inVienna, which operated also a pressing plant. Besides other things RWHM set up several labels with Czech repertory (Eden, Metafon, Sylvia). However, the Obergrund plant was used by Kalliope only for two years and had been standing idle since 1913. In 1914, Maasen decided to shut down the Viennese production site and bought the plant in Obergrund. He allegedly modernized the equipment and opened a new pressing facility in order to avoid importing records from the German Reich. However, there is no evidence for activities of the plant between 1913 and 1920. Thus, we can only speculate on what was going on there. The Obergrund factory played an important role, however, in the 1920s.

Although several pressing plant were operated in the Czech part of the Autrian-Hungarian Empire, there were no permanent recording premises until mid-1920s. The performers therefore had either go to Vienna and to Berlin for recording or had to wait for foreign technicians to come to Prague.

Afocionadoes of gramophones and discs founded the “The First Czech Gramophonists’ Club” in 1908. With the aim to popularize the gramophone, they demonstrated machines and publicely played discs all over Prague. By 1909, the “Gramophonists” had their regular weekly meetings and they even launched a disc rental service. A year later they announced public playbacks of the newest records every Thursday in one of the restaurants in Prague’s city centre where people also could rent discs. The club was mentioned the last time in February 1912.

The next part will examine the Czech recording industry in the 1920s, when the Czechoslovakian radio and electric recording technology were established as well as sound films became popular.

References:

Gössel, Gabriel (2001). Fonogram I. Prague: Radioservis

Gössel, Gabriel (2006). Fonogram II. Prague: Radioservis.

However, from a music business research perspective, one of the highlights was the second Vienna Music Business Research Days on “New Music Distribution Models” held at University of Music and Performing Arts Vienna. In talks, discussions and in the first Young Scholars’ workshop the recent developments in the dissemination of music by streaming, download and cloud-based services were highlighed by music business researchs and music industry professionals. The summaries of all the talks and discussions can be read in the blog as well as streamed for listening.

In the following you can find all academic theses & papers, which have been added for downloading in 2011. In addition find a list of important music business/industry studies and books published last year. You can also find a top-10-list of the most visited blog-posts and some more information.

The following academic theses & papers were added for downloading in 2011:

Dünser, Valentin, 2011, Und sie dreht sich doch. Was Musiklabels dazu veranlasst auf Schallplatte zu veröffentlichen. Master Thesis, Vienna University of Economics and Business Administration.

Kunz, Florian, 2011, Der Erfolg österreichischer Dialektpopmusik am heimischen Musikmarkt. Master Thesis, Vienna University of economics and Business Administration.

Lojda, Pavel, 2011, Podmínky pro vznik nové hudební produkční agentury v České republice: Transformace činnosti OSVČ pořádání kulturních produkcí formou založení nové společnosti s ručením omezeným. Master Thesis, Janáček Academy of Music in Brno.

Rajnai, Nikolett, 2011, Der Live-Musik-Markt im Zeitalter der Digitalisierung. Master Thesis, Vienna University of Economics and Business Administration.

Rütgen, Monica, 2011, Warum verwenden Musikschaffende Creative Commons Lizenzen? Eine qualitativ-empirische Analyse der Motive für die freie Weitergabe von Musikwerken. Master Thesis, Culture Management Program at the Institute of Culture Management and Cultur Sciences in Vienna.

The following music business related studies were published in 2011:

Bain & Company, 2011, Publishing in the Digital Era.

Hargreaves, Ian, 2011, Digital Opportunity. A Review of Intellectual Property and Growth.

Macromedia Hochschule für Medien und Kommunikation,  2011, Kreative fordern Technik. Musikplattformen im Stresstest.

Nielsen & MIDEM, 2011, Is Streaming Steaming Ahead?

Nielsen & MIDEM, 2011, The Hyper-Fragmented World of Music.

The following music business/industry books were published in 2011:

Allen, Paul, 2011, Artist Management for the Music Business. 2. Auflage. Amsterdam und Oxford: Focal Press.

Budnick, Dean und Josh Baron, 2011, Ticket Masters. The Rise of the Concert Industry and How the Public Got Scalped. New York: ECW Press.

Gibson, Nathan D. und Pierce Don, 2011, The Starday Story. The House That Country Music Built. Jackson: University of Mississippi Press.

Kassler, Michael (Hg.), 2011, The Music Trade in Georgian England. Farnham und London: Ashgate.

Kernfeld, Dean, 2011, Pop Song Piracy: Disobedient Music Distribution Since 1929. Chicago. Chicago University Press.

Levine, Robert, 2011, Free Ride. How Digital Parasites Are Destroying the Culture Business, and How the Culture Business Can Fight Back. Toronto: Doubleday.

MacLachlan, Heather, 2011, Burma’s Pop Music Industry: Creators, Distributors, Censors. Rochester: Rochester University Press.

Moser, David J. und Cheryl L. Slay, 2011, Music Copyright Law. Course Technology PTR.

Rutter, Paul, 2011, The Music Industry Handbook. London: Taylor & Francis.

Sparks, Richard und Milt Okun, 2011, Along the Cherry Lane: Tales from the Life of Music Industry Legend Milton Okun. Beverly Hills: Classical Music Today.

And finally, I would like to thank you for coming my blog of Music Business Research, which was visited by users from 29 countries 22,331 times in 2011. Most of them came from the U.S., from U.K. and from Mexico, but also from France, Canada, Brasil, South Africa, Australia, India, Singapore, Indonesia and even from Egypt, Nigeria, Kenya, Trinidad and Tobago, the Seychelles, New Caledonia and Guam.

The top-10 most visited article in 2011:

1.   The recession in the music industry – a cause analysis,  5,615 visits

2.   GAO report on the economic impact of “piracy”,  665 visits

3.   The CD is dead! Long live the music download?  594 visits

4.   How Bad Is Music File Sharing? – Part 23, 510 visits

5.   There is Music in the Cloud, 421 visits

6.   Business model “Michael Jackson”,  355 visits

7.   Music Experience and Behavior in Young People in the UK – a workshop presentation,  338 visits

8.   How Bad Is Music File Sharing? – Part 22,  262 visits

9.   How Bad Is Music File Sharing? – Part 16,  241 visits

10. The Radiohead Revolution?,  209 visits

Since March 2010, when I have started to blog on music business/industry topics, the blog’s posts and articles were visited 34,078 times. I am sure you will help me to cross the 50,000 mark this year. I will try my best to provide to you interesting articles and information on the music business/industry and there will be some new features too. Stay tuned and see you soon on my blog. Best wishes, PETER.

The Most Successful Acts of the 1960s

It is no surprise that the Beatles were the commercially most successful act in the 1960s. The Fab Four had eighteen different number one hits from 1964 to 1969 and topped the Billboard Hot 100 for 55 weeks (of 518 weeks) in the 1960s. All songs were written by John Lennon and Paul McCartney[1] and – except for one song[2] – were produced by George Martin. The Beatles had their heydays in the USA in the years 1964, 1965 and 1968, when their songs topped the single chart for eighteen, twelve and eleven weeks respectively. The Beatles continously hold the number one position with “I Want to Hold Your Hand”, “She Loves You” and “Can’t Buy Me Love” from February 1 to May 8, 1964.  In June, August and in December “Love Me Do“, “A Hard Day’s Night“ and “I Feel Fine“ followed. Thus, a third of 1964 saw Beatles songs on top of the Hot 100.

However, the most successful song of 1965 was not by the Beatles but “(I Can’t Get No) Satisfaction“ by the Rolling Stones. The Stones were the second most successful British Invasion act in the 1960s. They made it on the top for with five songs for thirteen weeks  from 1965 to 1969. The most successful years for the Stones were 1965 (six weeks number one) and 1969 (four weeks number one).

Only the Supremes could compete with the British Invasion acts. At same time when the Beatles and the Rolling Stones charted in the USA, the Supremes topped the chart with twelve songs for twenty-one weeks from 1964 to 1969. 1964 (seven weeks number one)[3] and 1965 (five weeks number one)[4] were the top years for the girl group, which was built around Diana Ross. From 1966 on the Supremes were present on top of the chart with one or two songs each year. This success should also be contributed to the songwriter-producer team Brian Holland, Lamont Dozier and Edward Holland, Jr., who coined the typical Motown sound of the Detroit-based record label.[5]

With the Beatles, the Rolling Stones and the Supremes the three most successful acts of the second half of the decade are already named. The first half of the 1960s was dominated by Elvis Presley. In 1960, the “King of Rock ‘n’ Roll” topped the Hot 100 with three songs for fourteen weeks. However, only “Stuck on You” can be credited as a rock ‘n’ roll song. “It’s Now Or Never“ and “Are You Lonesome Tonight?“ reflected the new direction Elvis had chosen according to his biographer Peter Guralnick after his military service in Germany.[6] Nevertheless “It’s Now Or Never“ and “Are You Lonesome Tonight?“ topped the chart remarkably long for five and six weeks respectively. In 1961, Elvis made it on the top with “Surrender” – a quasi cover-version of a Neapolitan folk song – and in 1962 with “Good Luck Charm”. In the following years Elvis Presley had no number one hit in the Billboard Hot 100 until November 1, 1969, when “Suspicious Minds” marked Elvis comeback on top of the chart.

This is a very remarkable success if we consider that music taste had dramatically changed in the meantime. Whereas in the pre-Beatles era, the charts were dominated by rock ‘n’ roll, teen idols pop, girl groups and traditional pop,  the Hot 100 list was shaped by folk rock, psychodelic rock, soul and funk at the end of the decade. In addition we can also find bubblegum and sunshine pop songs on the top of the US-single chart. The most successful artists in this respect were the Beatles-clones The Monkees, who topped the Hot 100 with ”I’m A Believer“ and ”Daydream Believer“ for eleven weeks in1967. In the year before, the Monkees went the first time to number one with “Last Train To Clarksville“.

A very successful act, who anticipated the psychodelic and hippie-wave of the late 1960s was The 5th Dimension. “Aquarius/Let The Sushine In“ peaked the Billboard Hot 100 for six weeks, which resulted in the best selling record of 1969. “Wedding Bell Blues” followed in the same year for additional three weeks at the top.

Bubblegum and sunshine pop were the reincarnations of teen idols pop of the late 1950s and early 1960s. The most successful artist of this genre was Frankie Valli and The Four Seasons with the 1962 top-hits “Sherry” and “Big Girls Don’t Cry”, which topped the chart for ten weeks altogether. In 1963 and 1964 the success was prolonged by “Walk Like a Man” and “Rag Dog”. With fifteen weeks on number one Frankie Valli and The Four Seasons was the fourth most successful act of the 1960s behind the Beatles, the Supremes and Elvis Presley but still ahead the Rolling Stones and the Monkees. Bobby Vinton, who stood in the tradition of the pop crooners of the 1940s and 1950s, ranked on the 7^th position. Vinton was top of the chart for ten weeks from 1962 to 1964 with ”Roses Are Red (My Love)“, “Blue Velvet” und “There! I’ve Said It Again”. It marks a historical break in the popular music history that crooner Bobby Vinton was succeeded on the top by the Beatles’ ”I Want To Hold Your Hand“ on February 1, 1964.

