INTELLECTUAL PROPERTY, RENTSEEKING AND ENTREPRENEURSHIP IN THE MUSIC INDUSTRIES

JOHN WILLIAMSON

A thesis submitted in partial fulfilment of the requirements for the degree of Doctor of Philosophy

QUEEN MARGARET UNIVERSITY 2010

Abstract The global music industries have been undergoing a period of substantial structural, financial and organisational change as a result of economic, technological and socio-political factors. This thesis begins by developing and providing a critique of existing approaches to the study of these industries as well as offering a clearer definition of what they comprise in the twenty-first century. This notes the limitations of the political economy and cultural industries approaches which have dominated studies of the industries to date, arguing that they only offer a partial explanation of their workings, and that recent changes in the industries are perhaps best described in more mundane economic terms. Having developed approaches to and definitions of the music industries, the second part of the thesis explains the contemporary changes within them using, as a starting point, case studies of two of the most significant new firms to have emerged within the industries in recent years (Sanctuary Music Group and Live Nation Entertainment). By examining how they are organised and structured, it allows for the development of a more wide reaching theorisation of how firms in the contemporary music industries work. The case studies highlight the increasing organisational flexibility of such firms as they address both economic and technological changes as well as shareholder demands. It argues that the most important, and underdeveloped factors in the contemporary music industries are the exploitation of intellectual property rights, rent-seeking and the type of corporate entrepreneurship and lobbying which stem from the need to accumulate IP and extract and protect rent from it. It concludes that the contemporary music industries are structurally flexible, and have to continually restructure to survive. However, this process has been characterised by a much greater reliance on finance from outside the

ii

entertainment and media industries, making them more closely tied to changes in the wider economy, as well as encouraging rapid growth in turnover at the expense of profitability. Keywords: music industries, cultural industries, intellectual property, rent seeking, entrepreneurship

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Acknowledgements

The protracted nature of this study means that there a number of people to thank for either helping or suffering along with me as the process developed. Special thanks to Susan Hansen for sharing and helping during the many low points of this lengthy process. Jeremy Valentine for supervising sympathetically and challenging me to improve. Martin Cloonan and Simon Frith for support and opportunities throughout and everyone in the School of Social Sciences, Media and Communication at Queen Margaret University who has helped along the way - especially Mark Percival and David Finkelstein. Thanks also to my parents for support throughout and to my former colleagues at the University of Paisley and others who helped or encouraged the work, especially Nichola Dobson, Sian Bayne, Simone Kurtzke, Vicky Ball, Matt Brennan, Kate McBain, Gerry Milne, Miriam Van De Kamp and Eammon Forde. And to those from further afield that I met at various conferences (IASPM, Cultural Industries Network) who were interested in the papers or this work. And finally. . thanks to the members of Belle and Sebastian for being flexible and understanding employers.

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Contents Abstract Acknowledgements Contents List of Abbreviations Used List of Tables ii iv v xi xiv

Chapter 1: INTRODUCTION Research Questions Context for Research Approaches to Popular Music Studies Thesis structure

1 1 2 3 5

Chapter 2: LITERATURE REVIEW Introduction (i) The Cultural Industries and Contemporary Capitalism (ii) Denitions and Models of the Cultural Industries Dening the cultural industries Models Approaches to the cultural industries Political Economy and Cultural Studies Hesmondhalgh and Symbolic Texts Caves and Creative Industries: Contracts & Theories of the Firm Problems and Combinations (iii) The Music Industries The Industrialisation of Music Holistic and Ethnographic Accounts

10 10 11 14 16 20 24 25 26 29 32 35 35 39

Micro-level Studies New Approaches Conclusions, Omissions and Problems (i) The recording industry is not the music industry (ii) Political Economy is not the only way

40 41 43 43 44

Chapter 3: METHODOLOGY Introduction Part 1: Reexivity and the role of the researcher Journalist Researcher Management Part 2: Research Methods and Strategies Research Paradigms Positivism Qualitative Positivism Critiques of Positivism Research Methods: Qualitative Research Issues with Qualitative Research Research Strategies (i) Case Study Research Typology of Case Studies Intensive and Extensive Case Studies Research Strategies (ii) Grounded Theory Combining research methods Conclusion

46 46 48 50 51 52 55 55 56 57 57 59 60 61 65 66 69 71 72

Chapter 4: THE CONTEMPORARY MUSIC INDUSTRIES: DEFINITION, VALUE AND ORGANISATION

74

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Introduction Part 1: Dening and Valuing the music industries Denitions from music industries organisations Lobbying Valuing the music industries Internal Sources External Sources What the numbers dont tell us Part 2: Changes in the music industries - Starting Points Technological changes Legislation - rights and prosecutions Government intervention in the music industries Government non-intervention in the music industries Conclusions

74 74 76 81 83 86 87 95 98 100 104 105 106 111

CHAPTER 5: CASE STUDIES / SANCTUARY MUSIC GROUP Introducing the case studies Sanctuary Music Group - an introduction History (i) The origins of Sanctuary (ii) Externally funded growth (1996-2004) (iii) The end of Sanctuary: disorganisation and disintegration Organisation: Sanctuary as a record label Ownership, outlooks, rosters and risk Demographics and Strategies: Ageing Artists and the Digital Market Sanctuary and Intellectual Property Sanctuary and the 360 degree model

112 112 114 115 116 118 122 123 126 134 139

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Conclusion: Sanctuarys success, failure and signicance

145

CHAPTER 6: LIVE NATION ENTERTAINMENT: A CASE STUDY FROM THE LIVE MUSIC INDUSTRY Introduction to Live Nation Context: Contemporary changes in the live music industry Live Nation: a short history Live Nation: initial strategies Risks and Problems External Problems Internal Problems Live Nation: Structural and Organisational changes Strategies: (i) Acquiring Businesses (ii) Acquiring Rights (iii) Risk Taking and Corporate Entrepreneurship (iv) Revision and Reorganisation The Worlds Largest Live Entertainment Company: Live Nation Entertainment Live Nations strategic changes Phase 1: Conglomeration and Vertical Integration Phase 2: Growth and Risk Taking Phase 3: Consolidation and Control Conclusion

149 149 150 156 159 161 162 164 166 169 172 175 177 179 181 182 185 186 187

CHAPTER 7: RECONSIDERING THE MUSIC INDUSTRIES Introduction (i) Intellectual Property and Copyright: Denition and Purpose Copyright

190 190 192 193

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Explaining Music Copyrights Collection of Music Copyrights Value of Music Copyrights Intellectual Property and Legislation Global Variations (ii) Rent-Seeking Rent-Seeking and the Cultural Industries The Music Industries and Rent-Seeking New Forms of Rent-Seeking in the Music Industries: Lobbying (iii) Entrepreneurship Denitions of Entrepreneurship Entrepreneurship in the cultural industries: from impresarios to the cultural entrepreneur Economic and Cultural Entrepreneurs Entrepreneurship in the Recording Industry: a contemporary picture Corporate Entrepreneurs Conclusions

197 199 200 202 203 207 208 211 212 216 218 221 223 226 231 233

CHAPTER 8: CONCLUSIONS Points of Departure and Approach Findings: An Overview Detailed Findings A Cautionary Note and Some Routes for Further Research

235 235 236 237 243

APPENDICES Appendix 1: Models of the Cultural Industries Appendix 2: Global Record Sales (1999 - present)

247 248 250

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Appendix 3: Major components of Sanctuarys 360 degree model Appendix 4: Growth of Live Nation (2005- 2010) Appendix 5: Music Industries Organisations and Lobbying in the UK Appendix 6: Studies of the music industries in the UK

251 253 254 255

BIBLIOGRAPHY

257

List of Abbreviations Used

AAIPT A&R ADA AEG AHRC AIM AIM ASCAP BACS BBC BCC BMG BMI BMR BPI CBC CC CEO CPA DCMS DMCA DRM DVD EEA EFF EMI

Alliance Against Intellectual Property Theft Artists and Repertoire Alternative Distribution Alliance Anschutz Entertainment Group Arts and Humanities Research Council Alternative Investments Market (UK) Association of Independent Music Association of Composers and Publishers British Academy of Composers and Songwriters British Broadcasting Corporation British Copyright Council Bertlesmann Music Group Broadcast Music Inc British Music Rights British Phonographic Industry Canadian Broadcasting Corporation Competition Commission (UK) Chief Executive Ofcer Concert Promoters Association Department of Culture, Media and Sport (UK) Digital Millennium Copyright Act (USA) Digital Rights Management Digital Versatile Disc European Economic Area Electronic Frontier Foundation Electrical and Music Industries Ltd

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EU FAC FRC FSB GATT GDP GLC IAC IASPM IFPI IMPALA IP IPR ISP LNE MCP MCPS MMC MMF MPAA MPPA MWE NBC NESTA NMa

European Union Featured Artists Coalition Financial Reporting Council Federation of Small Businesses (UK) General Agreement of Tariffs and Trade Gross Domestic Product Greater London Council Inter Active Corporation International Association For The Study of Popular Music International Federation of Phonographic Industries Independent Music Publishers and Labels Association Intellectual Property Intellectual Property Rights Internet Service Provider Live Nation Entertainment Midland Concert Promoters Mechanical Copyright Protection Society (UK) Monopolies and Mergers Commission (UK) Music Managers Forum (UK) Motion Picture Association of America Music Publishers Protective Association Music World Entertainment National Broadcasting Corporation National Endowment for Science, Technology and the Arts (UK) Nederlandse Mededingingsautoriteit (Netherlands Competition Authority)

xii

NMC OFT ORG PLC PPL PRS PWC RIAA RRS SABAM SACEM SEC SESAC SME SMG TRIPS UBS UK UMG UNESCO UIS USA WIN WIPO WMG

National Music Council (UK) Ofce of Fair Trading (OFT) Open Rights Group Public Limited Company Phonographic Performance Ltd (UK) Performing Right Society (UK) Price Waterhouse Cooper Record Industry Association of America Release Rights Society Socit dAuteurs Belge-Belgische Auteurs Maatschappij Socit dAuteurs Belge-Belgische Auteurs Maatschappij Securities and Exchange Commission Society of European Stage Authors and Composers Small and Medium Enterprises Sony Music Group Trade Related Aspects of Intellectual Property Union Bank Switzerland United Kingdom Universal Music Group United Nations Educational, Scientic and Cultural Organisation UNESCO Institute of Statistics United States of America World Independents Network World Intellectual Property Organisation Warner Music Group

xiii

List of Tables

2.1 5.1 6.1

Throsbys Concentric Circles Model of the Cultural Industries Sanctuary Music Group: Headline Financial Figures Live Nation Financial Results 2004- 2009

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CHAPTER 1: INTRODUCTION This thesis examines contemporary changes in the global music industries1, examining the substantial structural and organisational transformations which have taken place during the last decade. It uses a number of methods to rstly address underlying questions of denition, before examining in detail two signicant rms, representative of the new type of rms which have emerged within the industries. From this, it attempts to provide detailed answers to the following research questions and offer some explanations as to how the contemporary music industries work. Research Questions What are the most signicant social, political, economic and technological changes to have impacted on the music industries in recent years? How have these changes been reected in existing accounts of the music industry / music industries? How can the nature, characteristics and economic signicance of these industries be understood in a way which more accurately reects the reality of these changes? How have these changes impacted on both the structure of the industries and the organisation of the rms within them? How - if at all - is the operation of these new type of rms different from those in other (cultural) industries? How have individuals, the companies themselves and collective bargaining organisations responded to change? How successful or otherwise have the new business strategies employed in the last decade been? Having posed the questions, the remainder of this chapter seeks to provide some initial context for the research, locating it within the wider sphere of the academic study of popular music and the industries surrounding it. It then
1

Though the thesis refers to the global music industries, many of the examples are drawn from the UK experience. It will also generally refer (except when quoting) to the music industries (plural) for reasons outlined in chapter 4.

outlines the thesis structure, showing how it will set about answering the research questions. Context for Research During the course of this research, the global music industries have been in the midst of a period of turbulence which began in the mid to late 1990s. However, it is not only the business of popular music but also the study of it which are undergoing major transformations. In industrial terms, a combination of economic and technological factors has contributed to the end of the recording industrys period of uninterrupted growth between 1984 and 1999 2, resulting in a raft of media coverage which largely followed the line of the major recording companies that this was a result of piracy, which was largely attributed to the sharing of music files on peer-to-peer networks. In the subsequent period, the problems faced by the recording industry have also been covered extensively in news media, particularly with reference to the litigation and lobbying that have been at the core of the industrys response to the turbulence in a previously stable market. However, in spite of the music industries enjoying a higher than ever public profile, attempts to understand them have not necessarily progressed, relying instead on methods best suited to analyse the very different industrial structure of previous decades. This argument is set against the backdrop of an increase in the extent and approaches to academic research into popular music and what was generally referred to as the music industry over the previous decades. Whereas such studies often sat uncomfortably within other subject areas, notably Cultural Studies and Sociology (see, for example, Hirsch 1969, 1972; Peterson and Berger 1975; Frith 1978), by the 1980s, there was evidence of Popular Music Studies being viewed as an increasingly legitimate field of study in its own right (see Hesmondhalgh and Negus 2002 and Cloonan 2005). Much of this
2

according to the International Federation of Phonographic Industries (IFPI) sales of recorded music during this period rose from around $5 billion to $38.6 billion (Gronow and Saunio 1998; IFPI 2000).

can be attributed to the formation of an active and expanding organisation, IASPM (International Association For The Study of Popular Music) in 1981. Subsequently, the literature across the subject area has expanded rapidly, with specialist journals (for example, Popular Music, Popular Music and Society and Popular Music History), collections of writing (Frith and Goodwin 1990; Beebe, Fulbrook and Saunders 2002; Frith 2004; Bennett, Shank and Toynbee 2006) and a range of courses dedicated to the subject emerging around the world 3. Approaches to Popular Music Studies As digitisation brought about a raft of changes within the music industries during the 1980s and 1990s, academics with an interest in their workings became increasingly aware of the need for a reappraisal of the way in which research was carried out and what areas needed most attention. A starting point for this work was Friths (2000) agenda, which raised a number of issues of academic interest and pointed out that to build an accurate account of the music industry it was necessary to not only ask questions that are both more basic and more sceptical than those of straight market or policy research (ibid, p.390) but to concentrate on understanding the present (ibid) rather than attempting to predict the future. If this provides one of the points of departure for this research, a number of paradigmatic changes suggested by Frith (ibid) are also the subject of further investigation here, among them the shift from music as a manufacturing industry to one based around rights ownership, and the need for a closer study of the nature of the firms who own such rights. Frith also identified the increasing importance of research on both government policy and for the music industries themselves (2000, p.389) and both of these have subsequently played an important part in the lobbying of government by bodies representing the industries which has become so prevalent in recent

see Cloonan (2005) for an overview of the UK situation.

years. Each of these are central to, and starting points for the reconfiguration of the music industries suggested from chapter 4 onwards. Although Popular Music Studies provides a helpful context for this research, it is also worth noting both the multi-disciplinary nature of it, and the strengths and weaknesses this brings to it as a discipline. Bennett, Shank and Toynbee argue that it has emerged from a period when it was doubly marginalised in the academy (2006, p.5) both as a form of popular culture and due to the problems associated with music as a field which is treated with distrust by positivists in the social sciences and humanities (ibid). As evidence of this they reflect that scholars of popular music have come from a variety of disciplines, including musicology and ethnomusicology, anthropology, sociology, media and cultural studies, politics, linguistics, history and English (ibid). Indeed, it is only in recent years that some prominent popular music specialists have found themselves located in the music departments 4 of the older universities. While the range of academic disciplines brought to Popular Music Studies can be considered a strength, even Frith accepts that this multitude of different disciplines can result in a liberality of methodology which is not entirely helpful, (2004, p.367) while both McRobbie (1995) and Grossberg (2002) have gone further and argued that the field has failed to produce sufficient theory, the latter going as far as to claim that at the level of theory, I do not think that we have gained a significantly better understanding of how popular music works (ibid, p.28). This overstatement is rebutted by Frith when he accuses both of a disabling deference to the idea of theory (ibid, p. 367) with a coincident lack of interest in grounded data (ibid, p.368) and everyday cultural practice (ibid, p.369) which have been a major part of Popular Music Studies, and, in particular, studies of the music industries. Indeed, in conducting this research, it has been an important consideration
4

for example, Keith Negus is a Professor of Musicology at Goldsmiths College, Simon Frith a professor of Music at the University of Edinburgh

not to fall foul of both popular misconceptions and more rounded critiques of Popular Music Studies as a theoretically light discipline, and to address some of the specific shortcomings that Grossberg identifies, not least the relationship of activities in the music industries to wider political and economic debates and its relationship with late capitalism (Grossberg 2002, p.38). With this in mind, this research aims to locate the major organisational and economic changes in the contemporary music industries by using case studies of two significant and influential companies to have emerged in the course of the last decade. By drawing on the findings of these studies - and in particular reflecting on the importance of rent-seeking, entrepreneurship and intellectual property to these firms - the thesis aims to build on existing to knowledge to contribute new understanding to the subject. It will do so by initially placing the global music industries within the wider context of the cultural industries 5, but by also placing emphasis on the work of Richard Caves (2000) on what he labels the creative industries as a starting point that offers new and important insights into the industrial changes evidenced in the empirical evidence gathered in two case studies. At the core of this is the consideration that perhaps the operation of the music industries is not as different from other businesses as some cultural industries theorists would claim. Thesis Structure The structure of the thesis reflects the splits between, on the one hand, existing and new knowledge and, on the other, between theoretical and empirical work. It will take as its starting point the major contributions to understanding the music and cultural industries before yielding and discussing empirical work which allows for a reconceptualisation of the music industries.
5

these industries are often referred to as the creative industries though there are subtle differences in the usage - discussed in more detail in chapter 2.

Chapter 2 reviews the existing literature on both the cultural industries and music industries as a starting point to locate the music industries within the wider economy and to highlight the different attempts to understand the workings of them. It begins by looking at the economic context within which the music industries are usually viewed, firstly in the context of late capitalism and secondly within the sector of the economy usually referred to as either the cultural or creative industries. In acknowledging the traditional view that the music industries are best understood within the context of the wider cultural industries and using political economy as a means of understanding them, it also aims to suggest some helpful alternatives to these approaches in recent work. The second part of the chapter offers a loosely chronological overview of the major work from within Popular Music Studies which has contributed to the understanding of the music industries, which were first studied in organisational terms by the likes of Hirsch (1972) and Peterson and Berger (1975) and which was more fully developed in the works the major contributors to studies of the music industries, Simon Frith (1978, 1981, 1988, 1996, 2001) and Keith Negus (1992, 1996, 1999). While many of the subsequent accounts described focus on the recording industry, the chapter also offers some critique of the claims of the most common approaches (political economy and cultural studies) on the basis of their increasing obsolescence in the light of the contemporary changes and highlights some of the more interesting approaches brought to Popular Music Studies from other disciplines. and how they can help resolve some the problems caused by the lack of in-depth contemporary studies of the wider music industries and the continuing reliance on work which reflected on a very different industrial landscape. Chapter 3 details the research journey, highlighting both the authors experience of the music industries and the impact it has had on the work,

before locating the empirical research carried out within the broader context of qualitative research. It specifically addresses the value of both case study research and grounded theory, explaining how these can be used to take existing knowledge and become the basis of new and valid theory, justifying their use in this research. Chapter 4 offers some definitional and evaluative insight into the contemporary music industries. It starts by questioning and clarifying what is understood by the term the music industry, and questions where these definitions come from. It argues that self-definition and subsequent adaptation by the government and the media results in a skewed and unreliable version of both what constitutes the music industries and how much they are worth to the economy. This is coupled with a tendency to conflate the music industry with the recording industry, which has hampered the understanding of what actually happens in not just the recording industry, but how it relates to, and combines with, other music industries. The chapter goes on to detail the major changes in the music industries both technological and legislative - in relation to a pluralistic definition of the music industries, highlighting both the difficulties and attempted solutions they have applied in response to the major changes in the different parts of the industries. These focus primarily on the responses to the impact of digitisation and the changing distribution of music and the need of the industries to secure government support in order to secure their longer term future. This sets the scene for the discussion of the new types of company, and the actors within them, which have emerged as a response to these changes. Chapters 5 and 6 are case studies of two companies which have been at the forefront of these changes. The first of these, Sanctuary Music Group, grew from a UK based management company which had been active since the early 1980s, initially taking advantage of access to venture capital and funds

raised from a stock market listing to expand into a wide range of music related businesses, including a record label, merchandise company, music publisher and concert booking agent. In addition, the company took over other large management companies and became a shareholder in a number of record labels. This resulted in a huge increase in turnover (and profits) in the period from 1999-2003 and their self-styled emergence as a 360 degree music company, which aimed to generate revenues from every part of an artists income, rather than concentrating on one of the sectors of the industry as per the dominant model in previous years. That this business, underpinned by new types of finance and driven by entrepreneurs, subsequently failed (it ran up large losses through highlighting turnover over profit, before being sold to Universal Music in 2006) may have offered the first indication of the problems associated with such approaches, though it appeared to have little impact on the thinking of the other large music conglomerates, each of which simultaneously reorganised in some way reflecting the 360 degree model. Live Nation Entertainment is now poised to become the largest music company in the world6 and is the subject of the second case study (chapter 6). Like Sanctuary, Live Nation has opted for an organisational structure that is based on the acquisition of as many rights as possible, usually associated with established superstar acts, and has been the subject of much attention as a consequence of signing multi-million dollar contracts with artists like Shakira, U2, Madonna and Jay-Z. However, the significance of this lies not so much in the nature of the deals themselves but in the nature of the organisation. Although Live Nation adopted some of the same methods as Sanctuary, there are also fundamental differences which are examined. Whereas Sanctuary began as a relatively small and independent management company and expanded initially into the recording industry, Live

its 2010 merger with Ticketmaster should see its annual turnover exceed that of UMG (Universal Music Group), the largest record company.

