When acoustic recording was replaced by the superior technology of electrical recording, the record companies around the world had more or less unsaleable mechanical recordings in stock. It was estimated that alone in the U.S. approximately two hundred million acoustic discs were on the market. To get rid of the obsolete recordings the record companies sold them at cost price or less through jobbers to specific outlets, which normally did not offer records for sale. In Australia, importers made a profit by selling the outdated recordings with a new label to department stores and other outlets such as drapers and petrol stations. However, the profit margins soon attracted firms which have never previously been in the phonograh business before. Thus, the Australian market was flooded with cheap records by several importers which alarmed those record companies still manufacturing records in Australia. They feared that the cheap imports would cannabilize their regular domestic sales and started an ‘anti-dumping’ campaign.
Part 5: The Tariff Board Inquiry of 1927
By the end of August 1926, the distributor of Brunswick products, D. Davis & Company applied for higher duties on phonograph records to the Australian Department of Trade & Customs. After intensive consultation and correspondance the Parlophone Co., the Vocalion Gramophone Co., the Columbia International Co. as well as the Gramophone Co. joined the the claim for higher duties on imported records. Since there was considerable support among the record manufacturers in Australia the Department of Trade & Customs agreed to order an inquiry of the Tariff Board. The inquiry included three days of public hearings, held on 18 and 21 October 1927 in Sydney. 21 managers and spokespersons of record labels, record importers and sales outlets appeared before the Board to testify.
The hearings started with an eclat since Vocalion withdrew its submission for higher import duties on records in the last second. The managing director of Vocalion’s Australian branch explained he was adviced to do so by his English principals, although he personally was in no way opposing the application. However, the battle lines between the record manufacturers and importers/distrubuters were immediately drawn. The general manager of The Gramophone Co., William Manson, outlined the position of most of the local record manufacturers. He pointed at the capital invested by the firms and the employment they provide for large number of workpeople. But beyond that, the record manufacturers also create a considerable source of income for printers, bag makers, engeneering firms, and suppliers of coal and copper. All this would be put in question by the imports of cheap records and he concluded: “[O]ur industry is threatened with (…) unfair competition from abroad, which may well cause serious hurt, and possibly may make it necessary either to close down the new factories or to greatly reduce the staffs employed in them.” (p. 244). The president of the Retail Music Traders’ Protective Association of New South Wales, Francis Wilson, claimed that the ‘price dumping’ practices hurt the sales of local recordings: “My figures show that my sales have decreased by approximately 20% for the last six months, as compared with the corresponding period of 1926 (…). We formerly bought weekly an average of 45 to 50 records of fox trots and other popular stuff, whereas now the average is five or six, unless some particular hot hit comes out. (…) My purchases of popular titles from Brunswick people from April to September were 258 in 1926 and 210 in 1927, which corresponds with the 20% decrease mentioned above.” (p. 247-248). David Davis, the managing director of D. Davis & Company which manufactured Brunswick records and who initiated the Tariff Board Inquiry by his complaint, blamed the ‘illigitimate’ store, as he called them, for price ‘dumping’: “A further disheartening aspect it that we are seeing the dealers with whom we have been associated, many for 10 and 20 years, being slowly forced out of business by drapery firms who are handling cheap records only for the purpose of drawing public to their stores to sell them goods on which they make a larger profit.” (p. 251).
Davis’ testimonial was immediately challenged by a solicitor representing one of the department stores Davis mentioned by presenting a Brunswick record sold-off for a low price re-labelled as ‘Simolian’.Davis tried to play it down by arguing that his company indeed sold obsolete records a few years ago when it was not possible to recycle them for new presses. But he also admitted that this practice was a mistake which caused them a considerable loss.
However, this argument before the Tariff Board clearly showed that the major companies themselves were responsible for the ‘dumping’ practices, but when other players from outside the industry tried to gain their profits from the same practice they were immediately attacked by the established firms.
Another aspect was raised by Herbert Afriat, the director of one of the indicted record importers. The majors obviously operated a price cartel: “The His Master’s Voice, Columbia and Brunswick will not supply any person with records unless they enter into an agreement not to sell under their fixed price. In the case of His Master’s Voice, they will not supply anybody unless they purchase a certain amount of machines and records in the first case. I think the amount of £80.” (p. 253).
The hearings reveiled also some interesting details of the industry’s cost structure as well as the protective practices of the majors. Horace Newman, whose company imported products of the Crystalate Manufacturing Co. in England, argued in the hearing “(…) that the Australian made record is selling to the public at too high a price.” (p. 258). He pointed out that Crystalate Co. was in negotiations with a local record manufacturer to press the ‘Imperial’ records in Australia, but was offered a prohibitely high pressing fee. Thus, the negotiations were not carried on. However, Newman calculated that the Australian wages for record production were not more than 25% over the English wages. Taking into consideration the higher costs of material and distribution, the total cost of a record should had been more than 50% higher than such costs of English records. Therefore the usual retail price of 4 shillings was in his opinion too high, and instead a price of 2 shillings and 6 pence would have been appropriate. Newman also pointed out that record imports showed a falling trend: “The figures for the importation of records during 1926/27, show a falling off from the previous year, part of which reduction is due to the fact that the bis companies are now manufacturing here and not importing, and partly because has gone off during the past 12 months, possibly due to the competition of wireless.” (p. 261). And he gave statistical evidence: Whereas in 1925/26 records were imported to Australia of £68,477 on average per quarter, in 1926/27 the import value declined to £32,617 and were only £12,582 in the quarter ending 30th September 1927.
The longer the hearing went on, it became clear that the Australian record industry had been in a recession since 1926. The importer of ‘Banner’ records Kenneth Besly, pointed to a weak record business before it was severely hit by the Great Depression: “The record business generally has slumped during the last 12 months as has the whole gramophone business, including the manufacture and sale of machines, which would naturally mean a decline in the sale of records, as compared with the year 1926, which was regarded as an exceptionally good year.” (p. 263).
Further testimonials of records importers and distributors showed more protective measures of the major local manufacturers and clear indication of a cartel to keep up the price of records.
Nevertheless the Tariff Board suggested in its final report on 28 November 1927 a prohibitive high duty on record imports in order to protect the local manufacturers from ‘unfair overseas competition’. The duty should enable to increase the local recording companies’ output and to reduce costs of production with a consequent price reduction. In addition, the increased duty should also raise employment in the Australian phonograph industry. The recommendations of the Tariff Board Inquiry were implemented on the Customs Tariff Act 1928. As a result the quantity of records being imported dropped dramatically within a very short time and almost all record imports ceased by early 1928. However, the expected effects of the protectionist measurement did not occur. Neither the companies’ output nor employment in the phonograph industry increased. Instead, one by one of the record manufacturers in Australia went bancrupt until the two remaining companies – The Gramophone Co. and Columbia Phonograph – “(…) were forced to amalgamate, giving the new EMI a virtual monopoly of the Australian market until the end of World War II.” (p. 275).
In the final part 6 of the series on the early music industry in Australia, the causes for the deep recession on the Australian market for recorded music before world economic crisis hit the Australian economy will be analysed.
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