At the same time when Bobby Vinton songs made it on the top, Ray Charles could celebrate his greatest success in the pop charts. Although Charles used big studio orchesters and background vocals in his arrangements – similar to traditional pop – he revolutionized pop music by blending rhythm & blues and country & western to an innovative music genre which was later named soul music. Ray Charles topped the Billboard Hot 100 with “I Can’t Stop Loving You“ from his path breaking album ”Modern Sounds In Country And Western Music“ for five weeks in1962. In the year before Ray Charles was number one for two weeks with “Hit the Road Jack” and in 1960 the Afro-American musician crossed-over the first time to the “white” pop charts with “Georgia On My Mind”. From 1960 to 1962, Ray Charles topped the single chart for eight weeks altogether.

It is remarkable that the “white” The Young Rascals crossed-over with so called blue-eyed soul in the other direction at the end of the decade. In 1967 and 1968 The Young Rascals made it on the top with ”Groovin’“ and ”People Got To Be Free“ for nine weeks altogether. In 1966, the New Jersey-based band could already celebrate its first number one hit with “Good Lovin’” by succeeding the Righteous Brothers – another representative of blue-eyed soul.

The most successful song of the 1960s, however, was not interpreted by an act enlisted above, but by Percy Faith and His Orchestra. It was “A Theme From A Summer Place“ from the movie of the same title written by the film composer Max Steiner. This easy listening title topped the Billboard Hot 100 for nine consecutive weeks – a record that was only matched by the Beatles with “Hey Jude” in 1968.

In the 1960s four songs stayed on number one for seven weeks: “Tossin’ and Turnin’“ by Bobby Lewis (also best selling record in 1961), “I Want To Hold Your Hand“ by the Beatles (1964), “I’m A Believer“ by the Monkees (1967) and “I Heard I Through The Grapevine” by Marvin Gaye (1968).

Remarkable is also „Sugar Shack“ by Jimmy Gilmer and The Fireballs who released the best selling record in 1963, just ahead of the singing Belgian Dominican nun Soeur Sourire (born Jeanine Deckers), who topped the chart with the French song “Dominique“ for four weeks in1963. In the years before only two foreign language songs could reach the top position: 1958 “Nel Blu Dipinto Di Blu (Volaré)“ by the Italian Domenico Modugno and 1963 “Sukiyaki“ by the Japanese pop star Kyu Sakamoto.

Domestic and International Repertory at the Top of the US Single Charts

The presence of non-English songs in the US-charts indicates that the music taste of the US-Americans was also influenced from abroad. If we analyse the origin of the number one hits it becomes clear that foreign influences vary over the time. A record can be defined as a foreign production if the master was produced outside the USA, independently from the interpreter’s, songwriter’s or producer’s nationality. If e.g. the South African Hugh Masekela recorded a title in a New York studio and if the main production processes can be located within the USA, it is a domestic production from the US-perspective. Otherwise it is an international production. In this respect the share of international repertoiry was 21.2% in the USA in the 1960s. This means that in 110 weeks of 518 foreign music productions topped the single chart.

However, this share varies over the decade. Before the Beatles hit the scene in 1964, the foreign share was very low. In 1960 no song from outside the USA could top the Hot 100. In1961 and1962, a German and a British orchestral easy listing title – Bert Kämpfert’s ”Wonderland by Night“ and Acker Bilk’s ”Stranger On the Shore“ – peaked at number one for three weeks each. The foreign share increased in 1963 when the Japanese pop star Kyu Sakamoto and the Belgian “singing nun” Soeur Sourire went to number one with their foreign language songs. In the same year the futuristic instrumental work “Telstar” by the British music producer Joe Meek, intepreted by the Tornadoes, made it on the top. All in all, international repertoiry gained a share of 15.4% (measured in weeks) in 1963.

With the Beatles and the British Invasion the foreign share dramatically increased to 50.0% in1964. In1965, this share even climbed to 55.0% in order to fall to 24.5% in1966. In1967 the British Invasion phased out and the foreign share decreased to 7.7%. The Beatles and the French orchestral hit “Love Is Blue” by Paul Mauriat once again increased the share of international repertory to 30.8% in 1968. In the last year of the decade the Beatles and the Rolling Stones topped the US-single chart for 10 weeks, which accounted for a foreign share of 19.2%.

From Rock ’n’ Roll and Teen Idols Pop to Psychodelic Rock and Bubblegum

If we categorize the top hits by music genre the change of music taste can be highlighted for the 1960s. Before Beatlemania hit the USA in 1964, the 1950s influenced the music taste of the US-record buyers in the early 1960s. Teen idols pop à la Pat Boone, Paul Anka and Neil Sedaka on the one hand and classical rock ’n’ roll as well as rockabilly on th eother dominated the Billboard Hot 100 from 1960 to 1963. “Black” hits crossed over to the “white” pop charts in the form of doo wop and as the girl groups phenomenon, which was mainly created by Motown founder Berry Gordy, Jr. and the music producer Phil Spector. In 1961, doo wop songs topped the single charts for sixteen weeks. In 1963, girl groups such as The Chiffons, The Essex, The Angels reached the peak of their popularity. In 1961/62, the Twist was hyped by Chubby Checker and topped the Hot 100 for nine weeks. Traditional pop by Frank Sinatra, Dean Martin and Bobby Vinton made it on the top even in the heydays of the British Invasion in 1964 and 1965. It is striking that the dominance of the Beatles, who topped the single chart for fourteen consecutive weeks, was broken by Louis Armstrong’s “Hello Dolly” on May 9, 1964. In the same year Dean Martin reached the top of the chart with ”Everybody Loves Somebody“. In 1966, Frank Sinatra went number one with “Strangers In The Night“ and with his daughter Nancy Sinatra he had his last number one hit in the Billboard Hot 100 with ”Somethin’ Stupid“.

However, the British Invasion dominated the mid-1960s. Following the path of the Beatles and the Rollings Stones numerous other acts from the UK entered the US-charts. Peter & Gordon (with the Paul McCartney song ”A World Without Love“), The Animals (”The House Of The Rising Sun“), Manfred Mann (”Do Wah Diddy Diddy“), Petula Clark (”Downtown“ and ”My Love“), Freddie and The Dreamers (”I’m Telling You Now“), Wayne Fontana & The Mindbenders (“Game Of Love“), Herman’s Hermits (”Mrs Brown You’ve Got A Lovely Daughter“ and ”I’m Henry VIII, I Am“), The Dave Clark Five (”Over And Over“), The Troggs (”Wild Thing“) and eventually Lulu with “To Sire With Love“ (also best selling single in 1967) had one or even more number one hits in the USA. In 1964, British Invasion acts reigned the Hot 100 for twenty-four weeks, in 1965 even for twenty-eight weeks and in 1966 for eleven weeks. In 1967, British Invasion phased out after the UK bands had abandoned (mersey)beat.

The next big thing was psychodelic rock, which was mainly influenced by the Beatles’ concept album ”Sgt. Pepper’s Lonely Hearts Club Band“. However, this time US-acts ruled the single chart – e.g. the Beach Boys with ”Good Vibrations“, the Doors with “Light My Fire” and “Hello, I Love You” as well as Strawberry Alarm Clock with ”Incense And Peppermint“, who all reached the top of the chart with psychodelic music and texts in 1968.

Bubblegum and sunshine pop were the only music genres, which could compete with psychodelic rock. The simple texts and easy listing arrangements were very popular among pre-teens and teenagers. While the British Invasion was still ruling the single chart, the Beach Boys had two number one surf pop hits – “I Get Around“ and “Help Me, Rhonda“. The first bubblegum chart topper, however, was ”This Diamond Ring“ by Gary Lewis[7] and The Playboys, which reached the top of the chart on February 20, 1965. In 1966, Lou Christie followed with “Lightnin’ Strikes“, before the Monkees became popular. Thus, in 1967 bubblegum pop songs topped the Billboard Hot 100 for ten weeks altogether. A second wave of bubblegum hit songs can be identified for 1969, when Tommy Roe (“Dizzy”), the cartoon-band The Archies (“Sugar, Sugar”) as well as Steam (“Na Na Hey Hey Kiss Him Goodbye”= went number one. Sunshine pop acts such as The Buckinghams with ”Kind Of A Drag“, The Turtles with ”Happy Together“, The Association with ”Cherish“ and ”Windy“ as well as The 5th Dimension with ”Aquarius/Let The Sunshine In“ and „Wedding Bell Blues“ were also very popular in the late 1960s.

Although Bubblegum and sunshine pop was inspired by the British Invasion, they tried to copy the commercial success of UK acts under controlled conditions. In contrast, the emergence of new rock music subgenres was not the result of a master plan, but of the efforts by single musicians. However, when the major labels realized the commercial potential of such a rock music subgenre, it became streamlined to fit the taste of an average music consumer. A good example in this respect is folk rock, which initially was routed in the anti-commerical and anti-capitalist folk scene of the 1950s. Therefore, it is no surprise that pure folk acts hardly topped the US single chart. In 1965 the Highwaymen went number one with the gospel standard “Michael“ and the Roof Top Singers followed in 1963 with ”Walk Right In“. However, folk rock was a different thing and was made popular by the Byrds in 1965 with the Bob Dylan cover version of “Mr. Tambourine Man“ (three weeks on the top) and with “Turn! Turn! Turn!“ (one week on the top). Sonny & Cher followed with “I Got You Babe“ (three weeks) as well as Barry McGuire with “Eve Of Destruction“ (one week) in the same year. In 1966, Simon & Garfunkel’s “The Sound Of Silence“ (two weeks), by The Mamas & The Papas’ “Monday, Monday“ (three weeks), by Lovin’ Spoonful’s “Summer In The City“ (three weeks) as well as by Dononvan’s “Sunshine Superman“ (one week) reached the top of the chart. After a one year’s break, folk rock returned back on top of the single chart in 1968 and 1969: Simon & Garfunkel charted number one with “Mrs Robinson“ (three weeks), Zager & Evans with “In the Year 2525“ (six weeks) and Peter, Paul & Mary with “Leaving On A Jet Plane“ (one week). To sum up, folk/folk rock songs topped for thirty-eight weeks the Billboard Hot 100. Therefore, it was the third most popular music genre in the 1960s.

Another British Invasion inspired rock music genre, which charted well was the simple tailored garage rock, which is also referred to as proto-punk. In 1966, Tommy James and The Shondells with “Hanky Panky” and Question Mark & The Mysterians with “96 Tears” topped the Hot 100 with garage rock songs for a short time.

Similar to “white” pop music, rhythm & blues dramatically changed over the 1960s. The short lived girl groups phenomenon led to Motown sound, which was mainly shaped by the Supremes and their producer team Holland-Dozier-Holland since 1964. However, it was Mary Wells – and not the Supremes – who peaked at number one the first time with a typical Motown song – “My Guy“ – in May 1964. Three months later, the Supremes made it on top the first time with “Where Did Our Love Go?“ Until 1969 another eleven Supremes’ songs were chart-toppers. In addition, the Temptations with ”My Girl“ (1964) as well as the Four Tops with “I Can’t Help Myself“ (1965) and „Reach Out, I’ll Be There“ (1966) reached the top of the chart for Motown too.