Nation began as a spin off7 from an established media conglomerate (Clear Channel) with its core activities being in the live music industry, through ownership of venues and concert promotion. With the growth of revenue from live music coinciding with the downturn in the recording industry, that their power and influence was greater than that of the major record companies is perhaps unsurprising: however, their subsequent moves towards acquiring a range of rights beyond their core interests serve to illustrate both the changing nature of the music industries with their emphasis on intellectual property rights and the associated extraction of rent. It is also worth noting at this point the uncertainty generated by the new business models. While the recording industry before 1999 had a business model which ensured that the profits from their few successes outweighed the losses from their many failures, the world inhabited by Live Nation appears to inhabit a different type of economics, where failure appears to be part of the business plan, and the solution further external investment and expansion. By drawing on the existing studies of the music and cultural industries (in chapters 2 and 4) and the new evidence provided in the case studies, Chapter 7 identifies and explains the three common traits which are central to the reorganisation of the contemporary music industries. These are the importance of intellectual property, the subsequent political and economic rent-seeking and a proliferation of entrepreneurial behaviour within both large and small firms in the music industries. A consequence of each of these has been the increasing importance of lobbying which is the primary means of both rent-seeking and extending the scale and scope of the rights which are so important to them. While all of these have been studied to varying degrees with regards the music industries (intellectual property has been central to many recent discussions, while rent-seeking has been generally
7

a term used in US company law for the creation of a new company from a division or subdivision of an existing, larger one.

underplayed), it is also notes that political economy based studies under value the rle of the individual actors and entrepreneurs at work within the industries. It ends by understanding them them not within the confines of what is understood to be different about the cultural industries but within the context of the large, corporate firms which have come to dominate the production of popular music in the twenty-first century. The final chapter makes the case, based on the findings of the study, for a revised understanding of the operation of the music industries, the companies within them and the nature of the individual actors who make strategic and organisational decisions, while also suggesting a number of potential routes for future research into the industries. CHAPTER 2: LITERATURE REVIEW Introduction This chapter provides a context for the subsequent empirical studies of change in the music industries by surveying previous work on both the cultural industries and the music industries. To do this, it positions the music industries as an integral part of the cultural industries 8 (see appendix 1) as one of what Throsby describes as the core cultural industries (2008b, p. 221). By doing this, it becomes possible to locate them in the context of contemporary capitalism and the wider economy. It takes as a point of departure Shukers (2007) attempt to define the music industry and his approach to it. He observes that critical analysis of the organisational structures of the business and changes within it have drawn heavily on political economy (ibid, p.14) and are based around the acceptance of music as an unproblematised cultural industry. Though Shukers overview is an accurate reflection of the nature and content of the majority of studies of the music industry to date, this chapter argues that, rather than coming into its own in the last decade in reframing popular music
8

these are also discussed in more detail later in this chapter

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studies, (ibid, p.16), the over reliance on political economy as an analytical tool may have hindered previous studies in trying fully explain the nature and scale of the contemporary changes within the music industry. In addressing these criticisms and limitations, this chapter begins by problematising firstly the notions of the cultural industries as they have defined and modelled to date, and also the political economy approach which has underpinned much of the work on the cultural industries in general, but the music industries specifically. This will be done in three parts: firstly by examining attempts to locate the cultural industries within the context of the major changes in contemporary capitalism, and then by describing some of the attempts to define and the approaches taken to them. The third part addresses specifically the historical studies of the music industries, again describing the dominant approaches to them and arguing that the interdisciplinary nature of Popular Music Studies, rather than vindicating the dominant political economy approach offers a number of viable alternatives. This, coupled with the methodological approach outlined in chapter 3, provides the basis of the analysis of the industries as a whole and individual companies in the remainder of the thesis. (i) The Cultural Industries and Contemporary Capitalism Any study of the cultural industries needs to be placed within the context of contemporary capitalism, especially in the light of the changes witnessed in the second part of the twentieth century. Murdock (2003, p.18) notes that capitalism has moved from its classical state, based on the manufacture of material goods, to a new condition, which has resulted in fierce disagreement about the defining features and dynamics of this emerging formation (ibid). At the heart of this, numerous different labels have been applied, both to this new type of capitalism, and to a number of the characteristics ascribed to it. At its most simplistic, this can be viewed as a move from Fordism to post-

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Fordism, and what Murdock, drawing on the work of Amin (1994), calls the shift from mass production and consumption of standardised goods to markets based on flexible specialisation and niche markets (ibid, p.19). Murdock labels the transformation marketisation, which is characterised by privatisation, liberalisation, corporatisation and the re-orientation of regulatory regimes (ibid) and accelerated by both the shift from analogue to digital forms of coding and communication (ibid, p.20). This process results in a weakening of public or state controlled services, and the emergence of a number of large corporations, which are given increased scope for manoeuvre (ibid) by changing legislation and the increasing prevalence of market economics, even within state subsidised or controlled bodies 9. In terms of cultural production, Murdock identifies three major changes: the concentration of ownership, in which a new type of corporate actor, the multi-media conglomerate (ibid, p.21) emerges, alongside the casualisation of labour, where corporations move full-time employees on to freelance contracts and the increased commodification of services and products, where the pursuit of private interests takes precedence over commitment to the public good (ibid, p.22). Elements of each of these changes in the cultural industries also appear in the more holistic view of the changes in capitalism described by Lash and Urry (1987, 1994). They describe the progression of capitalism through three phases - from liberal capitalism to organised capitalism and then disorganised capitalism (1987, p.16). Lash and Urry describe disorganised capitalism in terms of a growing global market, where there is less regulation and an expansion of bureaucracy and rise in the number of white collar workers in service industries at the expense of a proletariat engaged in primarily manufacturing industry. During this process, the nation state is weakened because of the acceleration of globalisation and its declining power relative to the large monopolies which have become economically powerful to a point where it becomes difficult for the state to intervene in their
9

this debate continues in the UK around the BBC (see Holmwood and Robinson, 2009)

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activities. In addition, Lash and Urry note that disorganised capitalism has also seen the spread of capitalism to more countries than before, firstly with the increasing presence of these corporations in the the Third World, and subsequently in the former Communist states of Eastern Europe. In terms of how disorganised capitalism plays out in the new industries which have emerged, Lash and Urry identify three characteristics of the companies involved. They note that small, disintegrated businesses are not the only important economic form in disorganised capitalism (1994, p.22) and that hierarchies, especially in transnational firms, have a more enhanced rle to play in the new economic arrangements (ibid, p.23). Finally, they claim that while there are disintegrated networks of small firms engaged in networks and exchanges with each other, there is often a large transnational firm at the hub. When describing these changes in terms of globalisation, localisation and stratification (ibid, pp. 24-27), Lash and Urry argue that what in fact is important is not to view changes in terms of markets against hierarchies, but rather the victory of both markets and hierarchies over other, state, corporatist and associational, forms of governance which were much more prominent in organised capitalism (ibid, p.27). In the change from organised to disorganised capitalism, the conditions emerge for the new type companies and agents which have emerged in the cultural industries, whereby, using Bourdieus model of fields, various actors (including firms, regulatory bodies and professional organisations) are engaged in a permanent struggle to maintain or advance their position and alter the rules of the game to their advantage (Murdock 2003, p.18). Lash and Urry also identify the scope, within disorganised capitalism, for entrepreneurs, whereby product and process innovation (p.284) can enable gaps in the market to be identified, new uses of technology to be developed, and rapid responses to be initiated (1994, p.284). Changes in the global finance market also assist such entrepreneurs, thanks to the

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existence of a credit system, which is unregulated and governed through the market (ibid, p.285). This chapter argues that these fundamental changes in capitalism underpin the three aspects of the cultural industries that are integral to understanding recent changes in the music industries: the power struggles within them as companies compete to accumulate intellectual property rights, extract rent and the extension of different types of entrepreneurship across the new type of companies which have emerged in the wake of these changes. To do this, it will now address the cultural industries themselves, and then the approaches to them. (ii) Definitions and Models of the Cultural Industries Discussion of the cultural industries is widely regarded to have originated with the work of the Frankfurt School10 of critical theory, and, in particular the Adorno and Horkheimers The Culture Industry (1944) which argued that, under capitalism, culture had become commodified and an industrial process, representing a radical change in the status of culture within society. This marked a considerable shift from how Hesmondhalgh describes the perception of culture prior to this as a form of critique of the rest of life, (2007, p.16) which provided a utopian vision of how a better life might be possible (ibid). The emergence of these industries as increasingly significant in the economy during the post-war years saw both academics (Morin 1962; Mige 1979) and policy makers paying increasing attention to the idea of what became labelled the culture industries or cultural industries. The term was first noted and used in the domain of global economics by the United Nations Educational, Scientific and Cultural Organisation (UNESCO), who were responsible for a conference in Montreal in 1980 on The place and rle of cultural industries in the cultural development of societies.
10

a group of C.20th writers based around the Institute of Social Research in Frankfurt, who included Adorno, Horkheimer, predominantly writing from a Marxist perspective and critical of capitalism

14

The pluralisation of Adorno and Horkheimers term is highly significant, according to Garnham, because it represents both a move away from the elitist, cultural pessimism of the Frankfurt School (2005, p.18) and the particular version of the Marxist economics that underpinned it (ibid) and a shift in emphasis, away from a focus on the ownership of the media towards the entertainment industries of music, film and television (ibid, p.18). Within this new paradigm, Garnham also identified the increased importance of the processes of vertical and horizontal concentration and conglomeration (ibid) which allowed for the discussion of the cultural industries as a unified economic sector on a global scale, rather than focusing on the individual industries. This shift in thinking was exemplified in the first significant investigations of the characteristics of the cultural industries (plural) by Mige, Pajour and Salaun (1986) and Mige (1987), the latter providing a starting point for many subsequent accounts. In identifying five competing / overlapping logics at work in the production of culture 11, Mige marked out many of the characteristics of the industries which remain integral to their operation. These included - under the discussion of the editorial production of cultural commodities - the spreading of risks (ibid, p.275), the flexible/ casual employment arrangements, the large gulf between stars who benefit to an outrageous extent (ibid, p.274) and the majority who are almost permanently unemployed or lead a hand-to-mouth existence (ibid) and the dependence of small companies (who are, in many instances, the innovators) on a handful of transnational corporations. Though Miges work under emphasises the importance of intellectual property rights, it highlights two important distinctions, between both the individual industries, arguing that each of the cultural industries develops
11

These were the editorial production of cultural commodities, the flow production of broadcasting, and the production of written information, live entertainment and electronic information (1987, p.273-289)

15

according to its own logics (ibid, p.280), and the separation of subsidised and non-subsidised sectors within the cultural industries. For Mige, the main distinction to be drawn is not between live entertainment and canned products, but between a market sector and a non-market sector (ibid). In the latter, Mige took his lead from the work of Baumol and Bowen (1966), considering the notion that some art is subsidised by the state on the grounds that the costs of production will always outweigh the financial returns, but that its production is in the public good. Both of these are helpful when examining the music industries and their logics, where such public good arguments have often underpinned the relationship between the state and its subsidy of the traditional high arts, including (usually classical) music. Beyond the pioneering work of Mige, the most complete accounts of the cultural industries are in the work of Hesmondhalgh (2002, 2007) and Caves (2000), which, using different approaches (based on political economy and cultural studies in the case of the former and organisational studies/ neoclassical economics by the latter) offer considerable insight into the workings of what they respectively call the cultural and creative industries. Before returning to strengths and weaknesses of these particular accounts, it is helpful to look at the existing attempts to define and, indeed separate, the cultural and creative industries to date. Defining the Cultural Industries While the journey from Adorno to the work of Caves and Hesmondhalgh has done much to help explain and characterise the cultural industries, it has also created a number of definitional problems. Central to any discussion of the cultural (or creative) industries has to be an attempt to classify what, by its very nature, is an ill-defined concept, one which has become more fluid as it has taken root within economic and political spheres, and as the cultural/ creative industries have become increasingly seen as an integral part of government strategies for economic growth.

16

Most of the major studies of these industries, whether arising from different academic disciplines (cultural studies, economics and cultural geography among them) or government bodies, acknowledge what Hesmondhalgh describes as the difficulties of definition (2007, p.11) and attempt to resolve these with their own attempts at classification and creating a typology of the industries involved. For example, OConnor describes the term cultural industries as contentious (2000, p.17) while Pratt adds the precautionary note that much of the early studies of the cultural industries has been stymied by poor definition, and concomitantly, poor information, (2007, p.1) as well as cautioning that they have been a problematic category both in their conceptualisation and empirical measurement (2007, p.8). Attempts to narrow the definition have ensued as, by the broadest definition of the term, it is possible to argue, that all industries, regardless of their output, are cultural industries as they are involved in the production and consumption of culture (Hesmondhalgh, 2007, p.12). However, his argument that the cultural industries actually comprise those institutions that are most directly involved in the production of social meaning (ibid) and that they deal primarily with the industrial production and circulation of texts (ibid) sits comfortably alongside OConnors view that cultural industries deal primarily in symbolic goods - goods whose primary economic value is derived from cultural value (OConnor 2000) It is worth noting at this juncture that, even within broadly similar outlooks, the emphasis can be substantially different. While OConnor (2000) and Hesmondhalgh (2007) focus on the methods of production and the creation of symbolic meaning, Towse (2000), Lash and Urry (1994) and Garnham (2000) all place greater emphasis on the importance of intellectual property. Towse describes copyright as the organising principle for the creative industries (2003, p.170) while Garnham defines them as industries based on the exploitation of intellectual property (2005, p.16). Another important

17

strand to these definitions is the emphasis placed by Hesmondhalgh and Pratt (2005) and Throsby (2008a) on the important relationship between matters of definition and cultural policy, which are expanded in the attempts to distinguish notions of the cultural industries from those of the creative industries. Lastly, it is worth noting that Caves (2000) introduces other important ideas to the study of the industries which have been largely overlooked in the other literature, in the form of contract theory and the importance of rent-seeking among them. Though these diverse efforts to understand these industries may provide evidence of Pratts suggestion that we cant get their measure (2007, p.8) or that to all intents they are analytically invisible (ibid), and while it is beyond the scope of this work to satisfactorily resolve these problems, it is nevertheless important to form some type of analytical framework. There are three issues here: what to call these industries, what they comprise of, and how to approach them. To achieve this requires both a clear distinction between the meanings of the terms cultural industries and creative industries, as these have increasingly been used interchangeably despite the significant differences between the two. These are worth unpacking before firstly deciding which industries are and are not part of the wider cultural / creative industries and then locating the music industries within either tradition. The key difference between the two terms is their origin. While the former stems from Adornos work in the 1940s, the use of the term creative industries has emerged with the growing involvement of the state in the cultural industries some forty years later, and the increasing rle of both national and local government in these industries. Garnham notes that after the election of the Labour government in 1997, their own policy announcements stopped referring to the cultural industries and began to call them the creative industries, but also that this change in terminology was

18

motivated by a historically specific political context, (2005, p.16) one that saw a shift away from government support for the industries to one which viewed this in terms of investment against agreed outcomes. The UK governments Department of Culture, Media and Sport (DCMS), which was formed to oversee cultural activity, reflects this change in its own definition, which views the creative industries in terms of creativity and intellectual property, as those industries that are based on individual creativity, skill and talent, (http://www.dcms.gov.uk, accessed 12th August 2009) and as those that have the potential to create wealth and jobs through developing intellectual property (ibid) . Similarly, the department performs a lobbying rle on behalf of the industries and champions the cause of the creative industries across government and monitors policy that can affect creative businesses, such as tax and regulations or intellectual property rights (ibid), recognising the powerful position of the creative industries, as they are defined by government, as an area of economic growth. A report by the Work Foundation for DCMS (2007) saw the then minister, Tessa Jowell describe the creative industries as being comparable in size to the financial sector (2007, p.6) making up 7.3% of the UK economy and employing 1.8 million people (ibid). In such instances, it is in the interests of the department to achieve the highest value possible through the broadest definition of the creative industries to increase its claim to resources vis vis other government departments. A further example of the significance of the creative industries within the economy as a whole is given by Garnham, when he describes the shift from cultural to creative industries in terms of the inclusion of the computer software sector in the wider definition to help the claims about size and growth stand up (2005, p.26). In creating such a broad church of creative industries, Garnham notes that it further reinforces the importance of intellectual property by creating an alliance of companies (both large and small) within the industries with a shared interest in strengthening of

19

copyright protection (ibid). Throsby also notes the importance of definition on the framing of cultural, or creative, industries policy with the assertion that any attempts to measure an industry within the cultural sector will differ significantly (2008b, p.221) in its outcome, depending on the definitions applied. Models In attempting to establish a view as to which industries are deemed part of the cultural or creative industries, and where the music industries fit within these, it is often necessary to draw on sources which use the terms cultural and creative industries to describe different variations of the same thing. This can be seen in three of the most significant classifications: the model used by DCMS itself, Hesmondhalghs symbolic texts model, and, finally, Throsbys concentric circles model. The DCMS model is, unsurprisingly, the most extensive of the three, listing 13 industries as part of the creative industries (see Appendix 1) including a number of industries (notably software) which are absent from most of the other accounts. This is a broad classification based on a wide definition of what constitutes a creative industry12 , and may be employed partly to increase the overall value and significance of the industries for lobbying purposes within government, but it also presents a number of problems. The main difficulties lie in the lack of distinction between the types of creative industry (for example, software is viewed to be as much a creative industry as music or art, as to DCMS they are simply all copyright industries) though these are addressed in some of the other models, as is the conflation of cultural and creative industries, which undermine the UK governments approach.

12

the UK governments attempts to define and quantify the creative industries can be found in their Creative Industries Mapping Exercises (1998, 2001)

20

Hesmondhalgh offers an advance on this in his breakdown of the cultural industries into core and peripheral (2007, pp.12-14) cultural industries. In the former category, he includes the music industries, broadcasting, film, web content, print/ electronic publishing, video and computer games, advertising and marketing businesses, while his peripheral cultural industries include sport, software, fashion and consumer electronics and cultural industry hardware (ibid). While this helps differentiate industries within the cultural industries, it is still a slightly unsatisfactory solution: this makes Throsbys cultural industries as a subset of the creative industries within a concentric circles model makes a more intuitive and flexible account. In this, Throsby details a set of core creative arts (2008a, p.149) at the centre, with other core cultural industries, wider cultural industries and related industries, (ibid) allowing for some reconciliation of ideas around creativity and the cultural industries (see table below).

Table 2.1 Throsbys Concentric Circles Model of the Cultural Industries (2008b, p.150)

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However, the nature of such groupings raises another problem, as to which industries to place in the different boxes. For example, in his definition of the major cultural industries, Pratt offers a similar list to Hesmondhalgh, but adds visual arts, architecture and design, the performing arts and libraries and museums (2007, p.1). The issue here is perhaps less a question of which industries fit where but how to set the criteria used to locate them. This highlights a tension in the typologies, which often stems from how the writers have defined the cultural industries in the first instance. Throsbys concentric circles model, developed through a series of works (2001, 2008a, 2008b) offers both the most detailed review of existing literature on attempts to classify the cultural industries and the most solid typology of the different cultural industries to date. It also provides the basis for the understanding of the cultural / creative industries used by a number of governmental bodies and policy makers, including the European Commission (KEA European Affairs 2006) and The Work Foundation in the UK (2007), meaning that the principles behind it have gradually become assimilated into some policy debates on the industries. Nevertheless, it is worth noting Throsbys own caveat, that the model can only be viewed as a static snapshot at a given point in time (2008a, p.150) rather than a dynamic form of analysis. By using a combination of models of industrial organisation (see appendix 1), Throsby has built a typology of the industries, based on a study of previous classifications, namely the three already considered here as well as definitions from United Nations agencies - the World Intellectual Property Organisation (WIPO) and United Nations Educational, Scientific and Cultural Organisation (UNESCO) - and the advocacy group, Americans for the Arts. Unsurprisingly, the outcome is a huge variation in attempts to measure the cultural industries depending on the models used and industries included, with the WIPO model, which defines cultural industries as those based

22

directly or indirectly in the creation of, manufacture, production, broadcast and distribution of copyrighted works (2003, p.26) offering the broadest definition, and the concentric circles model the narrowest. In his analysis, Throsby establishes which of the cultural industries are central to all of the accounts and finds that only film, video and music appear in the core of all three models, (2008b, p.221) though his own account places literature, music, performing and visual arts as core creative arts with film and museums and libraries as other core cultural industries (ibid, p.222). This view of the cultural and creative industries is also reflected in the Work Foundation reports stylised typology of the creative industries (2008, p.103), which suggests a model that defines core creative fields at the centre of a number of concentric circles, drawing heavily on Throsbys original (2001) model. Beyond the core creative fields lie the cultural industries, then the creative industries and, finally, the rest of the economy. In this definition, the cultural industries are described as activities that involve mass reproduction of expressive outputs (ibid) which are centred around copyright and the wider creative industries, in this instance, are those sectors in which use of expressive value is central to their overall performance. Throsbys argument for the concentric circles approach is based on it attempts to achieve an equilibrium between the economic characteristics (associated with creative industries approaches) and the cultural ones associated with the cultural industries. By this model it is the cultural value, or cultural content, of the goods and services produced that gives the cultural industries their most distinguishing characteristic (2001, p.148). For the purposes of this thesis, the term cultural industries will be used throughout, on the understanding, as by Throsby (2001) and The Work Foundation (2007), that this refers to a more select group of industries than the wider term, creative industries, which will only be used when quoting or specifically referring to a range of industries that includes what Hesmondhalgh describes as peripheral cultural industries (for example,

23

software authoring and production of hardware like music instruments for the cultural industries). The appeal of Throsbys definition is that it offers a relatively uncontroversial classification not based on the needs of either policy makers or lobbyists, and more importantly, offers a clear distinction between the core creative arts (of which music is one) and other cultural industries. Nevertheless, if the cultural industries are often viewed as a more selective group than the creative industries, then it is necessary to examine the debates around this, namely which industries belong to the former and which to the latter, and where do the music industries, the focus of subsequent study, fit13? While the debate over which industries are placed where is, by Throsbys own admission, essentially ad hoc (2008a, p.150), there are two important outcomes from his work that inform the path of the argument in this thesis. The first is the location of music (as a creative practice) and the music industries at the centre of all the significant models of the cultural (or creative) industries. The second is in his argument that, having created the model, it is then necessary to adopt a number of methodological approaches (2008b, p.223) to carry out an (economic) analysis of either the cultural industries as whole, or any of them individually. Approaches to the cultural industries As a still expanding area of study, it is unsurprising that approaches to the cultural industries vary, and that, as yet, there would appear to be considerable gaps in each of them, regardless of their respective merits. By way of a starting point, this section will look at the political economy and cultural studies approaches detailed by Hesmondhalgh (2002, 2007) and what he rather dismissively calls the neo-liberal approach to culture (2007, p.31) of which he sites the work of Richard Caves as a prominent example. While it is impossible not to at least begin an examination of the cultural
13

a diagramatic representation of some suggested answers to this is provided in Appendix 1

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industries through the prism of a political economy approach, the case studies in chapters 5 and 6 provide some evidence that close study of the music industries in the twenty first century suggests that they (and presumably some of the other cultural industries) can increasingly be better understood by also examining the type of cultural, and mainstream, economics which characterise Caves approach. At this point, the aim is not to wholly dismiss or accept either, rather to support Throsbys assertion that a plurality of approaches is required to fully understand how the music industries now operate. Political Economy and Cultural Studies Political economy has been the dominant approach in texts examining the cultural industries, offering what Golding and Murdock describe as a holistic and historical approach concerned with the balance between private enterprise and public intervention (2000, p.72) which engages with basic moral questions of justice, equity and the public good (ibid, p.73). Wittel notes that the outcome of this are studies which focus on ownership, concentration, diversification and horizontal and vertical integration within large companies (2004, p.475)14 while Hesmondhalgh adds two further characteristics to this, namely the acceptance the culture is produced and consumed under capitalism (2007, p.34) and that this is central to the inequalities, of power, prestige and profit (ibid) which emerge within them. He also notes that political economy approaches are concerned with the extent to which the cultural industries serve the interests of the wealthy and powerful (ibid). This view of the cultural industries stems from a Marxist, or at least, leftleaning political perspective, and forms the basis of Hesmondhalghs account, which favours one variant of political economy (what he calls the

14

horizontal integration refers to the purchase of companies in the same line of business, vertical integration to related businesses which are related to processes of production in the original business

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cultural industries approach 15) over another (the Schiller-McChesney tradition16) rather than looking too extensively for alternative routes into understanding the cultural industries. Nevertheless, he is correct to raise some of the issues which are both overplayed and understated by the Schiller-McChesney tradition, notably its focus on the media industries and its concentration on macroeconomics and its weakness when dealing with the tensions between production and consumption. His argument that the cultural industries approach has more to offer in terms of assessing and explaining change/ continuity in the cultural industries (2007, p.35) is largely convincing when compared with the more rigid nature of the SchillerMcChesney, but undervalues contributions from other areas, notably mainstream economics, sociology and business/ organisational studies. While some consideration is given to sociology (notably Becker 1982 and DiMaggio 1987) and what he terms radical media sociology/ media studies (for example, Bourdieu 1996), Hesmondhalgh views these merely as a valuable complement to political economy work on the cultural industries, (2007, p.37) rather than a valid approach in their own right. Though he gives some weight to cultural studies approaches, in particular their attempts to refine and rethink what is actually meant by culture, this too is relegated to complementing the issues raised by other approaches (2007, p.43). Hesmondhalgh and Symbolic Texts By drawing on the work of Mige (1989), Garnham and Inglis (1990), Garnham (2000) and Vogel (1998), Hesmondhalgh identifies four common characteristics of the cultural industries, which he defines as those industries centred on the production of texts to be bought and sold (2002, p.18) and five common responses to them (2007, p.18) each of which, to varying degrees, can be seen at work in the music industries. These characteristics
15 16

a primarily European perspective, stemming from the work of Mige and Garnham

an American approach, typified in the work of Noam Chomsky, Herbert Schiller and Robert McChesney

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view the cultural industries as risk orientated businesses within which there is frequent conflict between creativity and commerce and where profit is derived from a combination of the large gap between the high costs of development and low costs of production, meaning that a small number of products selling a large amount of copies usually offsets the losses on the large number of products which are not profitable. The responses to these problems, as laid out by Hesmondhalgh, are the building of large repertoires to compensate for the greater number of failures against a smaller number of successes; the increased concentration and integration of cultural industries firms; the creation of artificial scarcity around cultural products; the formatting of them into what he describes as stars, genres and serials (2007, p.18) and the loose control of symbol creators (ibid) offset by the tight control of distribution and marketing (ibid). Significantly, it has been largely a political economy approach that has underpinned most of the attempts to unpack both the commodification of culture (Adorno and Horkheimer, 1990), music (Attali, 1985) and the music industries (see Frith, 1978, Burnett, 1996, Negus, 1992, 1999 and Shuker, 2001, 2007) making it both remiss to downplay the importance of it and unhelpful to use it as the sole point of entry to a study of the music industries: at a point when they are undergoing such rapid change, it is worth considering whether what may once have been the best model for explaining them remains so. Indeed, it is Hesmondhalgh who identifies one of the biggest problem with a political economy approach - namely its lack of empirical attention to what happens in cultural industries organisations (2007, p.37). By contrast, the study of organisations, and the relationships between them, is the central focus of Caves (2000) work, highlighting the crux of the problem with accounts which come largely from a political economy perspective - that they are valuable when studying the macroeconomic structure and history of an industry, but are left somewhat wanting when it comes to detailing the

27

internal organisation of individual firms within the industry or the rle of individual actors within them. In their defence of political economy, Meehan, Mosco and Wasko (1993) also address challenges to it - siting these as coming from a combination of changing world conditions (the demise of communism and the boom period enjoyed by western economies after the period during the 1970s and 1980s described by Hesmondhalgh as The Long Downturn) and postmodernism, which viewed the monolithic states, economies, cultures and identities of modernism (ibid, p.106) as redundant. While the latter critique is of peripheral interest here, the former seems to resonate, particularly when faced with the attempts to explain some of the more recent changes in the cultural industries. Negri and Hardt share the view that political economys top down approach is problematic, arguing that when one looks at things from the standpoint of political economy, i.e. from above, the theme of value-affect is so integrated in the macroeconomic process it appears invisible (1999, p.79). His argument that there is a need to reconsider political economy from below (ibid) may be something that other approaches can assist with. Indeed, looking at organisational structure from a perspective that assigns greater importance to the rle of individuals and finance within them may also help overcome the other gaps in its scope, namely its failure to adequately explain late period capitalism, and the changing relationships between large firms and the state (with politicians as intermediaries) in not just the cultural industries, but the wider economy. While the moral and social concerns of a political economy approach and its close examination of culture both as a concept and an industry are important in achieving an understanding of the cultural industries, it is questionable whether, it tells us enough about them in a situation where, as Throsby points out, economic liberalisation and rapid technological change (2008b, p.229)

28

has resulted in major changes to the way in which cultural content is produced, distributed and consumed (ibid). A globalised economy, underpinned by rapid technological change seems to present a number of challenges to a political economy approach, which may be resolved by paying more attention to the work of cultural economists. Caves and Creative Industries: Contracts and Theories of the firm The most significant challenge to these accounts of the cultural industries is by Richard Caves (2000). Caves offers a less rigid approach, which relies to an extent on economics and industrial organisation studies, using theories of the firm and contract theory, while maintaining what he describes as an integrated attack on the organisation of creative activities (ibid, p.2). Beneath both his description and analysis is a sense that previous economic accounts have mainly focused on the elite performing arts (2000, p.1) and that there is a need to look more closely at the rle of individual actors within the creative industries - both the creators and the business people working with them to broker collaborations and contracts. Also at the core of his account is the belief, drawn from Grampp (1989a, 1989b), that creative workers are purposive and intendedly rational in their activities, (2000, p.2) and, in that respect, not substantially different from workers in other industrial sectors. He does, however, accept that there are substantial and systematic (if not universal) (ibid) ways in which the creative/ cultural industries differ from the rest of the economy. The most important of these are uncertain demand and the nobody knows element of predicting the commercial success (or otherwise) of cultural products and the relationship of creative workers to their output. Where economists normally assume that workers hired for some job do not care about the traits and features of the product they turn out, (2000, p.3) Caves argues that they care vitally about the originality displayed, the technical prowess demonstrated, the resolution and harmony achieved in the creative act (ibid). He also notes the diversity of skills

29

involved in producing creative products, and how they generally exhibit some mixture of vertical and horizontal differentiation, (ibid, p.7) competing not only with other cultural goods, but with other cultural goods of the same type. Finally he notes that many cultural goods are not durable (for example, concerts and performances), and that the need for future income for the performers and writers is often based on shares in expected future rents (ibid, p.10). To fully utilise Caves work requires some understanding of both contract theory and theories of the firm. Caves defines a contract as being an agreement that governs the conduct of any economic transaction (ibid, p.11) and argues that all the parties involved seek maximum benefit from it (ibid). He notes that, in the creative industries, the most important aspect of the contracts involved is their complexity, which derives from a combination of the large number of parties involved and the difficulty involved in trying to ensure that all eventualities are covered. Economic theory uses two main approaches in trying to identify the rle of the firm within economic exchange: the neo-classical approach which Hart acknowledges is often the only theory of the firm presented (1995, p.200) and principal-agent theory, which recognises conflicts of interest between different economic actors (ibid, p.201). For Hart, the former is of limited use: he reduces it to the argument that most firms are managed and planned in a way that maximises owners welfare, (ibid) where the welfare is largely determined by financial return. He argues that the neo-classical approach describes in rudimentary terms how firms function, but contributes little to any meaningful picture of their structure (ibid). His view that principal-agent theory is more helpful, is particularly pertinent in the cultural industries. At the centre of this theory is the separation of the owners of a firm from those who make day to day decisions within it, where usually a professional manager makes production choices, such as

30

investment or effort allocations, that the firms owners do not observe (ibid). In such a situation, the manager has to be incentivised to share the owners profit motives, so as not be distracted by personal ambitions or aims which are not aligned with those of the owners, though Hart argues that even in such a situation, the manager will put some weight on their own objectives at the expense of those of the owners (ibid). While this develops the understanding of the firm beyond neo-classical economic theory, Hart is correct to note that it remains limited, revealing little about how firms are organised and making no predictions about the nature and extent of the firm (ibid). To overcome these problems, he reverts to ideas first proposed by Coase (1937) which viewed the emergence of firms as a way of, among other things, contracting costs that accompany any transaction (ibid, p.202). By this form of transaction cost economics, firms are limited in their activities by the point at which there were no savings to be gained by taking transactions away from the market. Although, Hart argues that both Coase and subsequent work by Alchian and Demsetz (1972) and Demsetz (1988), which is based on joint production and monitoring so that each actors contribution can be assessed, (ibid, p.203) highlights the likelihood, and nature of contractual failure both within and between firms, he argues that neither explains adequately how bringing a transaction into the firm mitigates the failure (ibid, p.204). Arguably, the two alternatives to these explanations offer the most relevance to the cultural industries: viewing the firm as a nexus of contracts17 and the property rights approach, though, importantly, Hart claims that all these previous theories of the firm appear to be converging (ibid, p.212). The former argues that there is little to differentiate contracts within a firm and those between firms (ibid) and that these contractual agreements are part of a range of contract types between firms which are set up in standard forms (limited companies, partnerships and sole traders) which are continually
17

thought to originate from the work of Jensen and Meckling (1976)

31

interacting with each other, merging and breaking up, often with large transaction costs in the process. Under the property rights approach, ownership of non-human assets within a firm (for example, machines, buildings, data and copyrights) goes along with residual rights of control over it (ibid, p.206). Each of the converging theories of the firm outlined by Hart offers a useful means of explaining the nature of the firm in the wider economy. However, the importance of contracts (as detailed by Caves 2000) and intellectual property and the residual rights around it (also highlighted by Lash and Urry 1994) would suggest that firms within the cultural industries are perhaps best explained by viewing them in terms of contracts and residual rights, which are often determined by actors within the firms, who are not necessarily (and often not) the owners of it. Theories of the firm can also offer some help in unpacking the integration and disintegration of companies, which is a recurring pattern in the cultural industries, as discussed by Lash and Urry (1994, pp.113-120) and is based on the scale of the firm. Once it reaches a certain size, according to Hart, the manager at the centre will become less and less important with regard to operations at the periphery (1995, p.209) resulting in new firms being formed, while the same managers may be involved in decisions which result in the merging or takeover of other existing firms operating in either horizontally or vertically similar markets. Problems and Combinations At first sight, Hesmondhalgh and Caves may appear to offer diametrically opposed and incompatible approaches to the cultural industries: Hesmondhalghs is based on what he calls a particular type of political economy, informed by certain aspects of empirical sociology of culture, communication studies and cultural studies, (2008, p.49) a tradition that attaches great importance to the distinctive nature of cultural products. By contrast, Caves work originates in neo-classical economics, which, by Hesmondhalghs critique, is unconcerned with the human needs and rights,

32

nor with intervening in questions of social justice, (2008, p.30) but which instead equates human happiness with the optimising of economic satisfactions (ibid). Although it is easy to juxtapose these approaches, portraying the former as being holistic and the latter as an analysis based purely on economic returns, to do so is to oversimplify matters. and It is, therefore, necessary to examine in more detail the strengths and weaknesses of each approach, with the outcome that it may be necessary to try and reconcile the two that to fully understand the cultural industries. However, this is less about the weaknesses of political economy as an approach, than about the lack of consideration of parallel accounts, which perhaps offer a more revealing insight into the way Throsbys core cultural industries work in the wider context of a dominant market economy. Hesmondhalgh, while accepting the need for a range of approaches, is, nevertheless, unaccommodating when it comes to economists, who he claims often fail to recognise the implications of these (distinctive) characteristics (of the cultural industries) and the limitations of the fundamental economic concepts underpinning their approaches (2008, p. 31). He further argues that even economic arguments which take account of such differences downplay the severity of the problems of cultural markets (ibid) and uses some of the more extreme strains of economic thinking with regards the cultural industries - for example, Coases view that there is no fundamental distinction (1974, p.389) between the market for goods and the market for ideas (ibid) - to dismiss more constructive concepts from the same perspective (specifically some of those introduced by Caves, who clearly does recognise the unique aspects of the cultural industries) as part of a generalised attack on neo-liberal approaches to culture. While Hesmondhalgh is right to be criticise of some of the underlying pretexts (at least as he assigns them) of neo-liberalism, and to urge caution in the application of economic concepts to the cultural industries (ibid), but for the

33

purposes of this thesis, they appear to offer at least as much as a more traditional political economy / cultural studies approach when it comes to understanding the logics at work in the new type of music industries firms studied in chapters 5 and 6. Arguing that the cultural industries are somehow exempt (or at least removed from) the neo-liberal concept that the production of efficient markets should be the primary goal of public policy (2008, p.31) weakens the understanding of how cultural industries have interacted with governments to pursue their own market aims in recent years. Some form of reconciliation between these two approaches is therefore necessary, if only to resolve the awkward problem of the fundamental shift in both why and how governments support the cultural industries. The move from interest in the subsidy of high culture18 to supporting the economic possibilities of the creative industries (in terms of job creation and economic value) marks a realignment of public policy, and one which needs the application of some economic principles to fully understand. To this end, Caves emphasis on contracts, rent-seeking through intellectual property rights and the rle of individual actors within the firm all provide useful tools for understanding the contemporary cultural industries. Largely because of this, it is, therefore, necessary to find a framework which can accommodate elements of both approaches. Hardt and Negris observation of the increasing indistinguishability of economic and cultural phenomena (2001, p.275) and their argument for approaches which are equally philosophical and historical, cultural and economic, political and anthropological (1999, p.xvi) are important here. They also argue that it is necessary for a modicum of inter-disciplinary understanding, whereby economists need a basic knowledge of cultural production to understand the economy, and likewise the cultural critic needs a basic knowledge of economic processes to understand culture (ibid).
18

see discussion in, for example, Witts (1998) and Cloonan (2007)

34

This makes Wittels view on the political economy of culture and the challenges and problems posed to the political economy of culture through the prism of Hardt and Negris Empire (2001) particularly useful: accepting that Hardt and Negris work remains in the realm of political economy (2004, p.479) he agrees with their case for a political economy from below (ibid) but argues the need to combine a political economy perspective with a cultural economy approach to open up a better understanding of late or global capitalism (ibid). This approach seems well suited to a study of the contemporary music industries, presenting an opportunity to move the discussion beyond the previous reliance on political economy, without jettisoning its intrinsic merits. (iii) The Music Industries However, studies of the music industries tend to overlook approaches that are rooted in (cultural) economics, preferring instead to work from either the political economy of the music industries, or more recently on the political economy of copyright as it impacts on the recording industry. While this is understandable in works which reflect the dominant position of the recording industry within the wider music industries prior to 1999, the new reality of these industries (as detailed in chapter 4) involves the declining significance of the recording industry, and the increasing economic importance of both the live music and music publishing industries. In recognising this, this overview of writing on the music industries examines the major works in the field, focusing on not only the starting points for analysis and the approaches adopted, but also those which have been under represented or omitted from the narrative altogether. The industrialisation of music Studies of the music industries seem to point towards one of three potential starting points for the studies of music in terms of its economic significance. Firstly, a number of general accounts of the recording industry (notably

35

Gronow and Saunio 1998; Barfe 2004; Hull 2004) trace the industrialisation of music from the invention of the phonograph in the late nineteenth century and the subsequent availability of physical copies of recordings for sale, though it can be argued that the sale of sheet music and the ability to make money from live performance predated this. In effect, a second claim is that publishing and performance were the starting points for the industrialisation of music (see Attali 1985) and that the attribution of this to the recording industry may be early evidence of its over-privileging in narratives relating to the music industries. The third stems from Petersons (1990) account of the importance of 1955 in the advent of rocknroll. While the economic value of music had steadily increased through the sale of records and exploitation of rights during the early twentieth century, he makes a case that it was the technological and industrial changes which took place around that time marked the start of the modern recording industry, where large quantities of physical products (at the time, vinyl records) were sold to a mass market by a combination of both major and minor companies. By connecting the sale of music to a much wider, youth market, Peterson can be seen to recognise the view of popular music and the industry around it in terms of the type of culture industry first identified by Adorno and Horkheimer in Dialectic of Enlightenment where they describe a culture industry (1979, p.163) with an assembly line (ibid) and a synthetic, planned method of turning out its products, (ibid) while Adorno had previously differentiated popular music from serious music by its standardisation (1990/ 1941, p.302) and what he calls pseudoindividualisation (ibid, p.308) which is used to hide the true nature of standardisation, where the music available to consumers is already listened to for them, or pre-digested (1990, p.308).

36

Adorno and Horkheimer also identified the shift away from music as a publishing and performance industry to one of manufacturing, but were writing in a period prior to the advent of a different, and wider, popular music industry during the 1950s and 1960s, as described by Peterson. However, claims continued to be made that the popular music industry conformed to a Fordist model 19 of manufacturing during this period, and there is some evidence to support this. Lash and Urry talk of the record industry taking on Fordist profiles (1994, p.113) with the development of a mass youth market in the 1960s (ibid), though if it did do this, it was most likely to have happened in the period immediately prior to this. Similarly, Frith describes how, by the late 1950s, rocknroll had been adapted to the existing practices of the major companies and the A&R (Artists and Repertoire) men had simply turned their skills to marketing teenage showbiz stars (1978, p.99). The production line approach to popular music of this era was often symbolised by the Tin Pan Alley system, whereby songwriters wrote to order for singers who were paid a flat fee by the recording companies, who then manufactured and sold the recordings for profit. A similar model was also used by a number of record labels 20 who built in-house teams of songwriters and musicians, offering an alternative, integrated production line approach to record making. However, Negus is subsequently correct to note that the recording industry has been misleadingly characterised as mechanical and factory like, (1999, p.17) and certainly by the mid-1960s many of the functions which would have been part of a production line had been disintegrated from the major companies, with a number of niche record labels emerging and an increasing number of artists ceasing to become wage workers by writing their own songs.

19

this was described by Bagguley as mass production articulated to mass consumption (1991, p.154)
20

most famously by the Detroit label, Tamla Motown, run by Berry Gordy

37

This is increasingly apparent in the type of organisational studies of the recording industry by Hirsch (1969, 1972) and Peterson and Berger (1975). Hirsch introduces the idea of gatekeepers who determine the success or otherwise of a record, and, by drawing on the limited amount of writing about the cultural industries at that point, makes two important claims which retain varying degrees of relevance in todays studies. The first was to highlight the nature of record company executives, who, he claims, invest entrepreneurial capital in the creations and services of affiliated organisations and individuals at its input (product selection) and output (marketing) boundaries (1990, p. 129). After investing this capital, the record labels find themselves in a situation where they have to connect the product and audience, thus introducing Hirschs second point, the importance of what he describes as mass media gatekeepers (ibid, p.136) whose influence comes from connecting the two. Peterson and Bergers perspective retains an interest in the homogeneity of cultural products identified by Adorno, but sought to prove that the degree of diversity in musical forms is inversely related to the degree of market concentration (1990, p.156) and that the existence of cycles of integration and disintegration meant that the industry, to that point, could be understood in terms of the changes brought about by a relatively long period of gradually increasing concentration, followed by a brief burst of competition and creativity (ibid). Although the work of Hirsch and Peterson and Berger is largely dismissed by Frith when he concludes that academic models established in the 1970s no longer worked, (2000, p.11) they, nevertheless, contain important ideas which remain part of contemporary debates. While notions of gatekeepers and intermediaries have become less popular and relevant, entrepreneurship, and the high failure rate that accompanies it, as well as the relationship between larger and smaller companies remain at the centre of contemporary discourse surrounding the music industries.

38

Holistic and Ethnographic Accounts While these early attempts to unpack the recording industry of the late sixties were limited in both scope and extent, Chapple and Garofalo (1977) and Frith (1978) produced the first holistic accounts of popular music making, providing detailed explanations of both music production and moneymaking. In particular, Frith concentrates on both the relationship between music and other media, and more significantly reinstates the importance of both live music and publishing revenues in what he calls the profitability of rock (ibid, p.105). This marks a notable change away from simply considering the recording industry as a risk-taking, manufacturing industry, and indeed, Friths subsequent work (1987, 1993, 2001) represents a paradigm shift, suggesting that the recording industry (and other music industries) could no longer be understood in terms of manufacturing and that the age of manufacture is now over (1988, p.57). Instead he argues that musical rights are the basic pop commodity (ibid). A result of this is that almost all the subsequent top down studies of the music industries have viewed them in terms of either rights or the relationship between major and independent companies. Negus Producing Pop (1992) remains the most extensive ethnographic survey of recording industry personnel with its stated aim of emphasising the cultural worlds being lived and constantly remade (ibid: vii). This strength and weakness of this work, which concentrates mainly on the major labels within the UK and US recording industries, lies in Negus claim that a large part of this book resonates with the voices of the recording industry personnel I have spoken to (ibid), meaning that it simultaneously offers new detail and insight, but, by analysing internal conflicts within the companies downgrades the type of conflict and struggle, described by Harker (1997, p. 49) to a series of disagreements and varying degrees of enthusiasm (ibid). Negus (1996, 1999) subsequently developed this work to look more closely at the global structures of the record companies, but, as previously noted, the outcome of this was partly to give academic credence to the major recording

39

companies claims, as expressed through their sectoral organisations, that they are the music industry (Williamson and Cloonan 2007, p.313). Micro-level studies Although other popular music studies text books of the period of recent years (Longhurst 1995; Burnett 1996; Shuker 2001, 2007) take largely the same approach to the music industries, there was also evidence of a significant, simultaneous change in the way popular music production and consumption was being approached. While the majority of previous work consists of global structures and top down analysis, a number of authors took a different perspective, instead examining the production of popular music on either a more localised (Cohen 1991) or specific to particular groups of music makers (Bayton 1999; Toynbee 2000) level, the latter producing an account which detailed the work of musicians and entrepreneurs who are poorly connected to the capital intensive sectors of packaging, distribution and the exploitation of goods (ibid, p.27). This coincided with the interest in music in every day life (see Toynbee 2002, 2003; Hesmondhalgh 2002; Frith 2004), resulting in a move away from large scale studies of the industries using political economy as a staring point to a more detailed account of the processes of creativity and the social and economic constraints upon them. With the exception of Friths most recent account of the music industry (2001, pp.26-52), there has been a lack of attention to the wider view of the music industries from within popular music studies, despite the sizeable changes that have been evident in recent years. In much the same way that Frith argued the theories of 1970s have become less relevant at the start of this decade, a similar case can now be made with regards to some of the approaches and arguments of the 1990s. However, while intellectual property remains at the core of the music industries, the nature of the companies (both new ones and those which have survived) has changed substantially and this means that a move from the strict political economy of the music industry as employed in recent accounts by Cvetkovski (2007) and

40

Shuker (2007) to a range of other approaches is both important and necessary. New approaches Of the more longstanding issues, copyright and its importance to the music industries has been well theorised by the likes of Frith and Marshall (2003), Greenfield and Osborn (2003) and Thberge (2003) and there has also been an important account of the wider impact of digitisation on the music industries (Hesmondhalgh 2007), but work by both Strachan (2007) and Webb (2007) has again focused on (relatively) small scale music making within the recording industry. Indeed, the more interesting accounts of contemporary change in the music industries have come from disciplines which have previously been on the margins of Popular Music Studies. These include cultural geography, economics and business and organisational studies. From the first of these, Leyshon (2001) and Leyshon et al (2005) have examined the nature of networks in the recording industry and the disruption caused by new technologies, work which sits alongside Webbs (2007) account of milieu cultures within popular music. Studies of the live music industry which have been generally overlooked elsewhere have been from the field of economics, with the work of Krueger (2005) and Connolly and Krueger (2006) providing a detailed entry point to, and analysis of the financial transactions within the top end of the live music industry. However, some of the most challenging work on the contemporary music industries has come from the fields of business and organisational studies. This includes work by Gander and Reiple (2002) on the relationship between organisations within the recording industries; Power and Jansson (2004) on the postindustrial music economy; Graham et al (2004) on the music industry supply chain; Wikstrm (2005, 2006) on business models and copyright, Styven (2007) on the nature of music in the internet age and Aggestam (2007) on entrepreneurship in the music industries. In their own way, each of these

41

appears able to open a wider range of insights into the nature of the contemporary music industries than a continued reliance on political economy. Conclusions, Omissions and Problems This chapter begins with Shukers assertion that the music industry is a cultural industry, best explained by use of political economy and argues that this is problematic on a number of levels, not least the plurality of approaches to the cultural industries and the need for a wider definition of the music industry. In addition, it argues the need for some form of recognition of the fundamental differences between both academic accounts of the cultural industries and government views of the creative industries and between the political economy and cultural economics approaches to them. To do this, it uses Throsbys concentric circles definition of the cultural industries and aligns it with Wittels arguments for a combination of the two major approaches to provide a framework for the study of both the music industries as both cultural industries and, less specifically, as businesses within disorganised capitalism. In moving beyond the confines of the type of political economy and cultural studies approaches to the cultural industries in general which have dominated many of the discussions of the music industries to date, it offers the approaches of Caves and Wittel as alternative starting points to the study of the music industries. In doing so, it aims to extend the definition and scope of the music industries studied (in chapter 4) and draw on a number of previously under-utilised approaches to provide a greater clarity in attempting to understand them (chapter 7). Most notably, this overview of the existing literature on the cultural and music industries highlights two major issues with the existing work in this area which are recurring themes of the remainder of the work - namely the hegemonic position of the recording industry within studies of the music

42

industry and the similarly dominant position of political economy as an approach to it. (i) The recording industry is not the music industry The most notable of these is the absence, within the existing accounts of any significant, holistic accounts of the live music and music publishing industries. They are only mentioned fleetingly within wider studies of either popular music culture (Frith 1978, pp. 93-99) or the music industry (Negus, 1992, pp.130-131) or occasionally when approached form very specific angles, for example in the work of Krueger (2005) and Connolly and Krueger (2006) on the economics of the superstar end of the concert promotion business. As yet there is no authoritative work on either, despite their now increasingly important place in both the economics and understanding of the contemporary music industries, meaning that this an area requiring further research, beyond the scope of this thesis.21 Simultaneously, the conflation of the music industry with the recording industry means that there is an abundance of studies of the recording industry, which, for the most part have dated badly, leaving a dearth of insightful contemporary accounts which are of little more than historical interest. However, to dismiss these purely on the grounds that they have been superseded by events would be to neglect their importance in both developing approaches to the study of the music industries and highlighting the aspects most worthy of study. As previously noted, Popular Music Studies has generally drawn on a wide range of disciplines, though studies which relate specifically to the music industries have been predominantly viewed from either a sociological, cultural industries or cultural studies perspective, with each of these providing some valuable starting points for an account of the contemporary industries.