Beside the smooth Motown sound, which was targeted at a white, young and well off audience, the rougher soul also crossed over into the pop charts. After Ray Charles had innovated and defined soul music in the early 1960s, representatives of the northern und southern soul entered to pop charts and made it to the top. Percy Sledge topped the Hot 100 with his soul-ballad “When A Man Loves A Woman“ in 1966. In 1967, Aretha Franklin followed with the Otis Redding song “Respect”, and Otis Redding himself went number one with “Sittin’ On The Dock Of The Bay“, shortly after he was killed in a plane crash. In 1968, the Motown artist Marvin Gaye was successful with “I Heard It Through the Grapevine”. However, soul also influenced white musician such as the Righteous Brothers and the Young Rascals, who went on top of the chart with blue eyed soul. Eventually, we should also consider pop soul, which topped the Hot 100 the first time with Johnny Rivers’ “Poor Side of Town“ in 1966. At the end of the decade soul was superseded by funk, which moved to number one the first time in 1968 with “Tighten Up“ by Archie Bell & The Drells. In 1969 followed Sly and The Family Stone with “Everyday People“ for four weeks on top of the single chart and the Temptations with “I Can’t Get Next To You“.

Despite all the changes of music taste throughout the 1960s, we can also identify stylistic continuity on top of the Billboard Hot 100. A genre that was always highly valued by US-record buyers in 1960s was country & western, which also influenced the emergence of rock ’n’ roll in the 1950s and even soul (see Ray Charles) in the early 1960s. On the other hand C&W was influenced too by pop music and amalgated to country pop, which was even more popular than the traditional C&W genre. The tragic ballad “Honey“ by Bobby Goldsboro and the social critical “Harper Valley P.T.A.“ by Jeannie C. Riley peaked at number one in 1968. However, when the British Invasion ruled the single chart in 1964/65 and in 1969, we cannot find any country/country pop song on top of the chart.  

Easy listening was the second genre, which enjoyed popularity in the 1960s. Especially at the beginning and at the end of the decade easy listening was very popular. As already mentioned before, “A Theme From A Summer Place“ by Percy Faith and His Orchestra topped the single charts for nine weeks in 1960. A year later, Bert Kämpfert’s „Wonderland by Night“ and Lawrence Welk’s “Calcutta“ topped the Hot 100 for three and two weeks respectively. The British Invasion temporarily disrupted the chart success of the easy listening genre, but in 1968 it came back on top of the chart with “Love Is Blue“ (five weeks) by Paul Mauriat and the “This Guy’s In Love With You“ (four weeks) by Herb Alpert. In 1969, Henri Mancini contributed another number one easy listening hit with “Love Theme From Romeo & Juliet“ for two weeks .

Despite all the problems of genre definition and categorization, we can identify twenty-five music genres on top of the Billboard Hot 100 in the 1960s. Most successful were British Invasion songs, which topped the Hot 100 for sixty-nine weeks, followed by teen idols pop with fourty-three weeks, folk/folk rock with thirty-eight weeks, traditional pop with thirty-four weeks, the Motown sound with thirty-one weeks and doo wop with thirty weeks.

Label Success in the Light of the US Single Charts

At the end of this the article, I would like to answer the question, which labels profited from the music preferences of US- record buyers in the 1960s? How performed the major record companies and what role played the indie labels? In order to answer these questions we have to define major and indie companies. A major record company in the 1960s covered the whole value-added chain from A&R, music production and record pressing to record distribution, marketing and promotion. The main factor that constituted the majors’ market power was a well established and a widely ramified record distribution network. In contrast, indie companies were mainly focused on the A&R function and could not rely on corporate structures. They either had use independent distributors or had to rely on the majors’ distribution. However, in some cases the difference between an indie company and a major’s sublabel was fluent. If an indie label such as Atlantic Records was bought by a major company, it cannot be defined as indie label any longer after the acquision, even if the dependence on the major’s structures was already high before. In addition we have to consider relatively autonomous labels of Hollywood film studios. Although these labels were not technically major labels, they were nevertheless part of financially potent parent companies such as MGM, United Artists, 20^th Century Fox and Columbia Pictures (Colpix and Colgems) and can be classified therefore as major labels. Mercury Records, however, is a special case. In 1945, Mercury was founded as an indie label in Chicago, but grew larger and larger over the years until it did not fit any longer in the indie category. Therefore, it was also called a super-indie. Since Mercury owned record studios, a well established distribution network but no record pressing plant, it could be defined as a major label even before it was bought by Philips in 1962.

Thus, 57 labels can be identified, which had number one hits in the Billboard Hot 100 from 1960 to 1969, whereby sublabels such as Epic (Columbia Records), UNi Records (MCA) and Capitol Records (EMI) are not separately counted.

The most successful record company of the 1960s was the British EMI with its US-subsidiary Capitol Records. Thank’s to the Beatles and the British Invasion EMI had 22 top hits, which topped the Hot 100 for fifty-six weeks. The Beatles alone accounted for fifteen top hits, which were sitting on top of the chart for fourty weeks. The rest of seven top titles were contributed by three other British Invasion Acts (Peter & Gordon, Manfred Mann and Freddie and The Dreamers), by the Beach Boys (“I Get Around”, “Help Me, Rhonda” and “Good Vibrations”) and by the country-pop singer/songwriter Bobbie Gentry.

CBS-Columbia and its sublabels (especially Epic Records) ranked second with eighteen hits and fifty-four weeks on top of the chart. The most successful acts for Columbia were Percy Faith and His Orchestra, teen idol Bobby Vee and crooner Bobby Vinton in the first half of the decade. The Byrds, Simon & Garfunkel as well as Sly and the Family Stone contributed the number one hits from 1965 to 1969.  In the pre-Beatles years, CBS-Columbia was successful with easy listening instrumentals, teen idols and traditional pop, whereas the company’s success mainly relied on folk rock in the second half of the decade.

Columbia’s main competitor on the US-market, RCA Victor, ranked third with fourteen top hits, which accounted for furty-six weeks on the top. Elvis Presley, therefore, was the outstanding RCA artist, who charted number one hits with six songs for twenty weeks. Before Beatlemania hit the USA, RCA was only successful with two teen idols – Neil Sedaka and Little Peggy March. However, during the British Invasion years, RCA could only reach the top of the Billboard Hot 100 with the C&W hit “Ringo” (1964) by Lorne Green, who was a popular actor in the TV series “Bonanza” and with the patriotic song „The Ballad of the Green Berets“ (1966) by the Vietnam war veteran SSgt. Barry Sadler. The RCA had no top hits until 1969, when an easy listening orchestral piece by film composer Henry Mancini went number one. One-hit-wonder Zager & Evans followed with “In the Year 2525“ as well as the cartoon-band The Archies with “Sugar, Sugar”. At the end of 1969, Elvis Presley’s “Suspicious Minds” was RCA’s  last number one hit of the decade.

The most successful indie label of the 1960s was Detroit-based Motown Records, which was founded by the Afro-American Berry Gordy, Jr. in 1960. Motown’s success was based on a unique and recognizable sound that met the musical taste of the “white”, middle-class youth. As mentioned before, the Supremes and their producer team Holland-Dozier-Holland accounted for most of Motown’s top hits – twelve songs held for twenty-one weeks the single chart’s top position. The girl group The Marveletts, thirteen year old “Little” Stevie Wonder, former Motown secretary Mary Wells, the Four Tops, the Temptations and Marvin Gaye contributed another eight top hits, which topped the Hot 100 for twenty weeks altogether.

Warner Bros. Records and its subsidiaries – Reprise Records and Atlantic Records from 1967 on – topped the chart with eleven songs for thirty weeks. Besides the Everly Brothers, who had a smash hit with “Cathy’s Clown” for Warner Bros. Records in 1960 after they had left Cadence Records, Frank Sinatra and his Reprise label accounted for most of the top hits in the decade’s first half. In addition to his own creative output, Sinatra also released records of his daughter Nancy as well as of his friend and stage colleague Dean Martin. Thus, Warner was mainly successful with traditional pop until 1967. In 1967, Warner got a very different image by purchasing Atlantic Records and signing artists such as The Young Rascals, Aretha Franklin, The Association, Archie Bell & The Drells and Peter, Paul & Mary, who all had number one hits for Warner Bros. and its sublabels.

The commercial success of the second British major record company, Decca Records, relied mainly on the Rolling Stones, who topped the single charts in the USA for thirteen weeks the with five songs. The rest of three songs and seven weeks were contributed by the Tornadoes and Brenda Lee, who had two number one hits for the US-Decca before it was purchased by MCA in 1962.

The second most successful indie label of the 1960s was the Indiana-based VeeJay Records. VeeJays success mainly relied on Frankie Valli and The Four Seasons, who topped the Billboard Hot 100 with four hits and for fifteen weeks. In addition, Gene Chandler contributed his doo-wop-hit “Duke of Earl” in 1962, which topped the chart for three weeks.

Philips Records, a subsidiary of the Dutch electronic giant, brought mainly European acts – the Belgian nun Soeur Sourire, Wayne Fontana and The Mindbenders, The Troggs, The New Vaudeville Band and Paul Mauriat and His Orchestra – on top of the US-Hot 100. The only exception was the US-band Steam, who had a bubblegum hit for Philips’ subsidiary Fontana Records in 1969. All in all, Philips Records and its sublabels topped for fifteen weeks the single charts in the USA.

„Super-Indie“ Mercury Records was on top of the chart with five songs for fifteen weeks before it was acquired by Philips in 1962. Mercury mainly relied on teen idols pop (an Elvis cover of “Wooden Heart” by Joe Dowell and “Hey Paula!” by Paul and Paula), on girl groups (“My Boyfriend Is Back“ by the Angels and “It’s My Party“ by Lesley Gore) and on country pop (“Running Bear“ by Johnny Preston).

One may doubt if Beatles’ Apple Records can be categorized as an indie label, since it heavily depended on EMI’s distribution networks. However, Apple Records was not part of the EMI empire and therefore it is treated as an indie label, which topped the Hot 100 for fifteen weeks with three Beatles songs – “Hey Jude“, “Get Back“ and “Come Together“ – in 1968/69.

In contrast, ABC Records was without any doubt a major record company of the 1960s, which mainly profited from Ray Charles chart success in the decade’s early years. Three out of five ABC’s top hits were contributed by the innovator of soul music, which were on top of the chart held for eight weeks. Tommy Roe contributed another two top hits: “Sheila”, which strongly referred to Buddy Holly, in 1962 and the bubblegum hit “Dizzy” in 1969.

MGM Records was another major label of a Hollywood film studio, which had eight number one songs for thirteen weeks. Most of them can be classified as teen idols pop hits of the early 1960s: “Teen Angel” by Mark Dinning, “Everbody’s Somebody’s Fool“, “My Heart Has A Mind Of Its Own“ and “Don’t Break The Heart That Loves You“ all by Connie Francis. However, MGM Records also anticipated the British Invasion with Herman’s Hermits. The last number one hit for MGM in 1960s was the bubblegum hit “Lightnin’ Strikes“ by Lou Christie in 1966.

Colgems Records was Columbia Pictures’ label for the casting-band The Monkees, who topped the chart for twelve weeks with only three songs. Colpix Records had the same function years before when the doo-wop-group The Marcels had a number one hit with “Blue Moon” in 1961 and teen idol Shelley Fabares with “Johnny Angel” a year later.

When Atlantic Records was not part of the Warner conglomerate yet, it topped the Billboard Hot 100 for ten weeks with several top hits: “Save The Last Dance For Me“  by the Drifters in 1960; “Deep Purple” by the folk-duo Nino Tempo & April Stevens in 1963; “I Got You Babe“ by Sonny & Cher in 1965; “Good Lovin’“ by The Young Rascals and finally “When A Man Loves A Woman“ by Percy Sledge in 1966. It was a mixture of r & b and folk/folk rock that accounted for Atlantic’s commercial success in the 1960s.

Roulette Records was another example for an indie label that succeeded with innovative music. The “Peppermint Twist – Part 1“ by Joey Dee & The Starliters contributed to the Twist hype of the early 1960s. The Essex was a girl group, who had a top hit with “Easier Said Than Done“ in 1963, and with Tommy James & The Shondells Roulette Records anticipated the psychodelic boom of the late 1960s.

Many other indie labels of the 1960s could only chart top hits with one act: Soul City with The 5^th Dimension, Cameo-Parkway with the Twister Chubby Checker, the British indie label Pye Records with Petula Clark, Sceptre with the girl group The Shirelles, Jay Holzman’s Elektra label with The Doors, Monument Records with Roy Orbison and the Phil Spector-label Philles with the Righteous Brothers.

However, not all indie labels succeeded with music innovations. Dot Records had number one hits with the easy listening orchestral work “Calcutta” by Lawrence Welk, with teen idol Pat Boone (“MoodyRiver”) as well as with “Sugar Shack” by Jimmy Gilmer & The Fireballs. Liberty Records relied on sunshine pop à la “Surf City“ by Jan & Dean and bubblegum pop by Garry Lewis & The Playboys. Imperial Records was successful with teen idol Ricky Nelson (“Travelin’ Man“) and with pop soul by Johnny Rivers (“Poor Side Of Town“).

And other indies focused on one music genre only such as Dunhill Records with folk rock – Barry McGuire (“Eve Of Destruction“) and The Mamas and The Papas (“Monday, Monday“) – and Red Bird Records on girl groups – The Dixie Cups (“Chapel of Love”) and The Shangri-Las (“Leader of the Pack”).

However, the analysis of the top hits in the Billboard Hot 100 indicates that indie record labels tended to innovate new music genres whereas major companies relied on traditional music styles. There are of course exceptions. ABC Records granted Ray Charles full creative control for his music experiments after he had left Atlantic Records. And EMI did not prevent the Beatles and their producer George Martin to experiment amongst others with psychodelic sounds. On the other hand indie labels such as Dot and Liberty preferred easy listening, teen idols pop and bubblegum pop. But if we look closer innovation within the major companies was only possible for well established artists such as Ray Charles, the Beatles and the Rolling Stones. In contrast, indie labels could either commercialize a short-lived fad by imitation or to innovate a new music style. The success of Motown,Atlantic and Roulette Records proofs that the innovation strategy was much more sustainable than imitation, which resulted in financial problems as in the case of Liberty, Dunhill and Dot Records.

Finally, we can calculate the share of major and indie labels on top of the Billboard Hot 100 – measured in weeks. For the whole decade, the major companies accounted for 57.3% of the top hits, whereas the indie labels’ share was 42.7%. However, the indie and major labels’ share varies from 1960 to 1969.  In 1960, the top hits’ share of the majors was extremly high with 80.0% on number one. In 1963, the indie labels outperformed the majors by 53.8% to 46.2%. Thank’s to the British Invasion and EMI/Capitol Records, the majors’ share in number one hits increased to 62.0% in 1964 and 62.7% in 1965. However, in 1966, major and indie labels had nearly the same top hit share. 1967 was dominated by the major companies again. They topped US-single chart for thirty-eight weeks, which corresponded with a hit share of 73.1%. In 1968, the indie labels outperformed the majors again by twenty-eight to twenty-four weeks, whereas in 1969 the share was exactly reversed: twenty-eight weeks for the major and twenty-four weeks for the indie labels.

To sum up, the 1960s can be characterised by a vivid indie-label-scene, which was also commercially successful. However, the major record companies consolidated their market position after the rock ’n’ roll revolution of the 1950s. Especially in the second half of the decade the majors started to purchase successful indie labels in order to profit from their innovative impulses. We will analyse the effects of this strategic relaunch of the major companies in 1970s in the next part entitled “The US Recorded Music Market in the Light of the Billboard Hot 100 – the 1970s”.

In the last part of the summary of Budnick’s and Baron’s book the merger of Ticketmaster and Live Nation as well as the emergence of 360 deals are highlighted.

Since in 2008 the exclusive agreement between Ticketmaster and Live Nation was due to expire, both sides began making strategic moves to improve their bargaining power. Live Nation demonstrated its willingness to bypass Ticketmaster by entering into a licensing deal with the German ticketing company CTS Eventim in summer 2007 and indicated that it would not renew the contract with Ticketmaster. In addition, Live Nation acquired a 50% stake in Michael Cohl’s Grand Entertainment for $123 million in stock and $10 million on cash, the music club chain House of Blues for $350 million and a majority stake in Coran Capshaw’s MusicToday (p. 308).

However, Ticketmaster fought back in buying Irving Azoff’s Front Line Management Group – one the world largest artist agencies. Thus, Ticketmaster outbid Live Nation, which was also interested in entering the artist management business. Since Live Nation lost the Front Line Management deal, it developed a new business model: the concept of the unified rights deal or 360 degree deal, as it is called commonly.

It was Michael Cohl’s initial vision, when he started Concerts Productions International (CPI) in the 1980s in order to own all artists’ rights. When Cohl entered Live Nation he became responsible to work out the first 360 degree deal for Live Nation with Madonna, who had left Warner Music Group before. In October 2007, Live Nation announced a ten-year, $120 million deal with the superstar, which included everything from touring, merchandise, fan clubs, studio albums, sponsorships and branding. Though, it was not Live Nation, which introduced initially the unified rights deal model, but EMI, which signed a $160 million contract with Robbie Williams in 2002 including all income streams from his recordings, publishing activities and performances. However, Michael Cohl is cited in the book that the 360 deal is quite older. “If you go back to the Dick Clark Caravan or the early ‘50s, you’ll find that the record company owned everything. The way I remember it was that they not only owned everything, but eventually they became limited in their scope – they let the merchandise rights go; they let the touring rights go. The old tours were the record company trying to sell records. Nobody thought they were going to make money of any substance from touring.” (p. 310).

Under Michael Cohl’s guidance Live Nation signed further 360 deals: a twelve-years deal with U2 for $100 million in March 2008 (including touring, merchandise, image licensing, website and fan club rights); a ten-years deal with Jay-Z for $150 million in April 2008 (including touring, recordings, publishing, management and record label businesses); a ten-years deal with Shakira for $70 million in July 2008 (including touring, recordings and merchandise); a three-albums and touring deal with Nickelback for assumed $50-70 million (pp. 309-310).

However, the financial market was anything than convinced about the Live Nation’s new business modell, which was incorporated as Artist Nation within the Live Nation’s empire. Between the Madonna and U2-deals, Live Nation’s share price plummeted by 50%. Live Nation’s CEO Michael Rapino became more and more concerned about Michael Cohl’s strategy, when the latter started to sign also then unknown acts such as Zac Brown Band and Paolo Nutini. Since Live Nation did not want to become a record label, it stopped signing new 360 deals and parted with Michael Cohl, who left Live Nation/Artist Nation with a lump sum payment of $4.5 million (pp. 310-311). In fact, Live Nation has not signed another 360 deal as of early 2011 (p. 312).

Beyond the 360 deal troubles, Live Nation was struck by another desaster. CTS Eventim’s ticketing system crashed at the end of January 2009, when the tickets for the Phish reunion tour were put on sale. It became clear, that Live Nation was not able to compete with Ticketmaster and it was not a suprise, when both companies announced a $2.5-billion merger as an all-stock deal on February 10, 2009 (p. 314).

Such a mega-merger that united the world’s largest concert promotion company with the world’s leading ticketing company, which also owned a big artist management agency, was of course an object of antitrust-investigations by the U.S.-Justice Department. In addition, two congressional hearings on the case were held – one before a Senat’s and another before a House of Representative’s subcommittee. The hearings unveiled that both companies controlled a remarkably high market share in their specific markets. Jam Productions cofounder Jerry Mickelson testified that Live Nation controlled 75 amphitheaters, making it impossible for competitors to enter the market successfully. Ticketmaster’s CEO Irving Azoff admitted in the hearings that his company provided ticketing services to 87 of the top 100 concert venues in 2007 and to 84 in 2008 (p. 321). These figures underline the threat of a vertical monopoly in the live entertainment business by combining Ticketmaster and Live Nation. Both companies argued the merger by the bad economic environment, which forced them to join forces. Live Nation’s CEO Michael Rapino pointed out in the hearings that they lose $70 million for their 1,000 concerts in 50 amphitheatres and blamed it to the artists’ managers, who would demand incredible high upfront payments and a 90% stake in the ticket sales (p. 321). Thus, Live Nation had to earn the money back by the ancillaries – food, drinks, parking fee etc. Rapino calculated that his company made an average of $12 to 15 per person from ancillaries, but only an average of $4 per person on every $100 worth of from ticket sales. However, Rapino did not say in the hearings that is was SFX, which aggressively established the high upfront payments and 90% stakes in ticket revenue in order to gain a high market when it entered the concert promotion business in 1996. This was the starting point of an oligopolization process of a prior very fragmented market.

Despite all the hearings and antitrust-investigations, the motives of the merger were not directly addressed according to the book authors. Whatsoever, at the end the Ticketmaster-Live Nation merger was approved by the authorities in January 2010, but with several conditions. Ticketmaster was required to license a copy of it software to the world’s second largest concert promotion company AEG to enable it to launch its own ticketing system. Ticketmaster also had to divest of ticketing company Paciolan, which was acquired in 2008. Ticketmaster and Live Nation were also forbidden to take action against any venue owner who would use another ticketing or promotion service. Finally, firewalls have to protect confidential competitor data from the company’s promotion and management business. It will be a test of time if these conditions will prevent the new live entertainment giant from abusing its market power and if it will provide the basis for a competitive environment in the ticketing and promotion markets. However, the Ticketmaster-Live Nation merger marks the beginning of a new era in the music business at all, in which all activities within the industry become integrated from A&R management, music producing and recording, music sales and distribution to touring, ticketing, merchandising and sponsoring.

In this respect, “Ticketmasters. The Rise of the Concert Industry and How the Public Got Scalped” is a very valuable source to better understand the driving forces not only in the live music market but also in the music business at all.

Budnick Dean and Josh Baron, 2011, Ticketmasters. The Rise of the Concert Industry and How the Public Got Scalped. New York: ECW Press. ISBN 978-1-55022-949-3, EUR 18.99.

Ticket Masters – Part 1: The Emergence of Electronic Ticketing Services

Ticket Masters – Part 2: The Rise of Ticketmaster

Ticket Masters – Part 3: The Ticketmaster’s Challenge: The Grateful Dead, Pearl Jam and String Cheese Incident

Ticket Masters – Part 4: Online Ticketing and the Secondary Market

Ticket Masters – Part 5: SFX Entertainment and the Revolution in the Concert Promotion Business

Submissions are strongly encouraged from students at all levels of the MA & PhD.