21

an AHRC funded research project is currently being conducted into live music in the UK at the Universities of Glasgow and Edinburgh: http://www.gla.ac.uk/departments/ livemusicproject/

43

Nevertheless, this recent extension of interest in the music industries to other fields can perhaps be used as evidence of the growing maturity of Popular Music Studies itself (Cloonan 2005), but, more importantly, many of these recent works present a number of new, albeit sometimes tentative, routes into the study of the music industries. Additionally, the approach which views belated study of the music industries (though most frequently, the recording industry) as a business first, and cultural industry second, presents not just a number of possibilities for future study, but some additional insight into some of the more problematic aspects of the music industries. Using a combination of existing work and being open to the influence of such areas, presents a starting point for a more flexible theorisation of the contemporary music industries. (ii) Political Economy is not the only way There are two substantial problems with the adoption of an approach based solely on political economy which are unpacked in this thesis. Both of these are examined in more detail in later chapters, but it is important to identify them at this stage as they are integral to the subsequent methodological choices in chapter 3 and reappear throughout the empirical part of the research. In adopting an approach that is based on political economy (or indeed, the Marxist critique of it) within the cultural industries is to assume rstly that capitalism is inherently stable and that these industries are somehow detached from and immune to turbulence and change within the economy. This does not sit well with the descriptions of late period, disorganised capitalism of the type detailed by Lash and Urry (1985). This late twentieth century view sees capitalism entering a new phase, which is not based on manufacturing and co-operation between the state, employers and trade unions, but one in which global markets are dominated by large transnational corporations and where the importance of the state is diminished by ongoing deregulation. It is in this context, that intellectual property, rent-seeking and entrepreneurship become increasingly important in understanding the cultural and music industries.

44

As a consequence of this, political economy makes less sense in the light of disorganised capitalism and the economic turbulence (rather than instability) which accompanies it. In such a situation, rms in the music industries can be seen to be simultaneously competing to nd ways of generating income (and in some cases, prot) but also joining together to pressurise and lobby governments into further deregulating previously publicly owned or regulated enterprises or to change legislation in a manner which is in their commercial interests. The second major problem with political economy in relation to the contemporary music industries is that it offers a limited account of how wealth and value are produced within the economy. As a result, it is the combination of these two issues in the context of the music industries that both raises denitional questions about the nature of the industries and makes elements of public choice theory and rent-seeking appealing explanations of their activities. Caves identies intellectual property as the major form of rent within the cultural industries, and it is around this intangible commodity that many of these activities can be explained. Rent, in economic terms, can be dened as unearned income, which is usually eliminated by markets, through price competition. However, in situations where monopolies exist rent can continued to be collected. As a form of intellectual property, copyright, which underpins the economics of the contemporary music industries, is a monopoly, which they remain actively involved in trying to protect and, indeed, extend. By focusing on intellectual property as the most important form of rent for the music industries, this thesis places the rms and organisations involved in the music industries as being primarily concerned not with the sales of recorded music, publishing rights or concert tickets as an end in itself, but as an activity around which rent can be sought in the rst instance and then new rents generated. This type of rent-seeking is exemplied by the attempts of

45

individual rms as well as music industries organisations and pressure groups to maximise the value of intellectual property in the form of campaigns to extend the length and extent of copyright, but also to protect the monopolies of the organisations which are responsible for the collection of these rents on their behalf. In essence, the thesis will draw on some of the less frequently utilised (in this context) elements of the theorisation of the cultural and creative industries to modify, update and critique the previous studies of the music industries as detailed in this chapter. In doing so, it will claim that increasingly value in the music industries is created by the type of rent-seeking that aims to produce nancial gain through lobbying rather than trade and wherein governments are relatively powerless when faced by the combination of private and industrial interest groups. While technological and demographic changes in the music industries have undoubtedly assisted this process, they have been secondary to the move towards an emphasis on what Ekelund and Tollison describe as the pursuit of prots created by government action (1991, p.7). By attempting to discuss and problematise the music industries (in chapter 4) and by gathering empirical data on the new types of rms at work within them (in chapters 5 and 6), the thesis will then link the empirical evidence gathered to show that these (intellectual property, rent-seeking and entrepreneurship) are now the dominant logics at work in the contemporary music industries. The following chapter works from this initial problematisation of both the existing accounts of the music industry and the traditional location of it within a strict cultural industries framework to develop a methodological approach which is best suited to achieving these goals. CHAPTER 3: METHODOLOGY Introduction Before examining in detail the operation of two major firms (Sanctuary Music Group and Live Nation Entertainment) within the contemporary music

46

industries, this chapter works towards creating a methodology which results in conclusions which are credible, resonant and useful (Charmaz 2006, p. 502). To achieve these aims, it starts with an overview of the the rle of the researcher before locating the research within wider debates about the nature of both knowledge and reality. Having located the research relative to the major research paradigms within the social sciences, it then focuses on the decisions taken during the research process and methods and strategies employed during it. Integral to these choices are the clear identification of the rle of the researcher, which is considered in the first part of the chapter. Thereafter, it focuses on the objects of the research and the type of methods (a qualitative approach) and strategies (in this case, the use of case studies and grounded theory) that are best suited to the type of research being undertaken. In doing so, it will critically consider each of these, analysing the inherent strengths and weaknesses of the research methods under consideration. At the start of this research journey, the two paths which appeared to present themselves as a means of addressing the research questions were to either follow one which placed the researcher at the centre of the narrative, or one which attempted to distance the researcher from the work. Each has its merits and brings about issues relating to subjectivity and objectivity; distance and proximity from the subject and the validity and credibility of the outcomes. Some of the work discussed in the previous chapter exemplifies these different approaches: for example, the work of Negus (1992, 1999) on the music industries uses a largely ethnographic approach, in which the researcher immerses themselves within the culture of the companies to observe and interview those working for them. While this approach often yields new and interesting data, it remains subject to the type of criticism that focuses on the tightness of the researcher to the subject matter. Harker (1997) attacks Negus for his proximity to the industry he is studying, while the author himself admits that in emphasising the active work of recording industry personnel (1992, p.vi) he is, offering an implicit defence of the

47

music business against various forms of sociological and journalistic cynicism (ibid, p.vii). By way of contrast, Hesmondhalghs study of the cultural industries uses a more detached, theoretical approach (see 2007, pp.30-50), yet even within this, he feels it necessary to reflect on his own position and background as a researcher to provide the context for the particular approach I take to the cultural industries (ibid, p.25). The nature of this study aligns it more closely in the latter approach, acknowledging Frith and Doyles claim that researchers in this field find themselves at an early stage of developing alternative frameworks, (2006, p.554) which are a result of significant gaps in empirical knowledge (ibid). The case studies will go some way towards to producing the type of empirical knowledge that allows for a more accurate organisational survey of the contemporary music industries and a revision of the theoretical frameworks which have dominated previous studies. Before discussing these in detail, it is helpful to provide what Denscombe calls a public account of the self that describes the researchers self (1998, pp.68-9) which is particularly important when the researcher is involved in the field of study as a practitioner or participant. While it may be the aim to generate authority through distance (as described by Gray 2006, p.176-7) it is equally important to acknowledge, regardless of the approach, the centrality of the researcher to the research process (ibid, p.21) and the influence the position, background and values of the researcher will have on the process undertaken. Part 1: Reflexivity and the rle of the researcher To achieve this requires a degree of reflexivity, which Nightingale and Cromby describe as an awareness of the researchers contribution to the construction of meanings throughout the research process, and the acknowledgement of the impossibility of remaining outside of ones subject matter while conducting research (1999, p.228). By their account, there is a

48

need for an explanation of the the ways in which a researchers involvement with a particular study influences, acts upon and informs such research (ibid). This can be further split, as Willig suggests, into personal and epistemological reflexivity (2001, p.10). Both the former, which centres around the values, experiences, interests, beliefs, political commitments, wider aims in life and social identities (ibid) of the researcher and the latter, which asks us to reflect upon the assumptions (about the world and about knowledge) that we have made in the course of the research, (ibid) will be considered as part of the discussion of the wider methodological approach that follows. Having discussed the position of the researcher within the research process in general terms, it is also necessary to view this in the specific context of this research, which requires a declaration of my interest and involvement in the music industries and some detail on the evolution of the thesis. It is, therefore, worth highlighting the most relevant elements of my background, as well as a number of specific experiences and identities which have played part in its development. I have been involved in the music industries (to varying degrees and in a number of different rles) for the best part of 25 years. As a teenager I produced fanzines and wrote about local and touring musicians for local newspapers, a path which led to a number of other positions related to the production and consumption of popular music. This has included (self) employment as a freelance music journalist as well as fulltime employment as a festival/ concert promoter and band manager, the latter position for internationally successful acts, bis and Belle and Sebastian. I have also been involved in the management and ownership of live music venues (The 13th Note and Mono in Glasgow) and of an independent record store (Monorail Music, also in Glasgow). In amongst these I have also had a parallel interest in the academic study of popular music (and the popular music industry) which stemmed from an involvement in conferences like New Music World in 1990 and the IASPM international conference which was held in Glasgow in 1995. I began this thesis in 2002 having taught part-time on

49

Adult and Continuing Education courses, and was a full-time lecturer in Music and Media at the then University of Paisley between 2004-6. Since then, I have combined my full-time position with some part-time teaching on the University of Glasgows postgraduate course on Popular Music Studies. This range of activities across both the music industries and academia is undoubtedly an influence on both the nature and orientation of the research, but I consider three of these identities as the most important in determining these: my work as (i) a journalist, (ii) a researcher and (iii) a band manager. Journalist Indeed, the research began from an interest, based on my work as a journalist, in the relationship between the production of music journalism and the music industries. From this, I was aware of significant changes in both fields, though the initial interest in the relationship between them, during what Bonoma describes as the drift part of the research process (1985, p.205) suggested that the more interesting changes are taking place within the music industries, and that the response (or lack of it) by individuals and organisations within them to these were not only frequently misunderstood, but also under theorised, and not always explicable using the existing literature on the music industries. The other influence of my journalistic experience on the research was the frustration felt by the limitations of the format, both in terms of the amount of space available for more reflective features and the tight control the music industries maintained over access to their artists. Most journalistic writing on music appears to be at the behest of the record companies or concert promoters allowing limited access to a small selection of the personnel that would likely be of interest to writers or readers. This, combined with limited amount of insight that could often be gathered from such encounters (especially when having existing professional relationships with some of the potential interviewees) was a factor in rejecting interviews as a research

50

strategy. The music industries natural inclination towards opacity is not necessarily best served by interviews, as in many instances, information will be unreliable: either through the revelation of limited detail or the withholding of detail, often on the grounds on commercial confidentiality. Researcher During the course of this research, two things played an important part in the (re)orientation of the work - my work as a researcher and later, as a band manager. At around the same time as embarking on this thesis, I was appointed lead researcher on a Scottish Enterprise22 funded mapping exercise of the music industry in Scotland (Williamson, Cloonan and Frith 2003). While my rle involved extensive amounts of quantitative research into the nature of activity within the Scottish music sector, the outcomes of the research and political ramifications (see Cloonan and Williamson 2003 and Cloonan, Williamson and Frith 2004) highlighted two fundamental changes in the music industry which seemed worthy of further investigation. The first, a result of studying music production in a country with no major recording companies, suggested that, rather than the narrow view of the music industry (which was often conflated with the recording industry), it was more helpful to view the music industry as a combination of different industries which share a common interest in intellectual property. This idea was developed in a conference paper (Williamson and Cloonan 2004) and a journal article (Williamson and Cloonan 2007) both of which stemmed from, and contributed to, some of the formative ideas and concepts behind this thesis. It is discussed further in chapter 4. Simultaneously, the political reaction to the mapping exercise highlighted in vivid terms the importance of this type of data, both for the funders and the music industries themselves. As Frith and Doyle note this type of clientbased research (2006, p.556) is vital for decision making in both the public
22

Scotlands national economic regeneration agency. See http://www.scottishenterprise.com

51

sector (for example, in deciding who and what to fund) and for the cultural industries, who often use the results of such research to lobbying for such funding. The outcome was a dissatisfaction on the part of the music industries and their representative groups whose various interests which were not well served by the report 23 , resulting in some of them attempting to suppress its dissemination (see Cloonan, Williamson and Frith 2004). This experience had a further impact on this research as it highlighted the limitations (and often dangerous influence) of such research, meaning that my aim with this work was to produce work which was driven by what Frith and Doyle describe as the curiosity or interest of the researcher rather than by client needs or policy relevance (2006, p.556). Management The second career change came at much later point in the research, when after spending four years working predominantly in universities, I returned to working in the music industries, as manager of the band, Belle and Sebastian, in 2006. By this stage in the research, I had already collected a vast amount of empirical data about the changes in the UK and global music industries and been investigating the Sanctuary Music Group for about three years. At this juncture, the 360 degree business model proposed by Sanctuary as a means of dealing with the changes in the music (and particularly, recording) industry, was simultaneously collapsing (in the case of Sanctuary itself) but being adopted by many of the major firms across the recording (Universal, Warner Music) and live music (Live Nation) industries. This created a number of possible problems for the research. I had initially decided to adopt a desk based approach using case studies drawn from largely secondary data of the type described by Frith and Doyle (ibid, p.558) to decrease the likelihood of bias and provide a most objective account possible of the music industries, while accepting the impossibility of a totally
23

For example, PRS claimed that we had undervalued the music industry in Scotland, yet had no alternative data or methodologies.

52

neutral description. Previously, I had decided to minimise my rle and experiences in the narrative, but without a day-to-day involvement in the industries, found this to be more readily achievable. By becoming involved as a manager, I was again working across the recording, publishing and live music industries I was studying, and I found myself in a position where I was party to anecdotal evidence about, and was dealing with, both the companies I was studying as part of the research24. While this could have yielded some interesting observational data, access and anecdotal accounts, I considered that, at this stage in the research, this would have created more problems (with reliability) than it would have added to the already substantial amount of data gathered and that it was best to separate, where possible, my identities as a researcher and band manager in the interests of maintaining a balanced and valid account of the industries in which I was now fully engaged as both a participant and researcher. Nevertheless, it would be wrong to ignore the tension between the two rles. As a practitioner, I feel that the academic accounts of the music industries did not always reflect lived in experience, yet as a researcher was deeply sceptical of the industries accounts of their own activities and successes. Indeed, it could be argued that the statistics and discourse from within the music industries seem even further removed from the realities of the contemporary music industries than the majority of academic accounts. It is also important to recognise the two way relationship between the two rles: as well as industry insider status potentially providing some form of new knowledge for the research, the research significantly enhanced my understanding of a number of concepts (for example, intellectual property) which I had only previously dealt with in a superficial or pragmatic manner. In essence, while my professional experience and contacts could add value to the research, the research has also brought a heightened level of understanding to my non-academic work.
24

Belle and Sebastian is signed to Rough Trade Records, which at the time was part of the Sanctuary Group. Live Nation was one of a number of concert promoters they worked with while touring in 2006.

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There are undoubtedly a number of Nightingale and Crombys values, experiences, interests, beliefs, political commitments, wider aims in life and social identities (1999, p.228) detailed previously which have influenced the approach to this work. The most important of these in this instance are a scepticism, derived from my identities as a journalist and researcher, with regards to the value of interviews and the accounts of so-called insiders, especially when some of the interviewees are known to the researcher on a professional level. My position as a researcher and manager has also contributed to my wariness of organisations which postulate the type of music industry common-sense which is often detached from the mundane realities and of the industries they supposedly represent. By adopting an approach that places the researcher at some distance from the research, this thesis aims to retain a degree of distance and objectivity, in a manner which is often absent from some of the alternatives. While ethnographic accounts based on interviews and direct observation often lead to more colourful narratives, at their worst extreme, particularly in the type of autoethnography described by Ellis and Bochner (2000), this can result in what Hair and Clark describe as potentially ctional, non-objective accounts which are neither valid nor reliable and in no ways scientic (2003, p.4). The point here is not to claim complete objectivity and neutrality: as a participant in many of the activities described, it is impossible to avoid ascribing certain meanings, values and positions, but rather to acknowledge these limitations as an inherent part of the methodology and research process. By doing so, it is recognising that it is far better to acknowledge the researcher is part of the world which he/ she is researching (Gray 2006, p. 72) as this is undoubtedly an inuence on the methodological approach taken. The following section will detail and expand on these methods and strategies.

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Part 2: Research Paradigms, Methods and Strategies Locating the research During the course of this research, the biggest influence in deciding which research methods to pursue - aside from the personal experiences and values detailed previously - has been the nature of the research itself. Goulding argues that choosing a methodology is a time-consuming, personal and reflective process (2005, p.35) which requires the researcher to address a number of issues before embarking on their research. These are paradigmatic choice, followed by decisions about ontology, epistemology and methodology. In doing so, the researcher has to address questions surrounding their basic belief system, the form and nature of reality and what can be known about it (ibid, p.36), the relationship between the researcher and knowledge and how he or she goes about finding out what he/ she believes can be known (ibid). Research Paradigms In addressing some of these questions for this study, it is, therefore, helpful to note that the positivist paradigm has dominated both the social sciences and has been particularly prevalent in the areas under investigation here: the study of businesses and the management/ organisation (generally) and within the media and cultural industries (specifically). Johnson and Duberley note that it is also the mainstream philosophical position of management studies (2000, p.38), which is partly a consequence of the nature of business analysis, where the knowledge involved is, according to Eriksson and Kovalainen, functional by nature (2008, p.17) and where there is a desire among researchers for some universal truth that would hold across industries, businesses, cultures and countries (ibid). Frith and Doyle confirm that the popularity of such an approach extends to media research, arguing that it is well suited to investigating work practices and managerial styles and carrying out organisational research (2006, p.562) as well as putting the researcher in a position which allows for the possibility of achieving some degree of distance from the subject. Guba and Lincoln (1994) note the

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dominance of positivism but offer alternative social sciences paradigms in the form of post-positivism, critical theory and constructivism in response to their critique of the former.

For them, the choice of underlying research paradigm is the most important, as this dictates, to a large extent, the subsequent choices of method, arguing that questions of method are secondary to questions of paradigm (1994, p105) as these constitute the basic belief system or worldview that guides the investigator (ibid). Historically, positivism has been the dominant research paradigm in both the natural and physical sciences, and while each of the alternatives attempt to address some of the critiques of positivism, it remains a useful starting point and signicant inuence, not least because of its importance within business and organisational studies and in underpinning case study research, of the type pursued here. However, studies of rms and their organisation generally rely heavily on quantitative methods, and, indeed, positivism is largely associated with such approaches. However, this thesis, while using a certain amount of quantitative data, adopts a primarily qualitative approach, making for an uncomfortable t between it and the more traditional positivist paradigm. There have, however, been a number of attempts to reconcile the different paradigms which are relevant in the case of this research. Positivism The positivist approach can be characterised as one which treats human behaviour in a manner similar to logical and rational science, in which Eriksson and Kovalainen note that inductive reasoning is impermissible and only conclusions derived from deduction and direct observational experience (2008, p.12) can be seen as certain, and therefore, verifiable. Hammersley and Atkinson (1995) describe the common logic of positivist studies as being the relationship of experimental and quantifiable variables which can be manipulated to identify relationships as the model for social research and the establishment of universal laws (cited in Goulding 2005, p.

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13) and Bryman lists the paraphernalia of positivism (1984, p.77) as preoccupation with occupational definitions, objectivity, replicability, causality and the like (ibid).

Qualitative Positivism While positivism is not generally associated with qualitative research, it nevertheless has an enduring appeal, with Prasad claiming that it continues to inuence the assumptions and values of several qualitative researchers even when they are not working with numerical data or statistical procedures (2005, p.5). Here, its inuence extends primarily to the positivist aims of producing work which is objective and valid, which Prasad suggests results in a form of qualitative positivism, (ibid) which takes a relatively commonsensical and realist approach to ontological and epistemological issues (ibid) wherein reality is believed to be separate from the researcher and is understood by using objective methods of data collection (ibid). He also notes that many case studies are rooted, either explicitly or implicitly, (ibid) in this approach. Critiques of positivism While a positivist approach has become embedded in business studies, Goulding admits that this may be a matter of expediency on the part of researchers, as often it is basically easier to do (2005, p.17). Nevertheless, it is important to be aware of the many wider critiques of it, particularly when applied to the social, rather than natural, sciences. Prasad highlights the differences in terms of the assumptions behind positivism as deriving from the study of largely inanimate or biological phenomena (2005, p.5) meaning that these are lacking the capacity for self-reflection and cultural production (ibid). For Prasad, positivism is ill equipped to answer many questions of interest to social science (ibid), particularly those involving organisational changes, ethics and socialisation within organisations.