Abstracts (of about 1,000 characters) are due by December 31, 2011 and full papers (15-30 pages) are due by May 2, 2012.  A maximum of 12 papers will be selected for presentation to guarantee a workshop atmosphere at the University of Music and Performing Arts Vienna on June 29, 2012. The sessions will combine paper presentations and discussions including interactive elements. The information on the acceptance of the paper proposal will be sent latest until January 31, 2012.

Please email your submission to viennamusicresearch@ijk.hmtm-hannover.de

Dowload here the full text of the young scholars’ workshop call for papers.

Until the mid-1990s the US concert promotion business was dominated by local venues and promoters. This changed dramatically when SFX Entertainment appeared on the scene. In part 5 the rise of SFX Entertainment to the main power of concert promotion and its transformation into Live Nation is summarized.

The North American pop and rock music business remained fundamentally unchanged until SFX Entertainment appeared on the scene in 1996.  In the decades before the live market in the U.S. and Canada was controlled by local promoters, who protected their territories from unpleasant competition. Thus, the artists’ managers or their agents had to cut deals with the local power brokers (p. 201). The first eruption that challenged the established system of fragmented local live music markets was Elvis Presley’s national tour deal with Concerts West promotion agency in 1970. Concerts West paid $1 million the Elvis’ management to acquire the right to book a national tour. Therefore, they had to cut out the various middlemen and directly contracted with the venues (p. 201). In response, some angered promoters encouraged impresario Bill Graham to start a competing model of national touring that relied on a network of local promoters. In 1974, Bill Graham sent out Bob Dylan with The Band,Crosby, Stills, Nash & Young and George Harrison for the first ever stadium tour in the U.S. However, local promoters were still in play and, thus, each local subcontractor in each city had so little money that they had to cut everything in order to avoid a deficit. Hence, the first national stadium tour ended up in a fiasko (p. 203).

Bill Graham’s failure showed that national tours would only be profitable, if they were organized by one promoter. After Concerts West successful beginnings, Toronto-based Concerts Productions International (CPI), founded by Michael Cohl, perfected the national touring concept. CPI succeeded in organizing Michael Jackson’s 55 date stadium “Victory” tour in 1984 (pp. 204-206).  In 1989, CPI bought out the Rolling Stones from Bill Graham Presents promotion agency – which had produced the Stones U.S.-tours in 1972, 1975, 1978 and 1981 – by paying a guarantee sum of $65 millions for 50 dates of the “Steel Wheels” tour. This was only affordable, since the entire tour was seen as one package – instead of 50 separate dates –, in which the single concerts were cross-collateralized. This means that the local promoters and venues were only getting flat fees after costs and expenses (p. 211). At the end, “Steel Wheels” tour was a hugh success, not at least for the Rolling Stones, who earned more than $260 million from ticket sales, merchandising and licensing deals, and sponsorship (p. 212). “Steel Wheels” was followed by “Voodoo Lounge”, “Bridges to Babylon”, and “No Security” tours, which made the Stones the top touring act of the 1990s grossing more than $750 million from 333 shows (p. 214). All the dates were successfully produced by CPI. Cohl’s new model of national touring attracted other superstar acts. In 1992, CPI paid U2 a $115 million guarantee for its “ZooTV” tour. Pink Floyd,Crosby, Stills, Nash & Young as well as David Bowie followed after CPI had morphed into The Next Adventure (TNA) (p. 214).

However, Michael Cohl sold The Next Adenture for an undisclosed amount in April 1998 to a new player in the pop and rock music promotion business – SFX Entertainment. In the same year SFX also acquired other music promotion companies: Don Law Presents for $71 million, Cellar Door Productions for $106 million and Avalon Entertainment for $27 million (p. 182). Where did the new power on the live concert market come from, which could afford such multi-million-purchases?

SFX stands for the initials of Robert F. X. Sillerman, who started as a marketing consultant in the mid 1960s and build up a broadcasting conglomerate in the 1980s. In 1992, SFX Broadcasting was formed by combining Sillerman’s Command Communications with radio mogul’s Steven Hicks’ CapStar Communications. The company went public in 1993 and expanded by the infusion of fresh capital (p. 156).

In 1996, SFX Broadcasting profited from the new Telecommunications Act, which deregulated all forms of communication in the U.S. It eliminated the ban on newspapers owning TV stations in the same market, lifted price regulations for cable systems with fewer than 600,000 subscribers, and permitted on company to own two TV stations and an unlimited number of radio stations in the same market. Previously one company was allowed to own only 40 commercial radio stations with a limit of four per market (p. 157). In 1996, Steven Hicks left SFX to form CapStar Broadcasting and SFX bought the New York-based concert producer and promoter Delsener/Slater Enterprises in order to diversify into live entertainment. The purchase provided valuable synergies, since radio stations want to do concert promotion and concert promoters always needed PR for their concerts. In the following year, SFX Broacasting also purchased Indianapolis-based Sunshine Promotions, which operated also two amphitheatres and the Meadows Music Theatre in Hartford, Connecticut (pp. 161-162).

In late summer of 1997, former business partner Steven Hicks surprisingly bought SFX Broadcasting for $2.1 billion – $1.2 billion in cash and $900 million in debt – to incorporate it into his CapStar Broadcasting group, which already owned 241 radio stations. However, it was a special deal as Budnick and Baron point out: “SFX Broadcasting could use its existing cash flow from radio business to finance the acquisition of its concert business as long as the debt was repaid upon the closing of the broadcasting deal after it had cleared governmental review” (p. 163) Within these six months, the promotion arm SFX Entertainment was establised as a public company, which raised enough money at Wall Street in order to repay its debt to CapStar in February 1998 (p. 163). In the meantime, SFX Entertainment used its liquidity to buy several concert promotion agencies: Concert/Southern Promotions in Atlanta for $17 million (p. 166), St. Louis-based Contemporary Productions for $91 million, Bill Graham Presents for $65 million and Houston-based PACE Entertainment for $130 million (p. 169).

Within the short time span of two and a half year SFX purchased nine concert promotion companies and changed the rules of pop and rock music promotion. SFX Entertainment business model relied on three incomes streams: ticket sales, ancillary revenues from food, brewerage and parking fees as well as advertising and sponsorship. Especially income from advertising and sponsorship was very important, since SFX realized that selling its customers data as packages to advertisers is much more lucrative than selling tickets. Within a year SFX doubled its revenue from advertising and sponsorship to $60 million in 1999 (p. 180) and “(…) was rapidly morphing itself into a global marketing company” (p. 197). Therefore SFX could afford to overpay acts by granting them 90 percent of the entrance fees in order to make it unattractive for them to contract with competitors. However, SFX Entertainment also profited from higher ticket prices. Since it entered the live music business in 1996 ticket prices had gone up nearly fifty percent until 1999. Thus, SFX Entertainment earned $1.5 billion in revenue and reported earnings of $209 million in 1999 – more than a quadruple than a year before (p. 192).

Robert F. X. Sillerman showed the world that concert promotion can be a billion-dollar-business and soon attracted investors. On February 29, 2000, SFX Entertainmant annouced its sale to then world largest radio broadcaster Clear Channel Communications, which owned or controlled more than 1,000 radio stations, 550,000 outdoor billboards and 19 television stations, for $4.4 billion (p. 192).

The synergies between broadcasting, advertising and concert promotion seemed obvious. When a big act toured through the country, Clear Channel would provide free advertising space and radio promotion in all the major cities, since it owned half of the billboards and radion stations in each of the cities. In addition, Clear Channel could aggregate the act’s audience in order to sell it to a potential sponsor including radio and billboard advertising. However, what sounds obvious in theory was not in practical terms. In the fall of 2000, the world economy was hit by an economic downturn, which was prologened by the 9/11 terror attacks in 2001. Since SFX, which was incorporated as Clear Channel Entertainment in the Clear Channel conglomerate, carried more than a billion dollars in debt, the new parent company was not able to get rid off the debt burden in the short run. In addition, Clear Channel did not find a way to create real synergies between radio, advertising and concert promotion businesses. In response to the economic problems, the company had to cut costs by setting free DJ staff in favor of cost-saving automation of playlists. Clear Channel was also accused to force artists into Clear Channel-owned tours and venues by promising more radio airplay and the company was one of the main targets of the 2003 congressional hearings on the concentration process in the broadcasting market (p. 223). All these problems led to the decision to spin off Clear Channel Entertainment into a separately traded company named Live Nation in spring 2005. At that time Clear Channel Entertainment/Live Nation was estimated to be worth $1.5 to $2 million – half of what it had been sold for five years earlier (p. 225).

Part 6 is devoted to the merger of Ticketmaster and Live Nation as a new conglomerate, which controls the world’s ticketing and concert promotion business.

Budnick Dean and Josh Baron, 2011, Ticketmasters. The Rise of the Concert Industry and How the Public Got Scalped. New York: ECW Press. ISBN 978-1-55022-949-3, EUR 18.99.

In the first decade of 21^st century the ticketing market was fundamentally changed by the launch of online ticket platforms on the Internet. In part 4 Ticketmaster’s strategy towards online ticketing is highlighted as well as the rise of ticket scalpers to secondary market ticketing firms is outlined.

In 1993, the Pritzker family decided to sell an 80 percent stake in Ticketmaster to Microsoft cofounder Paul Allen for $240 million. By this year, Ticketmaster was selling 61 million tickets world wide generating $1.3 billion in revenue (p. 227). Under the new ownership Ticketmaster was pushed towards the Internet. In 1995, a searchable database of events that the company was responsible for selling tickets was establised and a year later a transactional homepage was launched to sell tickets online (p. 228). However, despite the early move to the Internet, the company’s engagement in the new technology remained cautious and conservative. This could be blamed on CEO Fred Rosen, who hesitated to invest in an “uncertain” technology. In addition, Rosen showed the new majority owner little respect and ran the company as it were it his own (p. 232). Frustrated by the conflict with co-owner and CEO Rosen, Paul Allen decided to sell a 47.5 percent stake of Ticketmaster to Home Shopping Network in 1997, which was headed by Hollywood studio veteran Barry Diller. Diller bought more Ticketmaster stock on the open marekt to gain full control of the company with 50.1 percent. In October 1997, Home Shopping Network offered about $300 million for the rest of Ticketmaster’ stock, but Rosen and other co-owners rejected the bid. In March 1998, Barry Diller increased the bid to $400 million and Ticketmaster eventually agreed. For Fred Rosen it became clear that his days as Ticketmaster’s CEO were counted and decided to leave the company after 16 years. Barry Diller took full control of the company and subordinated it to USA Networks, which had been bought along with the Universal Studios, Inc. just months earlier from Edgar J. Bronfman Jr.’s Seagram. USA Networks itself was merged shortly before the Ticketmaster takeover with Home Shopping Network to USA, Inc. (later USA Interactive Inc. and eventually InterActiveCorp.). Barry Diller outlined Ticketmaster’s new strategy: To meet the challenges of the emerging Internet economy – e-ticketing.