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Furthermore, Guba and Lincoln note that positivism often strips research of a wider context and fails to account properly for human behaviour and the impact of both human constructions (the paradigms themselves) and the inherent biases and values of the researcher which become a prism for interpretation of data. While the epistemological and methodological beliefs which underpin positivism are influential in this research (the attempts to separate the researcher and the object of study and the use of empirical work to answer questions/ prove or disprove propositions), the ontological belief that an apprehendable reality is assumed to exist, driven by immutable laws and mechanisms (Guba and Lincoln 1994, p.109) is unreconcilable with qualitative research. Indeed, qualitative research goes some way to provide an insight into human activities as well as providing the type of contextual information that aligns it more closely with the post positivist belief that reality is assumed to exist but to be only imperfectly apprehendable because of basically flawed human intellectual mechanisms and the fundamentally intractable nature of phenomena (ibid, p.110). By using qualitative research methods and adopting case studies as the main research strategy, this thesis sits at the intersection of some of the major research paradigms. While positivism is frequently viewed as the default position of management, business and organisational studies, this is partly because research in these areas is often quantitative in its nature and therefore better suited to its beliefs and values. Similarly, case studies are often quantitative in nature and, by default, associated with positivism. However, while positivist values are evident in the methods employed, the ontological perspective is looser and more closely aligned with the postpositivist understanding of reality, wherein to produce valid outcomes, research has to triangulate across a number of research methods, to present the most objective and valid account of reality possible, while accepting that all theory is revisable and merely an attempt to get as close to reality as possible.

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Research Methods: Qualitative research This research uses qualitative methods: drawing on a combination of case studies and grounded theory to produce a framework in which meaningful and generalised conclusions can be drawn from its empirical studies. In explaining this approach, it is necessary to firstly consider the major paradigms which frame research within both the wider social sciences and business studies before examining the strengths and weaknesses of not only case studies and grounded theory in their own right, but of the potential hazards of using them together. As the empirical work in this research is focused on case studies of two firms the research methods draw extensively on methodological texts within the field of media studies (Frith and Doyle 2006), business studies (Ghuari and Grnhaug 2005; Lee and Lings 2008; Eriksson and Kovalainen 2008), alongside more general studies of the use of case studies (Yin 1994) and grounded theory in the social sciences (Glaser and Strauss 1967, Strauss and Corbin 1994). To a lesser extent, it also acknowledges work on research methods in entrepreneurship studies (see Neergaard and Ulhi 2007) as a means of producing a methodology that attempts to make a valid connection between the data produced during the empirical research and the theory generated as a result. By choosing to use predominantly qualitative, rather than quantitative research methods, the thesis follows the approach that Ghauri and Grnhaug describe as having a long standing dominance in business studies (2008, p.5). There are, however, a number of reasons for this, not least its flexibility when dealing with areas which are relatively under studied and where theory is not fully developed. While Silverman (2001, p.32) argues that the two types of research are not necessarily mutually exclusive (for example, qualitative research often provides the groundwork for more detailed, quantitative research at a later stage), Eriksson and Kovalainen note that qualitative business research can stand alone as an adequate method of knowledge production (2008, p.5).

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Definitions of qualitative research tend to place an emphasis on its attempts to understand data, the use of informants and the range of techniques which can be employed to produce data (see Reichardt and Cook 1979), while Laws and McLeod note that qualitative research is primarily concerned with the changing and dynamic nature of reality (2006, p.2), within which it identifies and isolates specific variables (ibid) in the study with a view to producing a holistic view of the subject being considered. Miles further makes the case for qualitative data, with his claim they are rich, full, earthy, holistic, real (1979, p.117) and that they offer a precise way to assess causality in organisational affairs (ibid), and it is this which makes it the most appropriate track for this study. However, the intuitive appeal of qualitative research in this context is that it offers a multitude of different approaches and methods, creating a flexibility of approach, of the type described by Borman and Preissle-Goez who call the looseness of qualitative research as one of its defining features and greatest strengths (1986, p.52). Merriam narrows this variety of approaches to basic qualitative study, ethnography, phenomenology, grounded theory and case study (1998, p.11). This thesis has primarily used the latter two approaches with the aim of achieving what Reichardt and Cook (1979) describe as one of the main functions of qualitative research, which is the production of generalisations which can be applied across a number of instances through the study and comparison of individual instances and contexts. Issues with Qualitative Research Before doing this, however, it is worth highlighting the problems surrounding such a positivist, qualitative and inductive approach to knowledge. While Morse et al support qualitative research as a refined and tightened view of real world experiences (1998, p.336) in defence of the critique that it goes nowhere (ibid), it is often viewed as being little more than thick description and, according to Gouldings summary of the complaints against it, can be

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filled with conjecture, unscientific, value laden (2005, p.11) and pseudoscientific, inflexible, myopic, mechanistic, outdated and limited to the realm of testing existing theories at the expense of new theory development (ibid, p. 12). Those researchers using qualitative methods have defended it against many of these potential weaknesses, arguing that qualitative researchers have to be disciplined and aware of potential subjectivity and bias, noting that the use of external references and literature is an important part of the process, removing bias and that arguing, as Morse does, that data analysis, which is at the centre of qualitative research, requires astute observation, questioning and a relentless search for answers and active recall (1994, p. 25). In addressing such criticisms, it is necessary to adapt the methodology to reduce their potency, and in this instance, this has been done by choosing a multiple case study approach to allow the consideration of what is unique and what is common across cases (Bryman and Bell 2007, p.64) and to allow the type of theoretical reflection on the findings they advocate. In addition, using case studies alongside grounded theory allows for some rebuke of the claims against qualitative research that it is unscientific and lacking in a sufficient structure to be the basis of theory building. Research Strategies: (i) Case Study Research To explain the combination of these methods and approaches used in this thesis, it is necessary to explain the general uses, types and outcomes of case studies, before explaining how the outcomes of the case studies can be used, as part of a grounded theory approach, to build theory which can be applied more generally. In this instance, this raises further methodological issues surrounding the issue of whether case studies should be used for testing pre-existent theories, or whether they should be the foundation for it. This will be considered in the examination of the relationship between case studies and grounded theory.

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Though case studies are only one of a number of types of qualitative research, Merriam argues that there are a number of shared aims as well as distinctions between these methods. In defining the purpose of qualitative research she notes that each of the five types of research is based on the goal of eliciting understanding and meaning, the researcher as primary instrument of data collection and analysis, the use of fieldwork, an inductive orientation to analysis and findings that are richly descriptive (1998, p.11). By way of distinguishing them, Merriam associates ethnography and phenomenology with disciplinary orientation, grounded theory with function and basic qualitative studies and case studies as being largely associated with form. By utilising grounded theory and case studies, this thesis concentrates on the function and form of two companies and, in doing so, extracts generalisations which can be applied more widely to the cultural and music industries. Choosing when to employ case studies as a research strategy25 is

dependent on a number of factors, all of which sit comfortably with this particular research. Merriam notes that the case study approach is determined by four factors - research questions; the control (or lack of) the researcher has over the variables being studied; the desired end product and the marking out of a bounded system as the focus for investigation (1998, p. 5). Ghauri and Grnhaug adapt this for case studies of businesses to add the focus on a current as opposed to historical phenomenon (2005, p.115) as well as the type of information needed and how easily this can be obtained (ibid), with case studies being used when we want to study a single organisation (ibid) or a number of organisations with regard to a set of variables we have already identified (ibid). The focus on the research questions is particularly important in the use of case studies, with Ghauri and Grnhaug using Yin (1994) to note that they
25

Eriksson and Kovalainen argue that case studies are more a research approach or research strategy than a method (2008, p.116)

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are a preferred approach when, as in this instance, how or why are to be answered, when the researcher has little control over events and when the focus is on a current phenomenon in a real-life context (2005, p.115). However, the issue of what information is needed and how it can be extracted is also important here, as this study draws extensively on secondary data relating to the two companies studied as the data collection. Significantly, case studies are an accepted and useful research strategy in business, organisation and media studies. It is the use of largely secondary data that makes them, according to Ghauri and Grnhaug, an ideal approach for business researchers, as the main aim is to investigate the case in relation to its historical, economical, technological, social and cultural context (ibid). Ghauri and Grnhaug also offer a number of characteristics of case studies before highlighting their suitability for studies of firms and/ or organisations. They view case studies are a preferred research method when the phenomenon under investigation is difficult to study outside its natural setting (2005, p.114) and when the concepts and variables under study are difficult to quantify (ibid). For them, case studies are often centre around the description of a management situation (ibid), with the actual research involving data collection through primary and secondary sources. The former includes verbal reports, interviews and observation, and the latter, a combination of collecting data through sources such as financial reports, archives and budget and operating statements, including market and competition reports (ibid). Eriksson and Kovalainen also make a case for the relevance of case studies to organisational and management studies, noting that its main purpose is to investigate the case in relation to its historical, economic, technological, social and cultural context (2008, p.116), with the aim being to present complex and hard to grasp business issues in an accessible, vivid, personal and down to earth format (ibid), though they note that when approaching cases studies of particular businesses or organisations, methods vary

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considerably depending on the purpose and aims of the study and the more specific research questions (ibid). Lastly, Frith and Doyle make the argument for the use of case studies in examining media and cultural industries firms on the basis that they can illuminate a given issue or phenomenon through the detailed examination of one instance of it (2006, p.564) and note they are frequently used in media research because the unit of organisation is often the organisation or firm. The complexity of organisation phenomena can be such that a case study provides by far the best sort of data (ibid, p.565). Although case studies provide a robust means of conducting the research, and have strong advocates across the range of fields involved in this research, there are a number of issues surrounding them which need to be taken into consideration: one relates to all case study research and the others are specific to case studies of firms and organisations. The major concern is the (lack of) generalisability of case study research, highlighted by Frith and Doyle, who argue that one of the major limitations of case study research is its failure to provide a sufficient basis for scientific generalisation, (2006, p.565) though Yin qualifies this by arguing that case studies are generalisable to theoretical propositions and not to populations or universes (1994, p.10). Given that the latter is within the scope of this research, it is not, in itself, a barrier to proceeding with case studies as the predominant research strategy, though it does highlight the need for the use of other, parallel strategies and careful consideration over the number and extent of the case studies to be carried out. The other potential obstacle, with regards case studies of firms, lies in the reluctance of firms to participate in research projects or to release reliable information. Bryman notes a number of these limitations when he claims that many companies are resistant to being studied, possibly because they are suspicious of the aims of the researcher (1995, p.2), while Frith and Doyle

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highlight the hazards of using the type of secondary data which often forms the basis of case studies of firms. They correctly caution that much of the public face of firms (for example, annual reports and websites) are about presenting the company, its activities, and its progress as favourably as possible to its customers, shareholders and the wider public (2006, p.569). However, it is worth keeping in mind that such questions of reliability are not exclusive to the use of secondary data, and, as Frith and Doyle put it: people and indeed documents sometimes lie (ibid, p.568). While this can be partially mitigated by critically appraising such data and treating it with a degree of scepticism, the wider issues can also be partially addressed by determining the type and number of case studies to be conducted and combining them with other research strategies to add both methodological rigour and validity to the findings. Typologies of Case Studies Having established case studies as a viable means of generating both data and theory, the next stage of the research process was to establish the type and quantity of case studies undertaken. As a starting point, Yin (1994, p.46) suggests four different types of case study design, which derive from two distinctions - between single and multiple case study designs, and between holistic and embedded approaches. The single case study approach is largely used for testing established theory using significant cases which either extend or challenge the theory, while multiple case studies are considered suitable for studies where each of the cases chosen has to serve a particular purpose in the study (Ghauri and Grnhaug, 2005, p. 120). The other consideration in choosing a particular type of case study is whether the overall strategy is based on an inductive or deductive approach or whether it is seeking to produce specific or more general explanations. Yin subsequently expanded this to six possible types of case study research (2003, p.5) by retaining the distinction between single and multiple case study approaches, but by changing the emphasis from holistic and

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embedded investigations, to ones which are either exploratory, descriptive or explanatory. Other writers offer variations on the same categorisations: Laws and McLeod replace the exploratory and explanatory categories with interpretive and evaluative case studies, the former being based on developing conceptual categories to illustrate, support or challenge theoretical assumptions held prior to gathering data (2006, p.5). Characteristics of evaluative case studies involve thick description as well as being grounded, holistic and life-like (ibid), with their main objective being the analysis of the data collected in order to form a judgement. This presents a problem at the heart of case study research - whether the data precedes the theory or vice versa. Intensive and Extensive Case Studies This problem is party resolved by the notion of intensive and extensive case studies as described by Eriksson and Kovalainen (2008, pp.119-125). Intensive case studies are geared towards understanding and exploring the case from the inside and developing what they call an understanding from the perspectives of the people involved in the case (2008, p.119), relying heavily on the type of thick description characterised by Geertz as verbalised interpretation that is able to crystallise the reasons behind the rich and multifaceted details of the case (2003, p.174) combined with interpretation, which focuses on the perspectives,conceptions, interactions and sense-making processes of the people involved in the study (ibid). However, this type of case study presents a number of difficulties when it comes to the interplay between theory and empirical data: Eriksson and Kovalainen admit that the main aim of intensive case studies is not to produce knowledge that could be generalised to other contexts in the conventional meaning (ibid, p.121), with its focus being primarily inward looking. As a consequence, it is more helpful to view this work in the context of extensive case studies, where the objectives are are either to test and

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extend existing theory or to build new theory using the empirical data collected in the case studies. By collecting data from the two firms and building theory based on the findings, this thesis is following Eisenhardts (1989) argument for the use of multiple case studies: these allow for comparative analysis which can result in the type of substantive (or mid-range) theories, typical of grounded theory, which are generated by taking the empirical data and transforming these into formal theories (or general theory) that apply to other contexts (Eriksson and Kovalainen 2008, p.123). In this situation, they claim that confidence in the propositions increases if replication of findings occurs across cases (ibid). However, there is a limit to the number of case studies which can be conducted, due to the the time-intensive nature of case studies as a research strategy. In producing what Frith and Doyle call a more thorough and multifaceted analysis of a particular process or series of events than . . any alternative research strategy, (2006, p.565) case studies are by their nature time consuming and detailed, meaning that to understand in depth how an industry works does not necessarily mean researching a large number of cases (ibid, p.564). In this instance, the decision to conduct two extensive case studies was largely down to the scope of the work, in the belief that offering two studies would allow for more generalisation than by merely conducting a single case study. It was also decided to study two new companies in detail, but to attempt to place them in the wider context of other major music industries companies. The reasons for the choice of Sanctuary and Live Nation are fully outlined at the start of chapter 5. Carrying out an extensive case study involves the use of various types of empirical data, which Eriksson and Kovalainen categorise as existing data and data produced for the project (ibid, p.126). In the former category, they list documents, archival records, media texts, organisation members

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personal diaries, digital materials and physical artefacts (ibid) while data produced includes interviews, surveys and direct and participant observation. In this research, the emphasis has been on the existing / secondary data, which is widely available as both Sanctuary Music Group and Live Nation Entertainment are companies which have to report to shareholders, meaning that there is an abundance of information is available. The most important data source in this research is, therefore, legal documentation which the companies have submitted to either government or market governance bodies. In the UK (for Sanctuary) this is mainly drawn from Companies House26 and by subscribing to e-mail alerts on the companys stock market dealings 27. For Live Nation, similar data was drawn from SEC (Securities and Exchange Commission filings for the company, which include quarterly reports and earnings calls 28 in addition to the type of data held on UK companies. Additionally, both companies have been the subject of extensive coverage and analysis in both trade publications (e.g. Music Week, Billboard, Five Eight), the business press (e.g. Financial Times, Wall Street Journal) and the news and business sections of broadsheet newspapers, providing a further source of both data and analysis. Having described the nature of the case studies, it also worth noting the process involved in collecting the data and producing a meaningful outcome. According to Bonoma, case study research goes through four stages: drift, design, prediction and disconfirmation (1985, p.205) with theory being produced and refined during each of the phases. The drift period involves the researcher becoming aware of the subject area and concepts and terminology related to it before creating and modifying their own research

26 27

Companies House holds accounts and ownership details for all UK companies.

these include all submissions - changes of shareholdings, resignations and appointments to the companys board of directors and of key employees, annual and interim reports as well as updates on the share price.
28

teleconference calls accessible to the public and shareholders involving reports by public companies followed by questions and answers with (usually) Chief Executives and chief finance officers,

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questions. The design refers to the proposed methods of data collection and investigation and the production of tentative explanations, before the work reaches a point (during the prediction stage) when it allows the researcher to make more accurate claims as to the outcome of the research. In the fourth phase, these explanations can be tested by applying the concepts to totally different cases or situations to test the generalisability of the results (Ghauri and Grnhaug 2005, p.117). Research Strategies: (ii) Grounded Theory Using extensive, multiple case studies allows for the possibility of developing or building theory, but to do so requires connecting such research findings with existing theoretical frameworks. Spiggle (1994) argues that many qualitative researchers fail to take the descriptive element of their work to a level of abstraction and explanation, and it is here that Goulding suggests grounded theory as a means of resolving this problem, given its aim of penetrating particular phenomena by moving through various levels of theory building, from description, through abstraction to conceptual categorisation (Goulding 2005, p.37). Grounded theory emerged with Glaser and Strauss The Development of Grounded Theory (1967) which aims to create a set of procedures which allowed theory to be formed from a grounding in the behaviour, actions and words of those being studied. In establishing this, it aims to rebut the claims against qualitative research that it was unscientific and that, rather than great theory being discovered, generating theory goes hand in hand with verifying it (ibid, p.1-2). Goulding adds that grounded theory becomes useful to qualitative researchers because of its insistence that enquiry is always context bound and facts should be viewed as both theory laden and value laden (2005, p.42) and for its rle in ensuring that it allows researchers to develop theory which goes beyond thick description (ibid).

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According to Glaser and Strauss such theory allows for the prediction and explanation of behaviour, is useful in theoretical advances, is applicable in practice, provides a perspective on the form of behaviour studied and provides clear enough hypotheses that crucial ones can be verified in present and future research (1967, p.3). Further descriptions of grounded theory highlight its suitability for the study of business and organisation, assisted by the nature of grounded theory as an evolving and flexible form of theory production, and because of its willingness to embrace both inductive and deductive methods, resulting in what Eriksson and Kovalainen describe as the development and evolution of theory during the research process due to the constant overlap between the data collection and analysis phases (2008, p.156). They note that grounded theory has gained a foothold in organisational studies and leadership studies (2008, p.155) as well as in the study of technological and organisation changes (ibid), making it an ideal method for this research as a result of its inductive approach and its modest claims for in generalisability, with most grounded theory carving out the inbuilt middle range theory from and with the help of the empirical data, (Eriksson and Kovalainen, 2008, p.154) and with its results restricted to theorising specific aspects of social phenomena, instead of broad, macro-level theories that deal with abstract entities such as society or the economy (ibid). This is a consequence of the nature of the process of deciphering (or coding) large amounts of data from empirical work. Approaches to how data is coded within grounded theory have developed since Glaser and Strausss original work, but central to both their methodology and subsequent variations have been schemes designed to extract meaning from data, centred around constant comparison, where in events or actions. . .are compared with each other in the analysis process, with the aim of searching for similarities and differences between them (ibid, p.159) to produce a concept or coded category. Having done this theoretical coding, wherein the relationships between these concepts are examined and result in tentative theory, a further

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process take place known as theoretical sampling, where additional activities and events are added to theory until theoretical saturation is reached (ibid, p.160). Combining Research Methods Using two different research methods strengthens the validity of the thesis by introducing triangulation, which is the process described by Denzin (1970, p. 310) as the use of either multiple observers, theoretical perspectives, sources of data and methodologies. In this regard, Eisenhardt proposes that the combination of case studies and grounded theory, results in the production of novel theory (1989, p.546), which is likely to be both testable with constructs that can be readily measured and hypotheses that can be proven false (ibid, p.547) and empirically valid (ibid). This, he argues, is a consequence of the proximity between the data and theory, and the constant comparison, questioning the data from the start of the process (ibid), while Locke (2001) notes that grounded theory sits well with organisational theory, the result of its ability to capture the complexity of contexts; link with practices and, thus, organisational actions; enable theoretical work in new areas of organisational life and to put life into well-established field as an alternative view (quoted in Eriksson and Kovalainen 2008, p.169). Nevertheless, though grounded theory allows for the production of theory from case studies, and its methods sit, for the most part, comfortably with those of case study research, the combination presents a number of possible problems, particularly when considering Yins claim that theory development prior to the collection of any case study data is an essential step in doing case studies (1994, p.28). This assumes that at least a certain amount of theory is in place before conducting the studies, while the process can also, as is the case in this research, begin with a detailed study of individual cases before the extraction of broader theoretical ideas. In this instance, the research process can be viewed as one where research comes largely before theory, rather than vice versa. This is described by Ghauri and

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Grnhaug as a situation where the prime task is to identify relevant factors and construct explanations (2005, p.36), meaning that the grounded theory approach wherein theory develops and evolves during the research process (Eriksson and Kovalianen 2008, p.156). This makes for a more helpful description of the research process in this instance than Yins accounts of theory development in relation to case studies. Conclusion This chapter has attempted to locate the research within wider philosophical approaches, and taking note of the position of the researcher as one of the determining factors in adopting such approaches. It has also noted that the nature of the research places it at the intersection of a number of fields of study: notably of economics and business (in general) as well as the cultural (and within them, music) industries specifically. As such, it has drawn its research methods and strategies from a combination of those with a proven record of producing insight and valid conclusions from across each of these disciplines. By using case studies and grounded theory as its strategies, the aim is to achieve what Eriksson and Kovalainen describe as the classic criteria of good-quality research (2008, p.291) noting that the qualities of reliability, validity and generalisability identified by Yin (2002) provide a basic framework for the evaluation of research in social sciences as well as in business research, (ibid) making them entirely suitable for this research. Although there are other ways of evaluating qualitative approaches, including Lincoln and Gubas (1985) concept of trustworthiness, which is based on a combination of credibility, transferability, dependability and confirmability and a post-structuralist approach of the type frequently used in cultural studies, the methods employed in this thesis are best measured against what Eriksson and Kovalainen propose are the best methods for making claims of validity: analytic induction, triangulation and member check (2008, p.292).

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The latter is irrelevant here as it is used specifically in research where interviews have been conducted 29, but analytic induction stems from Glaser and Strauss (1967) work on grounded theory and describes the process within it when the data are integrated with theory (Eriksson and Kovalainen 2008, p.292) and triangulation refers the use of multiple perspectives to refine and clarify the findings (ibid) of the research. More specifically, triangulation can take a number of forms, either in the shape of a range of methodologies (qualitative and quantitative research), different methods, data sets, theories or researchers. In this instance, the use of different methods (case studies and grounded theory), data sets (primarily Sanctuary and Live Nations company documentation - accounts, Annual Reports and shareholder updates and attendant press coverage) and theories (involving the rles of intellectual property, rent-seeking and entrepreneurship) ensure a high degree of triangulation, resulting in findings which may be a source for new and exciting angles, ideas and research questions (ibid). By undertaking a process involving the collection of data on both the two specific case studies and the music industries more generally, over a lengthy period of sustained and rapid change 30, the methodological approach can be characterised one which has involved a large amount of data collection and analysis, intertwined with the development, testing and revision of the conclusions and theories which emerge from such data. In acknowledging the issues surrounding the rle of the researcher and the wider hazards of such approaches and strategies, such a qualitative approach through case studies and grounded theory is, nevertheless, a detailed and robust means of seeking the kind of valid and reliable conclusions sought, while simultaneously seeking to minimising the amount of bias and subjectivity which can be a characteristic of the alternative approaches.

29

by offering the findings of the research to those originally questioned for further observation and input.
30

the research has spanned the period 2002-2010 and during the course of it one of the firms studied (Sanctuary) went out of business, the other (Live Nation) came into existence.