Therefore, USA Inc. bought Citysearch – a website, which partnered with local newspapers in order to provide comprehensive listings of events, businesses and service in major U.S. cities as well as in Australia and in Europe. However, Citysearch was transformed into a website to sell tickets online. In 1998, the still existing online ticketing business of Ticketmaster and Citysearch were mergered to a new publicly traded company: Ticketmaster Online-Citysearch (TMCS). Ticketmaster Corp. remained part of USA Inc. (p. 235-237). TMCS could raise enough capital for further growth and to improve the technological basis for the exploding online ticketing business. By 2000, TMCS had sold 19 million tickets online (1999: 10 million), which resulted in a gross revenue of $864 million (1999: $440 million). Within a year online ticketing business nearly doubled (p. 244). Despite the burst of the dot.com bubble in 2000, online ticketing still prospered. Whereas in 1998 less than 10 percent of the tickets were sold online, the rate increased to more than 30 percent in 2001. By 2003 it was over 50% and by 2008 around 75 percent (p. 250). It is obvious that it made no sense to operate different ticketing companies – one for online tickets (TMCS) and the other one (Ticketmaster Corp.) for outlet and phone sales. In November 2000, TMCS purchased a controlling interest in Ticketmaster Corp. for $653 million, in order to merge the two companies simply called Ticketmaster. In 2003, USA Interactive bought the remaining shares of Ticketmaster and made it again a private subsidy of a publicly held company.

Despite the unprecedented growth of Ticketmaster due to online ticketing, competition on the ticketing market intensified. Several Internet start-up ticketing companies had entered the market since the late 1990s. The most successful and fast growing company was Tickets.com. In 1996, venture capitalist Dan Afrasiabi bought Hill Arts and Entertainment Systems – a Connecticut-based ticketing software firm and renamed it Entertainment Express (p. 239). With his business partner Thomas Gimple, Afrasiabi purchased with Advantix another online ticketing portal, which acquired another twelve companies within the next two years. However, the most important purchase happened in 1997, when Advantix bought the reanimated BASS ticketing company, which was still running on the Ticketmaster system (p. 240). Since the acquired ticketing companies ran on different hard- and software systems, there was a strong need to unify the operations. With financial support of private equity firm General Atlantic the online ticketing portal Tickets.com was launched. In January 1999, the merger between Tickets.com and Advantix was announced resulting in a new company now branded as Tickets.com, Inc. In November, Tickets.com used the booming stock market to go public.

However, when the Internet bubble had bursted in 2000, Tickets.com got in serious financial problems. In addition, Ticketmaster did everything to get rid off the annoying competitor. In July 1999, Ticketmaster filed for copyright infringement, charging Tickets.com’s practice linking to Ticketmasters’ sales webpages by bypassing the front page. In turn, Tickets.com sued Ticketmaster for misusing his monopoly power on the ticketing market. However, both lawsuits failed and Tickets.com had to carry high costs for lawyers and court fees. Tickets.com also failed to gain clients in and was outbid by Ticketmaster in acquiring TicketWeb in 1999, which was founded by Rick Tyler and Andrew Dreskin as an alternative online ticketing company charging lower service fees of about $1 per ticket. In 2000, it was eventually purchased by Ticketmaster for $35.2 million. The company retained its autonomy within Ticketmaster as a low-cost alternative for smaller venues (p. 248). Andrew Dreskin used the money to launch a new online ticketing company, Ticketfly, in 2008 (p. 249). Since Tickets.com suffered from several setbacks and financial problems, it was eventually bought by its most important client Major League Baseball Advanced Media (MLBAM) (pp. 247, 249).

When Ticketmaster tried to get grip of the online primary ticketing market, it was challenged by the emergance of resell-online platforms for tickets. One of the first webpages devoted to the secondary ticketing market was Needaticket.com, which was later renamed LiquidSeats and eventually StubHub. It was founded 2000 by two Stanford gradute students and grew big in a very short time (pp. 274-275). In 2006, tickets worth of $400 million were sold on the site, representing more than $100 million in revenue for the broker firm. StubHub was one of the most accelerating private businesses and attracted potential inventors. Eventually, Internet auctioning platform eBay acquired StubHub for $310 million in January 2007 (p. 287).

Another resell-webpage was founded by the ticket broker Dough Knittle, who had earned his living by buying and reselling tickets for the Super Bowl for twenty years (p. 279). He realized the economic potential of the Internet for his business in the late 1990s and acquired a software to handle inventory control. The webpage RazorGator was built around this programme and offered an exchange platform for sports and concert tickets (p. 284).

A third successful online resell platform was TicketsNow, which was set up by the university dropout Mike Domek, who started his career as ticket broker in 1992 (p. 288). Since TicketNow had excellent relations to the brokers, the online business boomed, reaching $300 million by 2008 (p. 288). This attracted Ticketmaster to get involved into the secondary ticketing market by buying TicketsNow for $265 million in January 2008 (p. 296).

Ticketmaster had realized that the secondary ticketing market could not be ignored any longer. In the decades before Ticketmaster did everything to fight scalping practices. It blocked brokers from selling tickets and even confiscated them if possible. However, with the emerging online ticketing business, automated selling software was operated, which resulted in the sell-out of large concert events within minutes. In 2007, Ticketmaster, thus, had filed lawsuit against RMG Technologies, which had created TicketBrokerTools.com that enabled its users to flood Ticketmaster with ticket requests (p. 290). Despite the fact that Ticketmaster eventually succeeded over RMG Technologies in court, the quasi-monopolist on the primary ticketing market thought about a strategy to get access to secondary ticketing market too. Since it had became usual for bands to buy the best seats themselves in order to resell it to family member, close friends and VIPs, Ticketmaster started an auction platform for a few seats of the Lewis-Klitschko heavyweight championship fight in June 2002. Later acts such as Madonna, Tim McGraw, Shakira, Kelly Clarkson and Red Hot Chilli Peppers also participated in Ticketmasters auctions (pp. 293-294). This auction platform eventually evolved into TicketExchange. However, TicketExchange was far less successful than other ticket resell-platforms on the Internet. Thus, Ticketmaster decided to buy a fast growing online ticketing portal and eventually purchased TicketsNow as a reaction to StubHub’s acquisition by eBay months before.

In April 2008, Ticketmaster also purchased SLO Limited, which was specialized in selling VIP ticket packages (p. 296). SLO Limited was founded by Shelley Lazar in the 1970s. A primary school at daytime, Shelley Lazar handled the guest lists for bands in Manhattan’s music clubs. She used her close relationship to the stars to offer them a catering service which evolved over the years to a VIP service with pre-show dinner parties and ticket packages for best seats. In summer 1988, Shelley Lazar left the classroom and started her full-time employment in the music industry. She joined the Amnesty International Human Rights Now! Tour in 1988, handled seating arrangements for MTV Music Awards as well as for two papal masses. Above all she continued to offer friends and family ticketing services for Paul McCartney , Bob Dylan, Barbra Streisand, the Eagles, The Who, KISS, Tina Turner, Paul Simon, Police and recently Lady Gaga. However, when competition in the VIP service business intensified, Shelley Lazar decided to sell its firm to Ticketmaster.

Part 5 will tell the story how a fragmented market of concert promoters was unified and revolutionized by Robert F. X. Sillerman’s SFX Entertainment.

Budnick Dean and Josh Baron, 2011, Ticketmasters. The Rise of the Concert Industry and How the Public Got Scalped. New York: ECW Press. ISBN 978-1-55022-949-3, EUR 18.99.

Ticketmaster had a more or less monopolistic position in the ticketing market after the purchase of its main competitor Ticketron. In part 3 the conflicts between Ticketmaster and bands such as The Grateful Dead, Pearl Jam and String Cheese Incident over the right to sell tickets are highlighted.

After the acquisition of Ticketron in 1991, Ticketmaster enjoyed a monopolistic position on the U.S. ticketing market. The main market entry barrier was based on the exclusive contracts with the venues and promoters. In chapter 4 “A Bunch of Wholly Freaks” (pp. 91-113) the authors tell the story how Grateful Dead Ticketing Service (GDTS), which had been established in 1983 as a result of supporting the band’s fanbase with a ticketing mail order service, challenged Ticketmaster, after Ticketmaster had denied to accept a 50:50 split in Grateful Dead’s ticket inventory. Instead Ticketmaster demanded 90% of the ticket inventory, which was unacceptable for GDTS. Eventually GDTS succeeded, but it was a sole victory over the monopolist.

In other cases, Ticketmaster used its market power either to drive competitors out of the market or to purchase their assets. Until the purchase of the main competitor in 1991, Ticketmaster had also acquired Ticket World USA (1985), Capital Automated Ticketing (1989), Dayton’s Ticketing (1989) and SEATS (1990) (p. 134).

However, Ticketmaster more often was blamed for all too high ticket prices because of increasing service fees. Especially bands, who wanted to keep the ticket prices low for their fans, became uncomfortable with Ticketmaster’s price policy. Grunge band Pearl Jam became the spearhead of critic and they actively by-passed Ticketmaster by selling tickets for their shows by mail order service. The conflict heatened up in 1994, when Pearl Jam canceled a tour (p. 122). The band blamed the cancelation of the tour on Ticketmasters price poliy and therefore was approached by the U.S. Department of Justice, which had still an eye on Ticketmaster after the Ticketron acquisition. Eventually the investigation culminated in a Congressial hearing in summer1994, inwhich Pearl Jam band members testified against Ticketmaster.

In chapter 4 “Rumble in the Jungle” (pp. 114-153) the congressional hearings and the Department of Justice’s antitrust investigation are highlighted in great detail. Ticketmaster critics, in essence the band mates of Pearl Jam and some influential music managers, highlighted Ticketmaster monopoly position in the concert ticketing market and testified that it would be nearly impossible to organize a big tour beside Ticketmaster, since all the large venues would be bounded by exclusive contracts. On the other hand Ticketmaster CEO Fred Rosen testified that there would be sufficient competition in the ticketing market. He, thus, cited a study commissoned by Ticketmaster coming to the conclusion that 1.5 billion tickets sold for live events per year, only 51 million were sold by Ticketmaster (p. 136). However, this was the broadest definition of the ticketing market possible, including also museums, amusement parks, state parks, and county fairs. In contrast, Budnick and Baron cite Pollstar – a well respected trade publication for the concert business – that in 1994 Ticketmaster had exclusice contracts with 63.2 percent of the concert venues and handled ticketing for part of the remaining non-exclusive live venues in the U.S. (p. 136).

Althought the Justice Department had a very critical approach to Ticketmaster, the officers were not able to find sufficient evidence to file an antitrust complaint (p. 147). Thus, they announced the closing of the antitrust investigation on July 5^th, 1995. From a business outsider’s perspective this seems to be unreasonable. However, two main factors led to the investigation’s closing: (1) the venues were not forced by Ticketmaster to contract on an exclusive basis, but preferred exclusive and long-term contracts in order to get substantial advance payments, which could be used for different ends; (2) it was a tricky task to define the “relevant market”. Since Ticketmaster was not only constraint to the live music market, but did also ticketing for sports and other entertainment events, a limitation to the live music market would not hold up in court. In fact, rock music was only a small proportion of the company’s business conducted with arenas and theatres (p. 149). Despite the public expectation that Ticketmaster should be sued for antitrust reasons, the investigations led to nothing substantial – from the Department of Justice’s perspective.