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CHAPTER 4: THE CONTEMPORARY MUSIC INDUSTRIES - DEFINITION, VALUE AND ORGANISATION Introduction As as a means of contextualising the case studies/ empirical work in the subsequent two chapters, this one aims to achieve what Frith describes as the function of academics studying the contemporary music industries, namely the development of an account of the contemporary music industry that is empirically accurate and theoretically instructive (2000, p.390). Like previous attempts to do this, this argument will be, by necessity, a snapshot of the period in which it was researched, and subsequently overtaken and revised, but it will, hopefully, contribute to both widening the scope of the study and offer some suggestions of areas of existing study which maybe helpful in achieving this. It will do this in two parts - by firstly addressing questions of definition and quantification and then by surveying the contemporary changes (primarily technological and legislative) in the music industries which are central to the thesis. The three subsequent chapters will reflect in more detail on the structural and organisational changes which have come about as a response to these. The first part will offer a critique of the type of data which has generally been used to define and quantify the industries, particularly as produced by the industries themselves (or their close associates / hired hands) for primarily lobbying purposes. The second will suggest that recent changes in technology and in the response of governments to the needs of the industries have been integral to the reshaping and restructuring of the wider music industries and the companies within them. Part 1: Defining and Valuing the music industries In a separate article (2007) and in a conference paper, Martin Cloonan and I (2005) have argued that it is no longer helpful to think in terms of the music industry as a homogenous, single entity; rather that a greater understanding of the complexity of the business surrounding popular music can be achieved

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by considering the possibility of a wider set of music industries. Of these, the most significant are the recording, live music and music publishing industries, as it is from these three revenue streams that, historically, popular musicians derive the majority of their income. This would include, for example, revenues from CD sales and downloads (recording), royalties from the physical production and performance of these recordings as well as their use in films, TV programmes and advertisements (publishing) and the performance fees and merchandise proceeds from live performance (live music). While the proportions of income generated from each of these sources has proportionately changed substantially for a number of musicians, they remain the both the largest sources of economic income for both the music industries and by extension for individual musicians. This definition derived from an early part of this thesis, and the arguments behind it perhaps remain more important than the matter of whether or not to pluralise the term.31 However, they remain central to understanding the contemporary changes across these industries. It is therefore helpful to reprise some of the major arguments for this widening of the scope of previous studies of the music industry, before examining how the current activities, size and structure of the music industries fit within our proposed framework. In essence, our argument began from a negative standpoint, arguing that the music industry was not the simple, unified entity often portrayed by copyright collectives and industrial lobbying groups, and by reflection in the media (and to a lesser degree) in academic work. The aim here is to go beyond this and to explain why the study of the three major music industries and their trading in rights and risks offers a more rounded and contemporary account of the activities of the music industries or what the IFPI now describe as the wider music industry (2009b, p.1).

31

despite the changing nature of the companies involved, I still think that the plural offers more possibilities and will continue to use it, although I am less sure that it changes the arguments if we refer to these as separate industries or as sectors of a single music industry.

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Most significantly, we argue that the use of the term music industry disguises the complexity of the music industries, in recognition of the substantial changes which have taken place in recent years. The singular form is repeatedly employed by rights and lobbying organisations within the music industries to present a public facade of unity and homogeneity in a business which is complex, fluid and contains a wide range of frequently conflicting interests. Our argument extends to the media and official / government bodies (which have generally unquestioningly adopted the terminology supplied by these organisations) and academics, who have often given credence to the notion of a singular music industry, and in doing so have overprivileged the significance of the recording industry in their accounts of how the music industries work. This thesis develops this to extract the political importance of both the definitions and valuations which the industries representative bodies produce, arguing that they do not present a realistic picture of the contemporary music industries. Definitions from music industries organisations At a time when the recording industry sales are in decline (see Appendix 2), it is understandable that it has turned to lobbying government in a manner which was less evident during its period of considerable growth between 1983 and 1999. Industry organisations like BPI (British Phonographic Industries) the American equivalent, RIAA (Recording Industry Association of America) and their global platform, IFPI (International Federation of Phonographic Industries) have all played a major part in presenting the case of the recording industry to government in recent years, and in doing so have obfuscated the nature of the industry, and its position within a wider study of the music industries. This has tended to focus on two connected areas - the

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response to internet piracy and the protection of intellectual property rights and attempts to increase the copyright term on sound recordings 32. To achieve backing within the legislature, the record companies have had to rely on such organisations to lay claim to the support of a greater section of the music industries than is actually the case - resulting in the creation of increasingly pernicious umbrella bodies claiming to represent the whole industry to government. This has been encouraged by the UK governments repeated attempts to have the industry speak with one voice. In the UK, this has stemmed from a combination (in the past of) resistance on the part of the government to some of the attempts at lobbying and a reluctance on the part of the record companies during the eighties and nineties to look for explicit support for the state, preferring to highlight its free-market image and success without government support or intervention. By way of example, a former Minister for the Arts, Estelle (now Baroness) Morris 33 appealed at the Music Radio Conference in 2004 for the music industry to try to give the government one point of contact (Music Week, 3rd May 2004, p.3), something which the organisations involved have attempted to do subsequently, often leaving aside fundamental differences to improve their channels of communication with government. Nevertheless, the perceived need to seek government action on copyright, has brought about a substantial shift in stance on the part of the record companies: in 1998 when the Blair government began to show an interest in the cultural industries, Music Week reported that the music industry is a business instinctively

32

this quest has already been successful in the USA where the term was extended to 75 years under the Copyright Act of 1972, and extended to 95 years by the Sonny Bono Copyright Term Extension Act of 1998. As all existing songs where effectively published under the 1972 legislation, the first public domain sound recordings in the USA will not appear until 2067. In the UK, the copyright on sound recordings expires after fifty years (see http://www.pdinfo.com/record.php , accessed 5th July 2008)
33

On her elevation to the House of Lords, Baroness Morris became a director of the PRS.

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suspicious of government intervention and one which has done very well . . without it (Music Week, 27th September 1997). In the article, we argue that what we describe as representative and umbrella organisations (Williamson and Cloonan, 2007, p.306) used the term music industry to form common sense notions of the processes involved in the production of popular music, but also that its use provides something of a smokescreen (ibid) to prevent full understanding of the processes involved. Many of the bodies involved, notably BPI and IFPI, repeatedly used the notion of single music industry when referring specifically to the recording industry, often doing to to portray themselves as representative of a greater section of the music industries than they actually are (ibid, p.307). An example of this was Peter Jamiesons 34 address in 2003 to the In The City conference on the Music Industry Crisis, which focused entirely on the issues related to the recording industry. This conflation of the recording industry with the full range of activities involved in music production (especially live music and publishing) has been a characteristic of the approach of lobbying bodies in recent years, though there is some evidence of change in the period since 2007. This can be seen in the subtle readjustment of their self-definition and the creation of (in the UK) of a new pan-music industries body, UK Music, albeit one which continues to pedal the notion of a single, unified music industry. In the wake of the declining sales, it is increasingly untenable for recording industry organisations to claim to speak for the music industry as a whole. The BPI 35 now makes it clear on its website that it represents the British recorded music business (http://www.bpi.co.uk, accessed 5th June 2007), a claim which is sustainable given that its membership includes each of the four companies which dominate the industry as well as a number of the leading independents. More intriguingly, the IFPI now positions the recorded
34 35

Jamieson was at the time chairman of the BPI The BPI rebranded in 2007, dropping the full title of British Phonographic Industries

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music industry fas part of a much broader music industry, worth more than $130 billion globally (IFPI 2007c, p.1). Given that, by their own calculations, the value of retail sales of recorded music dropped below $30 billion in 2007 (IFPI 2008a), this would suggest that the recording industry is no longer the dominant part of a single music industry, as its industry organisations have previously claimed. Their definition of this broader music industry is, however, a confused one, including radio advertising revenues and sales of portable digital players (ibid), but neglecting to include revenues from merchandising and sponsorship, which would appear to be more closely connected to the sales of recorded music. This redefinition of the recording industry by its international trade organisation continued in 2009, with the recognition in the Digital Music Report 2009 that the recorded music industry is reinventing itself and its business models (IFPI 2009b, p.1). The report also moves away from using the term record companies to speak of music companies, to reflect their expanding rle (ibid). This is exemplified by the emergence of broader rights (ibid, p.19) deals where the record companies recoup their investment through a variety of revenue streams including record sales, live tickets, sponsorship, merchandise sales and publishing rights (ibid). While this attempt at rebranding and repositioning the record companies offers a more helpful account of their position spanning the music industries, the need to present a united front and appease their contacts in government remains evident. This is most evident in the advent of UK Music, which describes itself as a new umbrella organisation representing the collective interests of the UKs commercial music industry (http://www.ukmusic.org, accessed 8th June 2008) and which derives from the historical dominance of the major recording companies. The organisations members include representatives of the recording (BPI and Association of Independent Music (AIM)) and publishing (Music Publishers Association) industries; the rights organisations (PRS for Music, Phonographic Performance Ltd (PPL);

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managers (Music Managers Forum) and musicians/ songwriters (Musicians Union, British Academy of Composers and Songwriters). It makes substantial claims to representing the UK music industry, but this is a dubious claim 36. UK Music has no representation from the live music industry, and serves, rather than representing the UK music industry as a whole, (ibid) as it claims, it, in fact, represents a loose alliance of organisations with a stake in revenues from the exploitation of intellectual property rights across the music industries. Tellingly, the new organisation, which emerged out of the publishing industry lobbying body, British Music Rights, includes the Alliance Against IP Theft (AAIPT) and the British Copyright Council (BCC) among its industry partners, in case there was any doubt as to its priorities and emphasis on intellectual property. Although UK Musics aims include promotion of the interests of the UK music industry at all levels (ibid) it is clear from their initial output and actions that their existence is totally centred around the protection and extension of intellectual property on behalf of rights holders within government, media and educational circles. Their initial concerns have focused on the copyright term on sound recordings and the attempts to generate revenue from Internet Service Providers (ISPs), as it is the organisations view that they should be held liable for the widespread nature of illegal downloading of recorded music. While it is clear that UK Music adhere to a more traditional configuration of what constitutes the UK music industry there is still a sense of some form of progression: rather than the music industry being conflated with the recording industry, their worldview appears to conflate the music industry with those who have an interest in intellectual property rights. While this excludes the live music industry (arguably the largest part of the UK music
36

A further examination of the relationship between these organisations and government can be seen in Appendix 5

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industry / industries), it does reflect a notable change in self-perception and representation. On a wider level, this evidence of a welcome, if belated, redefinition of the recording industry by some of its representative bodies, and the increased emphasis on lobbying over intellectual property matters, suggests that, while the recording industry presenting itself as the music industry is less of an issue in the light of recent changes, many of our arguments surrounding the problems of describing a single (and by extension, unified) music industry remain relevant. This is particularly important when studying the impact of the way in which the notion of a unified music industry has been utilised in lobbying for legislative changes to supposedly help the recording industry during its downturn in sales, and the way in which this has been reported in the media. Lobbying These issues of definition are not, however, merely a matter of academic pedantry, as how the music industries represent their economic rle to government has become increasingly important in understanding how they actually work. At the core of this is the newly established shift in the function of industry organisations from being relatively benign representatives of (successful) industries to increasingly aggressive lobbyists on behalf of struggling ones. The BPI describes itself as a key lobbyist on behalf of the (recording)industry, engaging with government to ensure BPI issues are heard and acted upon within government, (http://www.bpi.co.uk, accessed 8th June 2008) while the IFPI lists lobbying among the functions of its secretariat, which extend to lobbying of governments and representation in international organisations (http://www.ifpi.org, accessed 8th June 2008). A measure of the scale of this activity can be obtained from the figures submitted by the American recording industrys organisation, RIAA, indicating that it spent $2.08 million on lobbying Congress over a range of copyright issues in 2007, a decrease on the $2.8 million spent the previous year (Bangeman 2008).

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Indeed, this paring back of the claims of the recording industry organisations (and their expenditure on lobbying) can be viewed as a tacit acceptance of the end of the dominance of that industry and the four major companies 37 within it. In addition, the emergence of the new type of music companies as described by the IFPI, and spanning a wider range of music industries, also suggests a broadening of the activities of the record companies in response to the decline in sales of their products in the period since 1999. However, this hardly results in a unified music industry of the type umbrella organisations like UK Music and its international counterparts suggest. Indeed, the notion of a single music industry is a matter of convenience for both government and the industry lobbying organisations, with a series of Department for Culture, Media and Sport (DCMS) ministers, including James Purnell, seeking an even stronger relationship with the music industry, (Ashton 2005) while wishing to narrow the number of representative organisations with which they have to liaise in the process. Indeed, another former minister, Andy Burnham welcomed the advent of both UK Music and the Featured Artists Coalition (FAC) in a speech to the UK Music Creators Conference, stating that I dont think we could ever expect the music industry to speak with one voice - so two isnt bad - but it does bring a lot more coherence and makes my job easier when representing you to the rest of government (11th December 2008)38. From this it is clear that it remains the objective of DCMS to sponsor the music industry by acting as its advocate within government, (http:// www.culture.gov.uk, accessed 3rd June 2008) making representations on behalf of an industry which it is only willing or able to understand in the

37

These are the major record companies - Universal Music Group (UMG), Sony Music Entertainment (SME), Warner Music Group (WMG) and EMI (Electrical and Musical Industries)
38

The change of UK government in 2010 was welcomed by the music industries. with PPLs director of government relations, Dominic McGonigal, describing the new Secretary of State for Culture, Olympics, Media and Sport, Jeremy Hunt as an old friend of the industry who has worked very closely with us (http://www.musicweek.com/story.asp?storycode=104117, accessed 1st May 2010)

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terms laid out by organisations acting on behalf of rights holders. In spite of the New Labour governments willingness to engage with the music industry, this has to be seen within the context of dialogue at what Jones calls at the level of the corporations (1999, p.31). By, in this instance, excluding the live music industry39 , the minority voices within the representative bodies and many of the small producers across all the music industries from their worldview, our argument is that by discussing a single music industry it is impossible to understand the diversity, conflict and inequality across the music industries (Williamson and Cloonan 2007, p.319). Talking about the music industries (plural) this allows the possibility of reflecting the lived in experience of those operating at different levels across the industries as well as investigating the question of what it means to be creative within a capitalist economy (Toynbee 2003; Hesmondhalgh and Pratt 2005). It also allows for a more detailed critique of the unchallenged claims of the industries which have been the basis of so much media coverage and policy making. Valuing the music industries Much of the argument that it is no longer sufficient to simply equate the music industry with the recording industry and the major companies within it, comes from the decline in revenues in the recording industry coupled with the growth in other parts of the music industries since 1999. While this makes it helpful to examine the scale of these industries in financial terms, this, in itself, creates a number of problems because of the unreliability of the data. Such data is, however, of great importance in the cultural industries (and music is no exception) and comes mainly in the form of quantifying both the employment and turnover within them. This may be a legacy of a time when
39

In apparent contradiction of their position, DCMS previously claimed to sponsor the music industry through its work with the now obsolete Live Music Forum, thereby recognising the growing importance of live music.

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such industries were competing for state patronage and support as governments became increasingly interested in what Hesmondhalgh calls the introduction of the concept of the cultural industries to cultural policy, (2007, p.139) exemplified by the GLCs (Greater London Council) move, during the 1980s, to shift its investment in cultural activity towards more popular arts forms, where the aim was not to celebrate commercial production, but to simply recognise its centrality in modern culture (ibid).Throughout much of the following decades, the production of statistical data has been at the heart of how these industries approach government. Statistics from apparently reputable research can be used to show both how different sectors ought to be rewarded for success or bolstered by the state in the event of economic difficulties. In the UK, this can be seen clearly within the recording industry, which believed itself to be under supported by government throughout the boom period of the eighties and nineties, and which has subsequently invested considerable resources in highlighting both the success and problems of what it inevitably termed the music industry to the government. Cloonan has described this alignment of interests between the lobbyists of the music industry and government departments as being part of a process of coming together of parts of the music industries and government around a common agenda if promoting British music (2007, p.124). In effect, the British recording industry has succeeded in hiding its real political agenda behind the less objectionable aims of promoting British creativity and boosting the economy, agendas which are much more likely to garner cross-party support. To achieve this, the British record companies have pursued a relentlessly upbeat appraisal of their own success. Even after four successive years (1999-2003) in which record sales declined internationally, and eighteen months after BPI chairman, Peter Jamiesons music industry crisis speech at In The City (2003), the rhetoric from the British music industries remained extremely positive. A British Music Rights submission to the Department of Trade and Industrys Trade and Investment White Paper in 2004 spoke of

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the music industry as a British economic success story contributing approximately 5 billion per annum to the UK economy, employing more than 120 000 people (2004, p.1). BPI announced that year end retail sales figures for UK album sales reached a new high in 2004, (press release, 7th January 2005), neglecting to focus on the declining singles market or the decreasing retail price of CDs, which all contributed to an overall decline in the retail value of the UK recording industry. By carefully drawing on aspects of their own statistics, a case could be made that suited their purposes, which in this and many other instances was an emphasis on the importance of copyright, and the pursuit of measures to strengthen and enforce intellectual property legislation. The figures used to make these presentations to official bodies stem from the two types of data which dominate discussions of the value of the music industries: the sales figures derive from the record companies own calculations through their (UK) trade organisation, BPI; the employment figures from a National Music Council report, Counting The Notes, one of a stream of reports 40 produced for or on behalf of government and government organisations produced in the UK (see also British Invisibles 1995; Dane, Feist and Laing 1996; Dane, Feist and Manton 1999; Wilson, Stokes and Blackburn 2001) as the government began to show increasing interest in the cultural and music industries after the election of the Blair government in 1997. These could be loosely termed internal and external sources, though the argument here, taking as its staring point Harkers mantra of doubt everything, (1997, p.46) is that, in the case of the music industries, neither can be regarded as an entirely reliable source of information. Indeed, recent history would suggest that the music industries have successfully, through a mixture of a lack of transparency and thoroughness in their internal figures and selective use and co-option of external sources, painted a picture of the
40

for further information on these reports and their findings see appendix 6

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industries for lobbying purposes which has gone largely unchallenged by both the media and politicians. Internal Sources The majority of the data relating to the various music industries (of which, unsurprisingly, as the largest, the recording industry has been most closely analysed) comes from internal sources. In the absence of other effective sources or mechanisms of measuring the size of any industry, researchers have had to rely on the figures supplied by the bodies representing the recording industry on a global and national level (for example, IFPI, BPI, RIAA), the outcome being that these are frequently uncritically reported by academics and the media alike. Harkers (1997) critique of the IFPI production of statistics remains resonant, and arguably, the manipulation of this data has become more even important for the industry as it moved from a period of growth at the time he was writing to one of decline in the subsequent decade. The key point to make here is that the major companies within the music industries are able to control how they are perceived by both the media and government. Harker makes a number of claims and charges against the IFPI and their data, most pertinently that they produce only those statistics and facts which this most secretive of industries wishes us to have (1997, p.45). Among his many complaints about the reliability of the IFPI data, two remain particularly relevant to this discussion. The first is the overemphasis placed on reducing the machinations of the recording industry to numbers (not coincidentally is the IFPI yearbook called The Recording Industry In Numbers) with Harker describing how quantity rather than quality is taken for granted. . size, to the IFPI is everything, (1997, p.46). The second is how such figures can provide a smokescreen behind which the complex reality of the business can be concealed, particularly by hiding conflict within the music industries. In his critique of Keith Negus Producing Pop, Harker talks of the danger of how music business common sense exercises an osmotic

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influence on the critical awareness of academics who approach it as journalists or sociologists or both, (ibid, p.47) the outcome being what he calls a symbiotic (ibid) relationship between the industry and critics/ academics. In addition, there is little to suggest that Harkers other complaints against the IFPI (the main source of global recording industry data) have lost their currency in the intervening years. Among the issues he raised - the nonavailability of like for like comparisons, the limited amounts of data published 41, the problems of what is meant by value and its strange assumptions about geography (ibid, p.47) - many remain unaddressed. These issues have been magnified, in recent years, by the IFPIs publication of an annual Digital Music Report,42 which is widely disseminated (free of charge), but with a clear agenda - that of promoting the industrys vision of a legal, monetised digital music business brought about the a combination of record companies new business models and clampdowns by governments on piracy. External Sources While this highlights the weaknesses of internal reporting from within the music industries, Harkers critique of Negus, which highlights the often mutually dependent relationship between the music industries and their analysts, can also be seen in the production of data about the music industries produced by external sources. These third parties, whether academics, market research companies or media groups, can, to varying degrees, be considered stakeholders in the industries in question, with a vested interest in the outcome of their studies, and are often not the reliable

41

The Recording Industry in Numbers is published primarily for the record companies; the pricing of the Annual Report puts it beyond individual researchers and many other institutions, and press releases offer a very limited (and heavily mediated) series of headline figures
42

this originally appeared as the IFPI Commercial Piracy Report, before the change of title in 2007.

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sources of information required to help build a detailed picture of the music industries. Our experience of working on a mapping exercise in Scotland for the economic development agency, Scottish Enterprise (Williamson, Cloonan and Frith 2003), provided substantial evidence of the kind of conflict which can arise between academic inquiry, and what Cloonan has subsequently described as justification for state intervention (2007, p.126). Having commissioned such work, it is hardly surprising that a failure to produce the expected or desired results, ended with various attempts to discredit and diminish the reach of the work (see also Cloonan, Williamson and Frith 2004). In this case, the conflict came in the shape of the desire of Scottish Enterprise to alter the executive summary of the report (which they were issuing to the media), but not the methodology (agreed in advance) or the remainder of the report, and in the criticism of the outcomes (though again, not the methodology) by representatives of groups claiming to speak for / represent the music industry in Scotland.43 At the heart of the problems with both internal and external sources of information about the music industries lie issues surrounding methodology and independence or otherwise of those producing the data. Harker highlights the opaque nature of the information supplied by the recording industry and the dangers of taking what the industries report at face value, while Cloonan also observes that a lack of interest in methodology on the part of both the media and music industries has a key impact on outcomes (2007, p.125). This would appear to place greater need for, and reliance upon, work which is methodologically rigorous, though many of the accounts used to analyse the workings of the music industries are often lacking in this regard. A clear example of the type of co-option of academic work to lend credence to an agenda set by some of the music industries can
43

For example. the board of the Scottish Music Information Centre refused to publish the report on their website.

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be seen in a recent reports on the Music Consumption Habits of Young People (2008, 2009) produced for British Music Rights / UK Music by the University of Hertfordshire. The first of these was reported widely in the British press (see Allen 2008; Sabbagh 2008) as it undoubtedly produced some notable headlines - that more than half of the music on the mp3 players of those questioned was not paid for and that 95% of the 1158 people surveyed had engaged in some form of copying (2008, p.18). The findings were quickly utilised by British Music Rights to pursue their lobbying agenda, with then Chief Executive, Feargal Sharkey, talking of new, mutually-beneficial commercial partnerships with technology providers, (ibid), while David Bahanovich of the University of Hertfordshire highlighted the symbiotic nature of the relationship between the academics, industries and government in this report claiming that we are committed to helping the industry find solutions through groundbreaking research. (ibid) However, there is no way of knowing how groundbreaking this research actually is, as the University and British Music Rights (and its successor, UK Music) have failed to publish their methodology, offering instead, only some statistics produced by the report with a minimal amount of commentary (British Music Rights 2008). This, along with Sharkeys willingness to discuss the interim results (which appear to be exactly the same as the final ones) with The Guardian (Allen 2008) just days after the completion of the survey, suggest that the results, rather than how they are achieved, are the primary consideration for the industries and academics alike. The data that is offered presents numerous apparent problems, which the absence of a methodology only accentuates. Though presented as a survey investigating the music consumption behaviour and experience of young people aged 14-24, (press release, 17th June 2008) the data clearly indicates that over 25s have been interviewed as part of the process.