Also the complaint by Ticketmaster’s competitor Tickets.com in 2003 led to nothing. Tickets.com tried to highligh Ticketmaster’s monopoly position in the market. In court a Tickets.com’s expert analysed that Ticketmaster contracted 31 of 41 of the large arenas, which covered 75% of the tickets sold, on an exclusive basis. In addition, in 25 of the regional areas, Ticketmaster’s market share was about 90% (p. 148). However, the court ruled similar to the Justice Department eight years ago by arguing that the venues and promoters willingly entered into long-term and exclusive contracts with Ticketmaster.

However, at the same time the ticketing giant was successfully challenged by a Colorado-based rock band with the funny name String Cheese Incident. Chapter 9 “A Quiet Victory” (pp. 251-271) is devoted to the band’s conflict with Ticketmaster on the same issue than Grateful Dead and Pearl Jams decades ago. The conflict was routed in the fact that String Cheese Incident commissioned the small firm SCI Ticketing to sell its tickets with a very low service charge. All the tickets, thus, were sold online at the same price. However, SCI Ticketing ran on TicketWeb platform, which was bought for $35.2 million by Ticketmaster in June 2000 (p. 252-253).  In May 2002, Ticketmaster instructed its exclusive venues and promoters that it would no longer allow them to provide direct artist-to-fan ticketing except to “legitimate” fan clubs. “Legitimate” fan clubs were defined by an annual fan’s contribution of at least $15, by the restriction to buy only four tickets per person, by the prohibition to resell tickets and by a “meaningful” interaction between fans and the band (p. 260). These requirements did not fit to String Cheese Incident’s practices. Therefore, the band avoided to play in Ticketmaster-operated venues, which proved a very tricky task, since most of the venues and promoters were exclusively bound to Ticketmaster.

When the reknowed e-commerce and antitrust lawyer, Neil Glazer, heard about String Cheese Incident’s ticketing predicament, he took particular interest in the case. He approached the band’s management and ticketing firm and suggested to sue Ticketmaster for abusing its monopoly power by defining barriers such as “legitimate” fan club rules (p. 261). A silent backer provided financial support and SCI Ticketing filed a civil lawsuit on August 3, 2003. In the lawsuit Glazer argued that Ticketmaster had exclusive agreements with 89% of the top fifty arenas, 88% of the top fifty amphitheatres, 70% of the top theaters and 75% of the top clubs, which clearly indicates a monopoly in the concert industry. The lawsuit, therefore, charged Ticketmaster for monopolizing and abusing its monopoly power in the sense of the Sherman Antitrust Act (pp. 263-264).

Ticketmaster responded as usual with denying all it was charged for and with a counter-lawsuit against SCI Ticketing alleging the firm for interfering with contracts and relationships in which Ticketmaster made great investments (p.265). However, Ticketmaster also feared negative publicity, after New York Times and Rolling Stone had covered the story. Quietly they offered the band to sell half of its ticket inventory directly to the fans and the other half over Ticketmaster’s channels – similar to the Grateful Dead’s deal. In addition, SCI Ticketing was allowed to resume sales for other clients than String Cheese Incident at least of 10% of the ticket inventory. In return, SCI Ticketing and band’s management would have to agree not to communicate the terms of settlement to the public (p. 266-267). Since Ticketmaster meet all the demands of the band and its ticketing company the case was settled outside the court. Although the lawsuit went away quietly, Ticketmaster had realized that it had to improve its relationship to artists and their management. Thus, the lawsuit led to the decision to invest in Irving Azoff’s Front Line Management in 2004 (p. 271). This was the first step to a complete reshape of the concert industry by joining the forces of the world’s largest ticketing company, the world’s largest concert promotion firm and one of the largest artist management agency. The result was Live Nation. However, this story will be told in part 6 “The Begin of a New Era – the Ticketmaster-Live Nation Merger”

Part 4 summarizes the emergence of online ticketing services and the launch of resell tickets platform on the Internet, which brought ticket scalping to a new level.

Budnick Dean and Josh Baron, 2011, Ticketmasters. The Rise of the Concert Industry and How the Public Got Scalped. New York: ECW Press. ISBN 978-1-55022-949-3, EUR 18.99.

On the other hand, the extension is criticized by open access activists, but also by most of the academics in the field of intellectual property rights. In an open statement to the European Parliament the who-is-who of IP-law professors and economists, including Nobel laureats Sir James Mirrlees and Kenneth Arrow, opposed the copyright term extension as an ineffective and unnecessary extension of monopoly rights in 2008[2].

Thus, the question arises, what is the economic rational for such a term extension? What are arguments and counter-arguments and how they can be assessed by economic theory?

Microeconomic Aspects of a Copyright Term Extension

Copyright grants – beside the moral rights – a temporary monopoly to the creators of intellectual property as an incentive for a higher probability of financial rewards in the market place. Otherwise, in the absence of a copyright, this would result in an undersupply of creative works. However, the financial reward by copyright is a monopoly price, which is higher than the usual competition price. The monopolist can raise the price to a profit maximising level, which results in a transfer of rents from the consumers to the monopolist and a deadweight loss. The deadweight loss arises from consumers whose reservation price equals or lies higher than the competition price but lower than the monopoly price. The monopoly, therefore, results in a welfare loss.

This is textbook wisdom, but leads to the question of optimal copyright protection. The seminal work in this field is Landes’ and Posner’s “An Economic Analysis of Copyright Law”. They modelled the situation of optimal copyright at an aggregate level. This implies that an increasing level of protection does not only increase revenue, but also increases costs, since much creative work reuses previous work. Further, there is a competition of works. If the number of works increases the increased competition reduces the revenue obtained from a given work. In addition, we have to assume a variation of production costs across works as well as a variation in demand (and welfare) across work. Taking these factors into account, we can derive the following propositions: (1) Some production of creative works occur without any copyright protection; (2) supply of creative works increases with the introduction of copyright protection; (3) however, there are diminishing returns to protection and (4) eventually increasing the level of protection reduces the supply of creative works, since beyond a specific level of protection “(…) the cost of expression to marginal authors will dominate, so that the number of works will begin to fall” (Landes and Posner, 1989, p. 335).

We can now derive an aggregate welfare function, in which overall welfare depends on the sum of welfare contributed by each work and the total costs of producing works including administrative and enforcement costs. However, the welfare contributed by each (existing) work diminishes with the level of protection due to the deadweight loss associated with copyright protection. Thus, the overall welfare gain depends on the welfare deriving from new works, on the decline in welfare from existing works (because of the deadweight loss) and on production and administration costs. Since a term extension would increase the deadweight loss as well as production and administrative costs, it is intutive that overall welfare has to decline. This is supported by Landes and Posner (2003, p. 220) who state that a retrospective extension of copyright “(…) can’t affect the incentive to create new works, since a retroactive extension affects only the return on works already in existence (…). Retroactive extensions do not enhance incentives to create expressive works, so if those incentives are the only benefits from copyright, such extensions will increase transaction and access costs without generating any offsetting value.”

Hence, we can conclude that a copyright term extension has two negative effects: (1) the number of works that will be produced does not change at best, but is expected to diminish and (2) the costs of production and administration increase, since the size of public domain decreases. Therefore, we have to expect a decrease of social welfare by a copyright term extension.

Neo-Institutionalist Aspects of a Copyright Term Extension

The neo-institutional approach in economic sciences is based on the assumption that market transactions involve transaction costs. According to Oliver E. Williamson’s seminal book “Markets and Hierarchies: Analysis and Antitrust Implications” (1975) transaction costs are determined by the frequency, specificity and uncertainty of a transaction. Frequency of transactions means how often a (similar) contract has to be concluded. High specifity means that the outcome of a transaction cannot be used in alternative ways and uncertainty of a transaction is related to the extent of possible opportunistic behavior.

If we consider that transactions in the music business are very frequent, specific (a sound recording cannot be used in an alternative way) and uncertain (because of opportunistic behavior), there is a need to lower transaction costs by exlusive contracts on the basis of copyright. In the absent of copyright, an author would sell his work to a publisher, who acquires all property rights to commercialize the work in any manner he or she wanted to – even to edit the composition if it seemed appropriate. In return, the author is free to sell his or her work to other publishers if it provides additional benefit. Therefore the publisher’s advantage to commercialize the music work without any restrictions is outweighed by the potential opportunistic behavior of the authors to sell their music to others. To avoid the opportunistic multiple exploitation of music works by artists, the publishers have to include clauses of exclusivity in publishing contracts that required monitoring and were therefore accompanied by higher transaction costs (e.g. control costs), depending on the protagonists’ market power. With the introduction of copyright the system of exclusive contracts is based on solid legal fundaments. The publishers try to acquire all the rights to the full extent on an exclusive basis, since they want to control all resources of exploitation and to avoid the authors’ opportunistic behavior. However, it depends on the market power of the publisher to acquire the whole bundle of rights from the authors. Thus, we can observe that companies in the copyrighted industries tend to form large business entities by intergrating horizontally as well as vertically in the value-added chain, e.g. the major record companies own the world largest music publishers in order to control most of the commercially relevant copyrights. The result of this aggregation of market power is an oligopolitic market structure, in which a few companies own a very high market share. Oligopolistic companies tend to establish high market entry barriers in order to make it difficult for new firms to enter the market. In the music industry an important market entry barrier are copyrighted works, which are controlled by exclusive contracts with the authors, but also with performing artist in the case of sound recordings.

To sum up, the exclusive transfer of exploitation rights embodied in copyright law enables publishing and record companies to monopolize the commercialization of the authors’ and performers’ creative work, which leads to monopolistic competition in the music industry. Since the monopolization of music works creates market entry barriers, in the long run, there is a lack of competition and tendency towards oligopolization of the industry’s structure. If only a few market actors dominate the market, they will strive for stabilization of their market power by increasing the span of control. Therefore, they dictate the contractual terms against the authors and performers on the one hand, and they lobby for restrictive copyright laws at legislative bodies on the other – as it is the case in the EU copyright term extension.

The copyright term extension, therefore, conserves outdated industry structures by raising the market entry barriers. However, this is not only harmful to small firms, which want to enter successfully the publishing and sound recording market, but also to music industry as a whole, since there are not sufficient incentives to create new and innovation music. The major record companies can still rely on the revenue streams of sound recordings made 50, 60 or even 70 years ago. They are, therefore, not motivated enough to invest in new talent and in innovative music styles.

Above all there is another threat. Since new and powerful players from outside the traditional music industry’s value-added network, has entered the music markets, they might be interested in acquiring the valuable back catalogues of the economically starving record companies. However, it is very doubtful if Google, Apple Inc., Amazon, Live Nation and others intent to produce new music. They are just interested in exploiting existing and promising back catalogues. By granting a copyright term extension to 70 years, these new powerful players in the music business might enjoy a still longer period of monopolistic protection without any incentive for the creation of new music.

Cui bono?