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Queries to British Music Rights 44 yielded neither a full copy of the report (if such a thing exists beyond the published version) nor a satisfactory account of the methodology beyond the assertion that standard academic methodology was applied to the analysis (2008, p.41)45. What this entails remains unclear, as does the issue of whether such a methodology was applied to the design of the questionnaire and the conduct of the survey, as well as the analysis. In addition, the excuse given for not publishing the full report was given as commercial reasons - there is some info that could impact upon commercial negotiations (e-mail correspondence with Adam Webb, 2nd July 2008). By way of contrast, the 2009 report was published in full and has a methodology section, though this consists of a number of bullet points (Bahanovich and Collopy 2009, p.3) and an assurance that standard academic methodology (was) applied to analysis (ibid). However, the report itself consists of a wide range of data and graphs, with no analysis whatsoever. Once again, this would appear to be a case of the music industries controlling and limiting the available information in order to gain commercial advantage, a process inherently at odds with academic inquiry. Nevertheless, this is hardly surprising. Universities operating music business and management courses need to forge links with the key players in the business 46 and (like other departments) generate income from research activities, creating exactly the type of mutually dependent relationship described by Harker, and one which potentially compromises the impartiality and independence of this academic research. This is another reason why vague assurances of standard academic methodology are insufficient - for
44

e-mail correspondence between Martin Cloonan (University of Glasgow) and Adam Webb (British Music Rights), 2nd July 2008
45

UK Music worked again with the University of Hertfordshire (2009) on similar research, which again referred to standard academic methodology (2009, p.3) for its qualitative research, and worked within the guidelines of the Market Research Society for its quantitative research (ibid).
46

University of Hertfordshire boasts leaders from the music industry walk through our door and work with our students

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the results of the research to be of real use to either the music industries or the government in areas of policy formation, the figures need some form of scientific validation. In this instance, the relationship extends beyond the academics and the music industries to the politicians. Shortly after producing the report for British Music Rights, the University of Hertfordshire awarded Sharkey an honorary degree in recognition of his contribution to music and film (press release, University of Hertfordshire, 7th November 2008)47 . Like his association with academia, Sharkeys return to live performance after fifteen years has also been politically loaded, appearing appeared on stage with MP4 - a band made up of Members of Parliament at a Rock The Boat event hosted by BPI in June 2007. A year later, the then Secretary of State for Culture, Media and Sport, Andy Burnham, in a speech to the UK Music Creators Conference (11th December 2008), listed his musical highlights of the year, one of which was playing Teenage Kicks on the guitar with Feargal Sharkey on a boat on the Thames (ibid). What is most concerning, however, is that a piece of research which appears so methodologically opaque can enter public discourse and prove influential without any real questioning of its results. As well as being reported in the media, the timing of the researchs publication coincided, helpfully, with the attempts of the music and film industries to reach a memorandum of understanding with the Internet Service Providers (ISPs), adding apparent weight to British Music Rights case for what Sharkey describes as a legal,subscription-based service (Sabbagh 2008). The figures produced by the research appear to be of more use as lobbying fodder for the rights organisations than as a piece of solid academic work.

47

Sharkeys contribution to film is unclear - he has never appeared in, produced or directed a feature film.

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While the music industries enjoy and can utilise the validation that academic research gives their case, there are two problems attached to this. The first is that, without evidence of both how the research was conducted and some context and background to it, such validation is undermined, and the reputation of the researchers open to question. The second comes when academic research yields results which do not suit the industries agenda. By attempting to undermine the results (and rarely, if ever, the methodology), the music industries prove that their relationship with researchers (whether from universities or elsewhere) is based solely on outcomes. Rather than wanting to extend their knowledge and understanding of their industries and their audiences, they merely wish to provide some kind of support for their often unsubstantiated claims. The problematic nature of this relationship between the industries and researchers was thrown into sharp focus when Sharkey spoke of an ever growing army of pseudo-intellectual cyber professors (speech at Midemnet, 23rd January 2009), presumably referring to those academics who have vigorously opposed the standpoint of the rights organisations (see Kretschmer 2008), arguing that the creative and commercial challenges (ibid) facing the music industries should be solved by creative and commercial solutions (ibid), and by, implication, not with the assistance of academics or intellectuals. Even so, he still found it necessary to claim in the next sentence, that in July 2008, British Music Rights published the largest-ever academic study into the music consumption of 14-24 year olds (ibid). It would appear that academics are still useful for the industries when they produce results which fit their worldview, but when they fail to do so, it is seen as evidence of the researchers being against us (ibid) by Sharkeys somewhat simplistic view of both the research process and his notion of a unified, conflict free music industry. While it is unclear what exactly Harker meant when he predicted the music conglomerates of the next millennium will have their own house-academic (1997, p.50), the

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relationship between UK Music and its academic partners would appear to offer some sort of his credence to his vision of co-option. Nevertheless, it is worth noting that the relationship between academics and the music industries is not limited to this type of mutually beneficial arrangement, and that, on occasion, research which is methodologically transparent and which yields results contrary to the perspective of the industries, enters the public domain as exemplified by the work of Oberholzer and Strumpf (2004) and Gowers (2006). In such cases, the response of the music industries has been to embark on extensive campaigns to discredit the work. This has tended to centre on issues related to the protection of rights a notable instance being the RIAAs response to Oberholzer and Strumpfs research which argued that the effect of illegal downloading on record sales was indistinguishable from zero (2004, p.3). Within days of the release of the findings, the RIAA issued a press release claiming that the results were inconsistent with every other study done by academics and research analysts (press release, cited in Child 2007). In the UK, BPI also moved quickly to cast doubt on the validity of the research, comparing it unfavourably with a host of other surveys (including their own, conducted by market researchers, Taylor Nelson Sofres, and a number of market researchers including Forrester, Entertainment Media Research and Jupiter Research), which all came to the opposite conclusion. Again, the most interesting issue here is not necessarily Oberholzer and Strumpfs findings,48 but the fact that the recording industry was so sensitive to its findings and so quick to dismiss the them. While the methodology was not overtly criticised, the RIAA spokesperson described the text of the analysis as incomprehensible to the layman (quoted in Holland 2004).

48

these were at odds with most investigations of the time and criticised by Liebowitz (2006).

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A similar example of this in UK terms, is the response to findings of the Gowers Commission in 2006 49. The point here though is less about outcomes and more about the response of the music industries in the UK to the findings of the report, which were based on an economic analysis of the benefits of extension carried out by the Centre for Intellectual Property and Information Law at the University of Cambridge. In this case, the presence of rigorous research methods held no sway over the lobbying groups, which poured scorn on such an approach while vowing to continue their campaign in the hopefully more pliable European context. The response from the industry organisations and trade publications was scathing, with two distinct strands of vitriol - one aimed at Andrew Gowers 50, the other at the academics used as experts in the field. One outcome was a PPL- organised, full page advertisement in the Financial Times of December 7th 2006 demanding Fair Play for Musicians and featuring the names of 4500 PPL members who had supposedly signed up to demand term extension. How this was achieved is unclear, especially as signatories included the deceased (Jimmy Shand, Lonnie Donegan and Freddie Garrity), non-British nationals (Cher, Belinda Carlisle and Suzi Quatro), who are already protected by the longer copyright term in the USA, and classical musicians who have made a career out of recording music that has already passed into the public domain. Music Week devoted four pages to the report, arguing that Gowers does not understand copyright, and certainly does not appear to understand the music industry (2006, p.35). The economists involved in writing the report - who drew on the work of five Nobel prize winners to show that retrospective copyright term extension would provide little in the way of economic benefit - were also compared unfavourably to the findings of an internal industry report, commissioned by by Phonographic Performance Ltd. (PPL) and carried out by Price Waterhouse Cooper (PWC)
49

The Gowers Review of Intellectual Property was set up in 2006 by then Chancellor, Gordon Brown, to conduct a wide ranging review of intellectual property laws in the UK.
50

Gowers was a former editor of the Financial Times, who has subsequently worked as head of corporate communications for both Lehman Brothers and British Petroleum.

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- claiming that he (Gowers) happily accepted advice from Cambridge University while rejecting a music-industry commissioned report by PWC (ibid). Unlike the internal reports on the music industries where industry organisations have a degree of control over the setup of the research, the choice of researchers and which (if any) of the conclusions will be published (depending on whether they suit their agenda), external, grounded research of the type carried out by Gowers is a considerably riskier proposition. In the case of Gowers, the music industry failed to produce any of the real arguments for copyright term extension, basing their case largely around economic necessity, which Gowers rejected regardless. By seeing through this and questioning the rle of the rights organisations 51 in reaching his conclusions, Gowers suggests that far from not understanding the music industry, his commission were only too aware of the nature of the lobbying on behalf of the recording industry. Inevitably, such rational arguments are of little interest to a recording industry focused on self preservation, and consequently BPI dismissed the economic perspective (Music Week, 16th December 2006, p.1) used by Gowers. What the Numbers Dont Tell Us By taking a sceptical view of the numerical data produced by and on behalf of the music industries, it is important, when engaging with them, to consider the source of any gures and the method of compilation by way of a caveat. In most instances, as Harker describes, the task is one of working with the rhetoric and gures supplied by the music industries (in the absence, in most instances, of credible alternatives) to look for a few problems . . . and the occasional, contradiction (1997, p.50) rather than accepting unquestioningly the messages that come with them. Harker is also right to add that the numbers themselves are not he most important thing to analyse, but rather

51

his report also recommended another Office of Fair Trading market survey into the UK collecting societies to ensure the needs of all stakeholders are being met (2006, p.8)

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what differences (and especially patterns of differences) between numbers seem to signify (ibid). In trying to create an accurate account of the complexity and reality of the music industries, this chapter will do this and focus equally on both what the industries data does and does not reveal. Even if we are to accept the numbers produced by the industries, quantifying the music industries creates a number of definitional problems, which have been discussed previously, not least the issue of what actually constitutes a music industry. Working on the basis that there are a number of interrelated music industries of varying (and changing) size and importance, it is also encouraging to note the shift, in recent years, away from conflating the value of the recorded music industry (as issued by and encouraged by the IFPI) as the value of overall music industry. The nature of the new companies emerging within the music industries and the restructuring of even the largest conglomerates (for example, Universal and Live Nation) to include interests across a wide range of the music industries means that it is no longer simple, or appropriate, to simply add their combined values and declare that the total value of the recording/ music publishing / live music industries. To attempt to make sense of the existing figures requires both a definition of what exactly constitutes the music industries, or what the IFPI have taken to describing as the broader music industry. While it is would appear that the period since 1999 has seen a sharp decline in the sales of the recording industry, this redefinition by their trade organisation would appear to be an effort to show recorded music to have an economic importance that extends far beyond the scope of recorded music sales (IFPI 2008, p.1). By their own figures, the value of the global recording industry at retail 52 in 1999 sat at $38.6 billion, a figure which has declined every year subsequently to a figure of $29.8 billion in 2007 53. This
52

one issue here is whether the size of the recording industry should measured in terms of retail sales or the actual revenue generated by sales to retailers (i.e. trade prices)
53

For a year on year analysis on wholesale value of the recording industry, see Appendix 2

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covers a period where the value of the industry was squeezed by the decline of the market for singles, the decreasing retail price of CDs and the impact of freely available music for download on the internet. It is, therefore, unsurprising that the IFPI now positions itself as being part of a $130 billion industry, though this figure is extrapolated crudely from a huge range of data largely supplied by the industries in question, thus magnifying the margin for doubt in the calculations. It also raises a number of questions about what should and should not be considered part of this broader music industry as defined by the IFPI. At this juncture, it is perhaps worth remembering that the monetisation of music began with sheet music (music publishing), proceeds from live performance and later the rights attached to performance (also collected by publishers) before the advent of technology (gramophones initially in the late nineteenth century) allowed the creation of recording industry. It could be argued that the vast majority of income generated by musicians in the twenty first century still comes from one of these three sources - through the music publishing industry (monies from the manufacture of records, performance - both live and in assorted media and the synchronisation of music to film, TV and advertisements), the live music industry (through fees for performance and the sales of merchandising and sponsorship rights) and the recording industry (through advances and royalties). However, there are numerous other activities which could be considered part of the music industries. For example, the IFPI include many industries from which musicians and songwriters received no direct revenue, such as the sale of radio advertising, musical instruments and portable digital players in their total figure of $130 billion. Similarly, when studying the music industry in Scotland for Scottish Enterprise, we (Williamson, Cloonan and Frith 2003) included the media, ancillary services (including legal, accountancy, management and publicity companies) as well as music retail (record shops and musical instrument shops) and music education as part of a calculations

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of the value of the music industry in Scotland. The response to this proved that both the notion of value and what constitutes the music industry are highly contested areas. While the report argued that value could viewed as being more than what the PRS told us constituted the music industry those who create and exploit IP rights (letter from PRS Scotland to authors, 2nd October 2003) these problems of definition and valuation create some anomalies and problems which have informed both this, and our other subsequent work. Part 2: Changes in the music industries - Starting Points Providing historical context and problematising how we define and understand the music industries offers a useful starting point for an analysis of the contemporary changes within them, allowing for both comparisons with the past and to question and explain the motivations of the large conglomerates that dominate the contemporary music industries. This section will examine, in broad terms, the major technological and legislative changes across the industries in recent years. The subsequent case studies will examine more specifically the playing out of these changes in the recording and live music industries have impacted on the two companies in question, in particular, with the emergence of new structural and organisational models for the individual firms. For the purposes of this chapter, it is difficult to pinpoint a starting point for contemporary changes, without appearing slightly arbitrary. While the majority of the changes discussed have taken place in the period since 1999, each of these has its roots in more fundamental change during the preceding decades. For example, changing economic conditions, the advent of digital music carriers and the changes in the law resulting from the WIPO Copyright Treaty in 199654 all preceded that date, but their impact was felt most strongly after it. For this reason, 1999 is a useful starting point for examining
54

This was implemented by the members of WIPO members in the subsequent years - the USAs Digital Millennium Copyright Act (1998) and EUs Copyright Directive in 2001

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the contemporary changes in the music industries as it marks a major tipping points in the history of these industries as a combination of factors resulted in the end of both the recording industrys boom period and its dominance of the music industries. Simultaneously, the music publishing and live music industries took on a much greater significance when studying the social economic and political changes in the production and consumption of popular music. Choosing a date to mark the starting point of a study can be done using the alignment of a number of different considerations which result in major socioeconomic change. In the context of the music industries, Peterson (1990) listed a number of factors which, when aligned, marked the year 1955 as the starting point of the popular music business, organised around the success of early rocknroll records. Peterson points to six factors, all of which, to greater or lesser degrees, can still be viewed as integral to the recent changes in the industries, and used to justify using 1999 as a starting point for examining contemporary changes in the music industries and as a significant date in the history of the business of popular music. These were changes in technology, legislation, the structure of the industry, the internal / organisational structure within the record companies, market demographics and what he termed career structure and occupational career (1990, p. 98). Each of these has contributed in some way to the fundamental changes in the industries in recent years, but this chapter will highlight the impact of technological and legislative changes. The following ones will look in more detail at the effect on the organisation and structure of the industries in general and within specific firms at the centre of them. While there have also been considerable changes in the quantity and nature of employment in the music industries in the period since 1999 (see Milmo 2003, p.25), these have largely been a consequence of the other changes rather than the factors which have precipitated the major structural changes in the industries, and, as such, will not be covered in detail here.

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(i) Technological Change The most significant contemporary changes in the music industries have been technological: the majority of changes to have impacted on the music industries in recent years has been related either directly or indirectly to the advent of digital quality recordings in the consumer market during the 1980s and the huge growth of the internet during the period since 1995. The advent of the compact disc, which launched in Japan in 1982, was the first massmarket digital music storage format, and significantly, not one which was protected in such a way as to make copying impossible. As the compact disc grew in popularity to become the dominant music carrier in the early nineties (overtaking vinyl and cassettes), computer hardware manufacturers realised the sales possibilities of home computer set ups which allowed users to both copy and play music. Initially, the complaints (and fears) of the record companies centred on the ability to make physical reproductions of CDs, as, in the mid 1990s, only 16 million people worldwide had access to the internet, accounting for less than 0.5% of the worlds population (http:// www.internetworldstats.com, accessed 25th May 2009). This increased to 1574 million people (23.5% of the worlds population) in 2008 (ibid), which coupled with the parallel increases in broadband access and speeds, has made the transfer of recorded music by digital means both a threat and an opportunity for the recording industry. Following the advent and accessibility of the CD-burner, two other technological advances were to combine with the growth of the internet to develop an online market (albeit one which was not, initially at least, monetised) in music which was to substantially change the nature of the recording industry. In the early part of the 1990s, the Fraunhofer Institute developed the MPEG-3 (mp3) music file, a compressed file which solved the problem of the huge size of music files and slow speeds of internet connections, which had prevented any form of online exchange of music. The combination of this with an application for such an exchange - the file sharing network Napster - resulted in a huge proliferation of digital music, albeit not

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one which the record companies approved of. The rhetoric of the time was typified by the RIAAs chief executive, Hilary Rosen, who during the course of the attempts to close Napster, described it as a haven for music piracy on an unprecedented scale. . a giant online piracy bazaar (quoted in Barfe 2004, p.326). However, by the time of its eventual closure in 2001, Napster had over 58 million users (ibid, p.328). While the record labels were able to close the first, large scale, peer to peer file sharing network, it was not sufficient to end the problems facing the recording industry caused by the sharing and free distribution of music. The use of the courts to and lobbying to attempt to close the widespread availability of free music online was a feature of the campaigns of the recording industry organisations throughout the last decade, with many of Naspters successors (for example, Audiogalaxy and Kazaa) being forced into settlements with the record companies, to initially withdraw copyrighted material, and subsequently become legitimate music platforms (see IFPI press release, 27th July 2006). In the light of the Kazaa settlement, the IFPI Piracy Report was still pursuing a defensive line with regards the many faces of music piracy (2006, p.4) estimating that almost 20 billions songs were illegally downloaded in 2005 (ibid) and that more than one in three of all music discs purchased around the world are thought to be an illegal copy (ibid). During period immediately after the closure of Napster the record companies also embarked on a number of other unsuccessful ventures to address the problems created for them by file-sharing, among them copy-controlled CDs and their own legal download sites (see Alderman 2002). Though the IFPIs rhetoric on piracy changed in subsequent years towards a more upbeat assessment of the legitimate digital music market, this was a result of the realisation that their position within the music industries had changed irrevocably with the acceptance that record companies have changed their whole approach to doing business, reshaped their operations

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and responded to the dramatic transformation in the way music is distributed and consumed (2009b, p.3). Having failed to stem the tide of music file sharing, the record companies, nevertheless, continued to act, where possible, to bemoan and limit the activities of file-sharers. In their 2009 Digital Music Report, the IFPI focused its attention on pre-release piracy55 (ibid, p.30) claiming that 3 million infringing links were removed as a result of legal threats by the record companies, and that over 40 billion files (ibid, p. 22) were downloaded illegally during the year. However, there is evidence that the approach of the RIAA and IFPI towards piracy has changed in recent times, with a reduction in both the amount of money being spent by the record labels in their pursuit of those uploading music to the internet. Initially, the new owners of EMI (Terra Firma) threatened to withdraw from the IFPI (see Gallo 2008), believing that the amount the major record companies contributed to the trade organisations, quoted by Terra Firma as being in the region of $250 million 56 (ibid), were too high at a time when they were attempting to rationalise costs within the company. An agreement was eventually reached which resulted in the record labels contributing less and the IFPI embarking on a cost-cutting plan (Holton 2008). Evidence of the impact of this, and of the record companies scaling back on anti-piracy activities was seen when the RIAA ended its arrangement with the company, Media Sentry, which was used for tracking illegally uploaded music, and with the news that around 25 members of RIAA staff were to lose their jobs in early 1999, including some in the antipiracy department (McBride 2009). Whether this represented a definitive change in approach by the record companies or merely a retrenchment caused by difficult economic circumstances is not entirely clear, but there does appear to have been a move on the part of the major labels to move from applying pressure on individual uploaders of music to lobbying
55

the practice of new albums being leaked on the internet weeks, sometimes months, ahead of their availability in the shops.
56

This figure was disputed by the IFPI

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governments with a view to extracting a rent from internet service providers for their part in the distribution of online music. While the impact of the internet has been most evident in the recording industry, it has also played a major part in the changes in the live music industry with the growth of online ticket sales, through both the primary and secondary ticketing markets. The latter, in particular, has created a myriad of problems for the concert promoters and artists/ artist managers in their attempts to protect their revenues, with considerably lobbying on the part of the live music industry for government intervention over the resale of concert tickets for profit, either by large scale companies (for example, Getmein, Seatwave and Viagogo) or individuals on auction sites (primarily e-Bay). This has been particularly noticeable in the UK., where the Concert Promoters Association (CPA) has been involved in an ongoing dialogue with government on this issue, including an appearance by promoters at a meeting of the Select Committee for Culture, Media and Sport, the publication of a report by the same committee in January 2008 and the subsequent response of the government (see White 2007; Baluch 2008; Gibson 2009). The report, and the governments response both indicated a lack of willingness to legislate in order to tackle the issues surrounding secondary ticketing, while acknowledging many of the problems associated it. Such a laissez-faire approach was at the heart of their call for voluntary action by the market participants, (reported in Ashton 2009a, p.1) although evidence of the governments continued interest in the sector came in the form of the announcement of a further DCMS consultation on Ticket Touting in February 2009 (ibid). The area has remained a source of controversy and disruption within the music industries, with some organisations (notably, the Release Rights Society, claiming to represent over 400 artist managers) and individuals (including Irving Azoff, the CEO of Ticketmaster and Rob Ballantine of the

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UKs Concert Promoters Association) arguing that resale of concert tickets should be made illegal. However, the response of both these organisations to the lack of legislation, has not been to increase their own efforts to clamp down on touting, but to become involved in the secondary ticket market themselves. In 2007, Ticketmaster bought the resale site, Ticketsnow, for $265 million, while in 2009, CPA launched its own ticket resale site, www.OfficialBoxOffice.com, which charges ticket buyers a 12.5% booking fee on top of the cost of the tickets, which are usually sold at considerably more than face value. On launching the site, CPA claimed that were the British government to introduce legislation outlawing secondary ticketing, it would immediately close the site in its current format (CPA press release, 23rd February 2009). In effect, the organisations who have bemoaned the immorality of ticket touting in one form, appear to have decided that it is a legitimate mode of operation when they share the profits from it, though this has created further conflict with artists. When Ticketmaster re-routed Bruce Springsteen fans to ticketsnow for sold out shows in 2009, the artist bemoaned a pure conflict of interest (cited in Knapton 2009) and received an apology from Azoff. (ii) Legislation - rights and prosecutions The second major area of change in recent years has been in the relationship between the music industries and the state, with a combination of the strengthening of the rights and industry organisations and an increased interest in the economic rle of the music industries from governments resulting in more legislative support for the industries. Indeed, the rle of government and lobbying in the music industries has become more significant in the light of declining sales in recording industry. While Hesmondhalgh argues that there is no reason to disbelieve (2009, p.10) the IFPIs claims of declining sales, he also points out the reasons for their willingness to disseminate such poor market performances in the media as being that such rhetoric can help the lobbying power of the recording