Neither the microeconomic analysis of copyright nor the neo-institutional approach support the EU copyright term extension to 70 years. As it could be highlighted, a higher level of copyright protection does neither increase social welfare nor support innovation and creativity in the music industry. Thus, the question arises, who profits from the term extension? The advocates for the copyright term extension argue in favor of the performers. However, in a study by Price Waterhouse Coopers (2006), which was commissioned by the British music industry body BPI, the gain of an initially suggested copyright term extension to 95 years would create between £ 8.4 million and £ 163.0 million in additional revenues in present value for the UK music industry. In the EU Commission’s impact assessment (p. 36) to the proposed directive (2006/116/EC) on the term of protection of copyright and related rights the extension to 95 would generate between € 44 million and € 843 million in additional revenues for the music industry in the EU.[3] If we consider that 20% of the additional revenue will be delivered to a performers’ fund, the income share in the additional revenues between labels and performers will be 72:28 percent. This means that in the high scenario (€ 843 million) revenue of € 606 million will be channelled to the labels and € 236 million will go the performers. If we assume a market share of 80% for the four major labels, they would profit from the copyright term extension to 95 years by € 484.8 million. The rest of € 121.2 million will be divided among thousands of indie labels.[4] On the performers side we know e.g. from collecting societies’ data that only a small proportion of authors and performers receive a high share in the revenues. Assuming the existence of a 20%-fund for performers, the EU Commission assesses that 77-90% (€ 181.7 to € 212.4 million) of the additional revenue for performers will go to 4,900 (20%) of the approximately 24,500 performers in all EU countries. It follows that each of top-20%-performers will earn between € 37,086 and € 43,347. In contrast, the rest of 80% of performers (19,600) will receive between € 23.6 million and € 54.3 million. This results in an additional income of € 1,204 and € 2,759 for each of the bottom-80%-performers. In the afore mentioned open statement of the IP-experts to the European Parliament (p. 11) they come to the conclusion that “(…) the bottom 80% of perfomers would each get 58 euros a year (…). Under the low scenario they would receive approximately 4 euros a year.”

Conclusion

Based on the assumptions of the EU Commission, the copyright term extension is much more in favour of the four major record companies and the superstar artists than indie record labels and less successful performing artists. Thus, one may wonder why the all the EU authorities – commission, parliament and council – supported the claim for a copyright term extension on sound recordings to 70 years? One answer can be found in a New York Times article. According to the newspaper the copyright term extension was passed with the minimum amount of votes required under EU rules. All member states with a considerable music industry – Germany, United Kingdom, France and Spain – supported the legislation. Whereas smaller and especially Eastern European countries – Czech Republic, Slovakia, Slovenia, Romania beside Sweden, The Netherlands, Belgium and Luxemburg – fiercely opposed the new law.[5] This does not mean that these countries do not want to protect the economic interets of the performers. Instead, these countries fear that the copyright term extension will protect the main players’ interests on the biggest European music markets to the disadvantage of their markets. In an addendum to the Commission’ impact assessment, Sweden declared that “[e]xtending the term of protection for sound recordings as proposed is neither fair nor balanced. (…) Sweden believes there to be good reasons for measures aiming at improving the situation for those professional musicians and other artists who often operate under economically difficult conditions. Extending the term of protection will however not primarily be of benefit to this group.”  The Belgian declaration also stresses that the extension will not improve the situation of the performing artists, but will only favour the record producers. For Belgium the extension “(…) will have a negative impact on the accessibility of cultural material such as those contained in libraries and archives, and will create supplementary financial and administrative burdens to enterprises, broadcasting organizations and consumers.” This argument is in line with the economic analysis of the term extension’s impact from a microeconomic as well as neo-institutional approach. Therefore, the copyright term extension is not an appropriate measure to improve the situation of the vast majority of performing artists and does not provide any incentive for creativity and innovation in the music industry.

Sources

Billboard.biz, “EU Extends Copyright Term To 70 Years, September 12, 2011

CIPPM, CIPIL, IviR, Max-Planck-Institute for Intellectual Property, Competition and Tax Law Statement on Copyright Term Extension, October 27, 2008

Council of the European Union, 2011, Declaration of Sweden and Belgium to the Proposal for a Directive of the European Parliament and of the the Council amending Directive 2006/116/EC of teh European Parliament and of the Council on the term of protection of copyright and related rights.

European Commission, 2008a, Proposal for a European Parliament and Council directive amending Directive 2006/116/EC of the European Parliament and of the Council on the term of protection of copyright and related rights

European Commission, 2008b, Commission Staff Working Document accompanying the Proposal for a Council directive amending Council Directive 2006/116/EC as regards the term of protection of copyright and related rights impact asssement on the legal and economic situation of performers and record producers in the European Union

Landes, William and Richard Posner, 1989, “An Economic Analysis of Copyright Law.” Journal of Legal Studies, 18(2), pp. 325-363

Landes, William and Richard Posner, 2003, The Economic Structure of Intellectual Property Law. Boston etc.: Belknap Press of Harvard University Press

New York Times, “E.U. Extends Royalty Protection to Music Performers and Producers”, September 12, 2011

Price Waterhouse Coopers, 2006, The Impact of Copyright Extension for Sound Recordings in the UK. A Report for the Gowers Review of Intellectual Property prepared by PwC on behalf of the BPI.

Tschmuck, Peter, 2009, “Copyright, Contracts and Music Production”. Information, Communication & Society, 12(2), pp. 251-266

Williams, Oliver E., 1975, Markets and Hierarchies: Analysis and Antitrust Implications. New York: Free Press.

After the main players of electronic ticketing service in the 1970s established a modern ticketing market, only Ticketmaster survived. In part 2 the “Rise of Ticketmaster” into a more or less monopolistic market position is highlighted.

Ticketmaster was founded 1974/75 by university graduates Albert Leffler, Gordon Gunn and Peter Gawda inspired by the Select-A-Seat software solution (p. 53-54). However, the Ticketmaster founders lacked investment capital. They even could not afford an appropriate mini-computer. It took more than a year to find sufficient financial backing by the owner a direct mail marketing company, Charles Hamby (p. 58-59). On the new financial basis, clients all around the U.S.and even in Norway could be acquired. However, Hamby had underestimated the financial resources to compete with Ticketron. Additional capital was needed and provided by Hyatt Management Corporation, which ran the newly opened Superdome in New Orleans. Hyatt Management Corp. was controlled by the Pritzker family, who ran the world-wide Hyatt hotel chain (p. 81). They bought out the initial investor Charles Hamby, but failed to set up a sustainable business model. In early 1980, the Pritzkers decided to find a buyer and sold the company to their tax adviser and lawyer Burt Kanter. Burt Kanter hired Frederic Rosen as special counsel, who should observe the dozen systems in operation. Rosen quickly found out that Ticketmaster was mis-managed and had a high economic potential. Early in 1982, he decided to buy Ticketmaster and approached Jay Pritzker to invest $1.0 million if he could raise other $3.0 millions. Eventually the Pritzker family decided to support Rosen and became majority owner of Ticketmaster with Fred Rosen as president and former BASS founder Jerry Seltzer as vice-president.

Within a short period of time Fred Rosen revolutionized the whole ticketing process and thus challenging the market giant Ticketron. The only parallel to Ticketron was that Ticketmaster also started to establish company-owned operations rather than striking licensing deals (p. 69). In all other aspects, Rosen diverged from Ticketrons blue-print: Ticketmaster required full inventory from any facility or promoter in exchange for a share in the service fee charged (p. 72). Therefore the service fees had to be doubled. In addition, Ticketmaster encouraged its clients to close their box offices on the first day of sale, since the whole ticketing process could be handled by exclusively by Ticketmaster. Thus, no tickets were available anymore without service charges (p. 73). A Ticketmaster employee is cited by authors to outline Rosen’s business model in contrast to Ticketron’s: “So Fred [Rosen] came in and said, ‘Right now you have a cost center, it’s called your box office. You pay for the equipment and you have to pay for the labor to sell the tickets. I’m going to give you the equipment for free. I’m going to equip your entire box office with terminals. I’m going to teach your people how to sell tickets over those terminals, and I’m going to support those people. What I’m going to ask you to do is close down the first day of sale on concerts and let me sell those tickets through my outlets. So now you don’t even have to pay the labor on the first day of sale. But if that’s not enough, I’m going to give you a piece of every ticket I sell. So I’ve just turned your cost center into a profit center.’ (…) [T]hat was the difference between Ticketmaster and Ticketron and why Ticketron lost the entire business.” (p. 75).

Within three years as CEO of Ticketmaster Rosen redefined the ticketing business. Instead of simply charging ticketing fees – as Ticketron did – Ticketmaster started to pay advances against proceeds to the venue holders and promoters. The upfront payments made it easier for the promoters to budget and to meet the demands of the bookers on the one hand. On the other, they became dependent on the cash injunctions by Ticketmaster. However, Ticketmaster went a step further and provided also marketing and advertising sources to promote the events (p. 78).

The impact of these efforts was mirrowed by the sales figures: “In 1982 the company’s sales hovered around $1 million, supported by twenty-five employees. Three years later that number jumped to just over $200 million, a vast improvement but still only about a third of Ticketron’s efforts. Then in 1987 Ticketmaster finally eclipsed its competitor, with both selling just under $400-million worth of tickets.”

In the late 1980s Ticketmaster was the main force in the U.S. ticketing market, and competitor Ticketron lagged behind. Budnik and Baron identify several reasons for this development: (1) Ticketron was a computer firm that sold tickets, but Ticketmaster was an entertainment firm, which used computers to sell tickets. (2) For Ticketron’s parent firm Control Data electronic ticketing was only a side-business in its portfolio, which did not contribute much to the company’s profitability. (3) Ticketron positioned itself as the “fair” market force by protecting the interests of the promoters and ticket buyers by keeping the service fees low. However, this was the wrong strategy in a concert business that changed its nature fundamentally in the late 1980s. The top music acts had become more and more demanding and received 85 to 90% of the gross ticket sales. The promoters and venue managers found themselves in a very competitive environment, in which the acts and their bookers defined the rules. In this strained situation Ticketmaster once more provided helping hands – in order to get even more control over the promoters. It offered its clients the possibility to establish service charges by contract. That means it raised the service charge in favor of the promoters and on the back of the ticket buyers (p. 84). This new Ticketmaster price policy cannot be overstated in its long-term significance for the ticketing business according to the authors: “With the ability to earn extra funds from heightened service charges, promoters now had the freedom to match the ever-amplified demands by booking-agents, in a sense overpaying for the acts and then making up the difference by taking additional expense onto the service fee. The consumer was hit twice.” (p. 84).

Since Ticketron was not prepared to adopt Ticketmaster’s business practices, the former main force in electronic ticketing lost ground and produced annual losses. In 1989, Control Data sold Ticketron for $16 million to a group of investors backing Abe Pollin, who ran the Capital Centre in Washington D.C. and was also the owner of the Washington Capitals and the Washington Bullets. However, the new management team failed acquire important new clients and to contract out Ticketmaster clients (pp. 85-89). On February 27, 1991 Ticketmaster announced the purchase of the Ticketron assets for $11 million (p. 89). In 1992, the combined Ticketmaster/Ticketron concern reported a total revenue from ticket sales of $1 billion (p. 90).

However, the acquisition of Ticketron by Ticketmaster was allowed by the U.S. antitrust authorities if Ticketron would sell the Ticktron system of Hackensack to the Shubert Organization, which controlled 17 Broadway theatres and had automated its ticket sales with support by Ticketron branded as Telecharge service (p. 81).

Part 3 will highlight how The Grateful Dead, Pearl Jam and The String Cheese Incident challenged Ticketmaster’s exclusive position in ticket sales.

Budnick Dean and Josh Baron, 2011, Ticketmasters. The Rise of the Concert Industry and How the Public Got Scalped.New York: ECW Press. ISBN 978-1-55022-949-3, EUR 18.99.