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industry, by strengthening arguments that domestic industries need government support in shaping legislation (ibid). The type of support the music industries seek from governments falls into two distinct categories - intervention and non-intervention. In the former category, the majority of the recent legislative pleas have centred around the protection of their products and extension of rights, while non-intervention has been the favoured outcome of the industries when both European and American legislatures have had to rule on the increasingly large mergers in each of the three major music industries. Government Intervention in the music industries The advent of digital technology has been used as rationale for the record companies to attempt to widen the scope of copyright in a manner that Frith and Marshall describe as benefiting corporate interests at the expense of those of both artists and consumers (2004, p.4). The first notable cases of this came in the USA, in the wake of the WIPO allowing its members to revise and extend national copyright laws to cover the internet and computer networks. This resulted in changes to the Copyright Act in the form of the Digital Millennium Copyright Act (1998), which included clauses preventing the circumvention of Digital Rights Management (DRM) on works belonging to suppliers of digital content. Hesmondhalgh considers this, along with the Sonny Bono Copyright Term Extension Act (1998), as being evidence of the digital environment being fruitfully presented by the copyright industries (2009, p.13) in a manner which suggested legislation was needed to protect them (ibid). The extension of the US copyright term 57 was to have a significant knock on effect in other parts of the world, being used by domestic industry organisations to argue for similar extensions in parts of the world where the term remains shorter. At present, this has been the subject of an intensive lobbying effort in the European Union, in an attempt to
57

this was extended to the life of the author plus seventy years (as in the case of music publishing) and for 95 years to works made by corporations, including films and most popular music recordings (Hesmondhalgh 2009, p.13)

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increase term length to 95 years, as advocated by EU Commissioner for Internal Market and Services, Charlie McCreevy. In the UK, the governments position on the copyright term extension for sound recordings has wavered between the position of the previously discussed Gowers Commission (which argued for no change) and a compromise which moved towards McCreevys position. In the interim, the case for extension had won political support after extensive lobbying from industry organisations. This came in the form of a report by the House of Commons Culture, Media and Sport Select Committee as well as from the leader of the Conservative Party, David Cameron, although this seemed to be conditional on the music industry demonstrating a wider social responsibility (Shewrin 2007). Pete Wishart, SNP MP for Perth and North Perthshire also introduced a Private Members Bill in the House of Commons proposing extension of term, though for an unspecified length of time. While academics and lawyers led by Martin Kretschmer lobbied the EU and argued in the media against extension (see http://www.bournemouth.ac.uk/ newsandevents/News/2009/mar/ne001_copyright_policy.html, accessed 11th March 2009), this held little sway in domestic political terms, though tellingly, the formulation of a definitive EU position has been delayed by the position of other member countries (Ashton 2009b). Government Non-Intervention in the music industries While this is the an example of the importance of government intervention in favour of the music industries, there are also a number of instances, in both the EU and USA, where either the inaction, or very limited interventions, of governments has also worked in favour of the music industries, and, in particular, the large corporations which dominate the recorded music, live music and music publishing industries. As with the lobbying for new legislation, the majority of cases centre on the battle for control and ownership of rights among ever larger companies. The two practices within the music industries which ought to have caused most concern for the

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legislators have been the non-competitive nature of both the largest companies and the monopolistic practices of the collection societies. In the first instance, it is useful to consider mergers in each of the three major music industries, each of which have set precedents in terms of scale. The first, and at that point, largest proposed merger in the recording industry was between Sony and the Bertelsmann Music Group (BMG) in November 2003. At the time of the merger, the market shares of the two companies were 14.1% and 11.1%, meaning that the merger, were it to go through would create a new company almost the same size as the market leader, Universal Music Group (UMG). After announcing the merger, it was subject to investigation by both the Federal Trade Commission in the USA and by the European Commission, which was concerned that the merger would create or strengthen a dominant position in the market (EU press release, 3rd October 2007). Within seven months of the investigations being announced, both the FTC and European Commission had approved the merger, despite protestations from organisations representing independent labels and consumers. However, after an appeal to the European Court of First Instance by IMPALA (Independent Music Publishers and Labels Association), the European Commission ruled in July 2006 that the original ruling had been flawed and for the first time, an investigation was reopened into a completed merger. However, the merger was again cleared in 2007, and though a further IMPALA appeal against the decision was lodged in 2008, Sony acquired 50% of the company it did not own later in the year, making it the sole owner of the company and ending the joint venture to which the smaller labels had mounted opposition. On this occasion, the European Commission ruled that the new Sony company would would not significantly impede effective competition (http://www.eubusiness.com/news-eu/1221501726.64/, accessed 1st March 2009) concluded that the transaction would not significantly impede effective competition within the European Union.

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More recently, in the music publishing industry, the purchase of BMGs music publishing division by Universal for !163 billion was also approved by the European Commission in March 2007, despite the combined catalogues creating a market share of 22%, making Universal the largest of the music publishing companies. In this instance, the commission did raise serious doubts (EU press release, 22nd May 2007) about the impact of the merger when it came to collecting royalties from online applications, as in many instances, these were the only areas where copyrights were not administered by the collection societies. In effect, the monopolies of the collecting societies, meant no competition concerns would arise (ibid) because of the uniform tariffs for the complete administered repertoire (ibid). However, with online rights, the Commission noted that, partly a result of one of its own recommendations, that publishers had started to transfer their rights to selected collecting societies acting as agents for individual publishers and granting European Economic Area (EEA) wide licenses (ibid). As Universal could gain competitive advantage in this field58, the Commission ruled that they had to divest a number of their existing publishing catalogues before the merger could go ahead, among them Zomba UK, 19 Music and BBC Music Publishing. Nevertheless, the divesting of these relatively small parts of the company could be considered a small price to pay for the larger merger to go ahead. Finally, in the live music industry, the proposed merger of Live Nation and Ticketmaster presents the largest challenge yet to the regulatory authorities, given the turnover of the two companies and vertical and horizontal nature of the merger. As well as being competitors, they occupy different positions in the live music industry, potentially creating more entry barriers in the formation of what would be the largest company in the music industries. After

58

Universal signed a pan-European licensing agreement with the French rights society, Socit des Auteurs, Compositeurs et Editeurs de Musique (SACEM) in 2008 to collect digital related revenues from across EU countries.

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the announcement of the proposed merger, the US Justice Department announced that it was to investigate the merger, with a hearing beginning at the Senate Judiciary Committee on Antitrust, Competition Policy and Consumer Rights on 24th February 2009, before being taken up by the House of Representatives Judiciary Committee on 26 February 2009. Lobbying on both sides of the argument has already been intense, with Smashing Pumpkins singer, Billy Corgan, who is managed by Ticketmaster Chief Executive, Irving Azoff, claiming in a letter to Congress supporting the merger that the combination of these companies creates powerful tools for an independent artist to reach their fans in a new and unprecedented ways (quoted in DeRogatis 2009). Other artists and Live Nations main rivals have opposed the deal. Bruce Springsteen argued that the one thing that would make the ticket situation even worse for the fan than it is now would be Ticketmaster and Live Nation coming up with a single system, (http://www.brucespringsteen.com, accessed 6th February 2009) while Tim Leiweke, the Chief Executive of AEG, the second largest concert promoter in the USA, said that I will be very, very surprised - shocked - if this transaction were permitted to proceed as proposed (Dicus 2009). However, the merger was duly approved in the UK in May 2010 by the Competition Commission, following an appeal to the Competition Appeal Tribunal by one of their rivals, CTS Eventim (Masson 2010a) having previously been approved by the Department of Justice in the USA in January 2010 (Waddell 2010). Aside from the major companies mergers often being unopposed, the rights collection societies have often been the subject of investigation from government bodies in both the UK and European Union, but with little evidence of their monopolies being meaningfully broken. The PRS was subject to a study by the UK Monopolies and Mergers Commission in 1996, but the recommendations focussed on how the organisation could more equitably distribute the monies it received rather than subjecting it to

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competition. The Gowers Commission revisited this territory by recommending that the OFT consider conducting a market survey into the UK collecting societies to ensure the needs of all stakeholders are being met (2006, p.8), while the EU has also been critical of the operation of the societies (see Wallis 2004, p.12; Kanter 2008). To date the outcome of their interest has been limited to the areas of cable, satellite and internet broadcasting use (Kanter 2008) and the outcome a free, pan-European market in these rights, where the rights organisations in each country can offer their services to music publishers and composers in another EU member state. However, when it comes to the collection of other performing and mechanical royalties, the organisations retain a near monopolistic position. In the USA, the two major rights collection societies - American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music Inc (BMI) - have been frequently subject to investigation by antitrust authorities, with the first investigation of ASCAP as early as 1934. Seven years later both ASCAP and BMI were accused of restraint of trade, forcing both organisations into signing Consent Decrees which placed certain obligations on them in exchange for preserving their market dominance. The decrees have been modified several times, most recently in 2000 (see Department of Justice press release, 5th September 2000), but the two organisations continue to dominate the market, with only SESAC (originally the Society of European Stage Authors and Composers), the only one of the three to operate on a for profit basis, taking a small share of the market. While it is the responsibility of governments to examine anti-competitive practices, there is evidence that while the music industries remain wary of government intervention,59 the actions of governments in recent years are perhaps best encapsulated by the DCMSs notion that it sponsors the music
59

the RIAA and MPAA (Motion Picture Association of America) both attempted to lobby senators into legislating a permanent exemption from antitrust actions, after a number of actions were raised against them by webcasters in 2003 (Orlowski 2003)

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business within the UK government. Among western governments, there is evidence of both a willingness to support the copyright industries as part of the increasingly economically important cultural / creative industries, and susceptibility to lobbying from these industries which makes regulation or interference, even when it may not be in the public interest, extremely unlikely. Conclusions This chapter has argued that it is no longer sufficient or helpful to consider the music industry as a single entity dominated by the sale of physical products by the record companies. Instead, it argues that the contemporary music industries are a complex mixture of overlapping industries predominantly based on the acquisition of IP rights. In doing so, it provides evidence of a shift in the industries perception of themselves: away from the remnants of a former manufacturing industry towards a series of fragile alliances of sometimes unlikely partners unified by an interest in a the acquisition and exploitation of intellectual property rights. Within this context, it has also observed that the changes which have resulted in structural and organisational change have stemmed mainly from new forms of underlying technology and the changing relationship between the music industries and the state. The most significant outcomes of this have been a change in the type, ownership and structure of the companies at the heart of the music industries, which reflects the increased importance of (among other things) rights acquisition. The case studies of Sanctuary Music Group and Live Nation Inc (Chapters 5 and 6) look in detail at the emergence of the new types of company and, in particular, the 360 degree company which is involved in all aspects of the music industries, before extracting some more general observations about the structure of the contemporary music industries and the type and nature of the companies involved in them.

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CHAPTER 5: CASE STUDIES / SANCTUARY MUSIC GROUP Introducing the case studies The two preceding chapters have provided a justification for the use of the case study as a research strategy and established a framework, via. Peterson (1990) for studying the contemporary changes within the global music industries. The two case studies which follow seek to provide a detailed analysis of two examples of the new type of firms which have emerged in the music industries as a response to these changes. Studying their histories as well as their organisational and structural responses to the market changes discussed in the previous chapter, allows for the extrapolation of more general observations about the changing nature of firms in the music industries in chapter 7. In choosing the firms for the these case studies, the major considerations were their influence on other existing companies as a result of innovation (in the case of Sanctuary) and the sheer scale of Live Nation, which has rapidly become the largest music company in the world. Superficially, the two may appear to offer similar solutions to the declining sales of CDs, by raising finance from sources outside the music industries (venture capitalists and the stock market) and by engaging in a rapid period of acquisition and expansion away from their core music industry60 . However, the routes taken and differences in scale mean that between them they offer a great deal of varying empirical evidence to illustrate the reorganisation of the music industries in recent years. While Sanctuary was a British company with its origins in artist management, which initially expanded as a record company, Live Nation is a much larger, US based company, which was spun off61 from the larger Clear Channel Communications, and is rooted in the live music industry. Sanctuarys
60 61

management in the case of Sanctuary; concert promotion in the case of Live Nation

US stock market term describing separation of one division of a large corporation into a separate entity

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inclusion can be justified on the grounds of being one of the first companies to expand with investment from outside of the music and cultural industries into a rights-based, pan-music industries business, with interests in management, the recording industry, live music and music publishing. It was also the first to label their approach a 360 degree 62 model, which has subsequently become a template for the strategies employed by the majority of the major companies, notably Warner Music, EMI and Universal in the recording industry and Live Nation in the live music industry. The interest in Live Nation stems from its historical difference from Sanctuary, both as part of a large cultural industries conglomerate (as opposed to an independently owned company) and its background in live music. All the previous major companies in the music industries have been based around the sale of recordings, but Live Nation emerged as a concert promoter which was capable of generating revenues comparable with (and in some cases in excess of) the major record labels. Although their model remained centred on live music, their subsequent ventures into multiple rights deals with major artists saw them also moving towards a 360 degree style business model. If moves towards such a structure hold an intuitive appeal for companies in the recording industries as a means of compensating for the declining returns from recorded music, these case studies also raise other important issues related to the recent changes in the music industries. Notably, these centre around the diffusion of traditionally held notions of independence within the recording industries, the replacement of traditional management structures in the recording industry with those more commonly associated with other large cultural industries firms, particularly those which are underpinned by entrepreneurial behaviour within larger organisations.

62

a model which involves involvement in the extraction of income from all aspects of an artists career, not merely one as was often the case with record companies, publishers, concert promoters, etc. This is discussed in more detail later in the chapter.

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In addition, the progress of the two firms suggest that the 360 degree models are a deeply problematic solution to the issues facing the music industries. With Sanctuary ultimately being taken over by Universal and Live Nation having failed to post a profit in its first five years of operation, these two companies offer an insight into the problems of companies faced with the difficulties of combining a risk-taking, entrepreneurial mentality with managing the expectations of shareholders and large levels of debt. In this situation, looking at the history, strategies and structure of such companies offers considerable insight into the contemporary workings and outlooks of both independent and major companies in the twenty-first century music industries. Sanctuary Music Group - an introduction Sanctuary Music Group was one of the most well-documented and reported music companies in the UK during the period of this research, partly as a result of their initial success and ability to supply the media with a number of good news stories at a time when coverage of the music industries was generally focused on their decline and the issues surrounding them, as discussed in the previous chapter. While much of the coverage of Sanctuary was PR driven and superficial in its outlook, this should not detract from the importance of Sanctuary in the wider context of the music industries during the early part of the twenty-first century. To redress this, this chapter will examine Sanctuary from an historical and organisational perspective. It will look at the history of the company in three parts - its origins, its growth and its demise before looking at the way in which its internal organisation changed during each of the periods. In terms of the latter it will examine Sanctuary as a record label (which became its main emphasis during its period of rapid growth) and in terms of its evolving organisational structure, notably in terms of ownership, demographics and strategy which culminated in the emergence of its 360 degree structure. It will argue, that in spite of its problems, as one of the first companies to fully

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embrace the market for rights and new realities of the music industries as described in chapter 4, Sanctuary was an important example of the changing structure of the both the music industries and the firms within them. History: (i) The Origins of Sanctuary Sanctuary was formed in 1988, though the companys founders, Andy Taylor and Rod Smallwood began working together informally as concert promoters at university in the 1960s and had traded since 1976 as Smallwood-Taylor Enterprises. This served initially as a vehicle for joint ventures outside their full-time work: Taylor trained and worked as an accountant, becoming a partner in Robson Rhodes and working as a financial director at Perstorp, while Smallwood worked for a number of small companies in the music industries as an agent and manager. This centred around concert promotion and catering, and they began selling shares in their business a year after its formation in 1976. The first major turning point came when Smallwood gave up his full-time employment with an agency to take on the management of Iron Maiden, who signed to EMI in 1979 and released their first album the following year. Within three years, the turnover of Iron Maidens record and merchandise sales exceeded 50 million as they became one of the most successful rock groups in the world. There were, however, several indications in their early careers that Smallwood and Taylor were interested in expanding the traditional limits of music management companies by offering a more holistic approach. This diversification during the 1980s included opening an American division, as well as making ventures into travel agency (Platinum Travel), live agency (Helter Skelter) and business management (Focus Business Management), providing services to both their existing management clients and others beside, opening a range of income streams beyond their management commission 63. It was in these early years of the company that two central
63

artist managers traditionally take a percentage (in the region of 10-20%) of the gross income of artists

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tenets of what was to become the Sanctuary Music Group became established: their willingness to sell parts of their business in order to raise capital for expansion and their ability to see income streams across the full range of an artists activities in the music industries. Arguably it was their background in both artist and business management that allowed them to develop their business in a manner that was considerably wider in its scope than their contemporaries in the music management and, subsequently, recording industries. By the early 1990s, Sanctuary began to focus on the accumulation of intellectual property rights, both in the music industries and beyond. Before expanding to launch a record label and music publishing company, Smallwood and Taylor had interests in book publishing and television production, the latter through Cloud 9, a short lived television production company, which was a joint venture with Roy Thompson, a former BBC executive. Funding for these ventures, significantly, came from outside what, at that time, were the conventional sources for funding in the music industries - namely, the major record companies or distributors. Several years later, a report commissioned for DCMS, Banking on a Hit, discussed the problems of achieving bank and venture capital funding for Small and Medium Enterprises (SMEs) in the music industries, concluding that the sometimes impoverished management image of the industry (1999, p.7) coupled with perceptions that it was complex and high-risk, resulted in low levels of investment. (ii) Externally funded growth (1996-2004) However, long before this Sanctuary had succeeded in raising funds from external investors. Venture capitalists, Baronsmead and ABN Amro had funded the initial expansion of the group into television production, while in 1996, a 40% share in Sanctuary Music Productions 64 was offered on the
64

Sanctuary Music Productions consisted of the groups record label, publishing company and recording studios

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Alternative Investment Market (AIM). The success of this in generating working capital resulted in the whole of the Sanctuary Group being listed on the London Stock Exchange, becoming a public limited company, in 1997. This brought about one of a series of organisational changes in the company. It was divided into three divisions (music, television and facilities) with Smallwood and Taylor by this point being reduced to owning 20% of the company each, though both retained senior management rles, as head of music management and Chief Executive respectively. The revenues from the stock market flotation allowed Sanctuary to embark on a period of unprecedented growth which continued until 2004, before a series of profit warnings during 2005 and 2006 (Sabbagh a nd Sherwin 2005) that preceded the companys eventual sale to Centenary Music, part of Universal Music Group, in 2007 (Fildes 2007). This period saw the turnover of the company increase from 23.06m in 1999 to 166.7m in 2004, with profits increasing from 3.11 million in 1999 to 18.36 million in 2003, before posting three successive losses in 2004 to 2006. The early part of this period of expansion saw Sanctuary emerge as a major player in the independent sector, allowing them to buy record labels and publishing catalogues,65 the merchandising company Bravado and the first of a number of management companies (MM&M and Big FD) which were to be a prominent part of Sanctuarys strategy. As both sale and profits increased, Sanctuary was able to attract further investment from outside the music industries in the form of the issue of 27 million new shares (raising 20.5 million) in 2001, with a further 20 million raised in 2003 from the investment banks, Merrill Lynch and Highbridge International. By 2004, the companys founders, Smallwood and Taylor, as well as some of the other directors sold blocks of their share in the company to allow further institutional investment ahead of their attempts to expand in the U.S. market. Ironically, Sanctuarys
65

Sanctuary bought Castle Music in 2000, Modern Records and the Trojan Records catalogue in 2001; it bought the publishing company Air-Edel in 2002

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diversification through the early part of the decade included the setting up of Gerrard/ Sanctuary Wealth Management Service in 2002, a company offering financial and investment advice to musicians and sports stars (see Sanctuary 2003). This new finance increased the companys bargaining power, both within the music industries and beyond. A global distribution deal was arranged with Sony BMG in 2003 and the company made the most significant of its purchases with the takeover of two management companies dealing with some of the most successful r&b acts in the world as Sanctuary tried to establish an urban division: Music World Entertainment was bought in 2003 and Erving Wonder, the following year, resulting in the formation of Sanctuary Urban Management, a company which represented artists such as Destinys Child, Angie Stone and Mary J. Blige. Sanctuarys increased interest in management was confirmed in 2005 with their last major acquisition, the 16 million buy out of Twenty First Artists, the management company for Elton John and James Blunt66 . (iii) The end of Sanctuary: Disorganisation and Disintegration The final years of the Sanctuary story offer a marked contrast to the growth of the previous decade, characterised by with the rapid selling off of parts of the company (primarily in the areas of management and record companies), profit warnings, take over rumours and financial and managerial restructuring, before the remainder of the company was sold to Centenary / Universal in 2007 (Terazono 2007). At the centre of these changes was the sale of Music World Entertainment back to Matthew Knowles for $5 million in 2006 (Terazono 2006), in recognition of the failure of Sanctuarys move into urban music. The Groups Annual Report for 2005 reported that a significant number of releases in the Urban Records operation were cancelled, and, while some of those that were rescheduled were released in
66

This came shortly after the acquisition of publishing rights for the GunsnRoses back catalogue.

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the early part of the second half of 2005, most of the remainder have now been cancelled (Sanctuary 2006, p.2). Further weaknesses appeared in the recorded music division, with the blame being laid at the door of joint venture, Rough Trade, which recorded a 2.8 million loss in the year to September 2006 (Sanctuary press release, 23rd November 2006). Sanctuarys 49% share in Rough Trade Records was subsequently sold to the Beggars Group in 2007 for around 800 000 (Allen 2007b). However, it was not only the recording part of the business that was subject to change. In November 2006, Iron Maiden ended their management relationship with the company, taking its founder, Rod Smallwood with them (Sanctuary press release, 3rd November 2006). Air Edel Recording Studios were also sold to Cutting Edge Music in 2007 for around 0.5 million (Sanctuary Interim Report 2007, p.1), as the company continued to dispose of assets as part of a strategy to recover from a series of financial and management problems which became evident on the publication of the companys accounts for the year to 2005. The companys auditors, Baker Tilly, reported that accounting procedures carried out by Sanctuary management in previous years had the effect of understating the loss for the current year by 15.9 million and to understate net assets by 26.3 million, (Warwick-Ching 2006) and that the accounts did not give a true and fair view of the state of affairs at 30 September 2005 of the group loss for the year then ended (ibid)67 . This, coupled with the announcement of a pre-tax loss of 143 million, off the back of a number of profits warnings during 2005 and 2006 (Jivkov 2006) resulted in the share price and value of the company dropping significantly, from around 50p per share in 2003-2004 to less than 1p in March 2006, before reaching a final sale value of 20p in 2007.

67

The Financial Reporting Council (FRC) later vindicated Baker Tillys qualifications (Reynolds 2006)

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These accounting discrepancies resulted in the departure of the companys other founder, Andy Taylor, in March 2006 (Sanctuary 2006) along with Finance Director, Mike Miller, and former chief executive, Merck Mecuriadis. Bob Ayling, a former Chief Executive of British Airways was appointed as chairman and Frank Presland, from Twenty First Artists 68, taking over as Chief Executive. By the time of Smallwoods departure in November 2006, there were no long standing members of the Sanctuary management team left on the board of directors. Instead there was a six person board, five of whom had been appointed in the previous twelve months (Sanctuary 2007, p.21). By the end of the year, none of the directors (or former directors) were listed as having a substantial interest, 69and the largest shareholders were all venture capital / banking groups - namely, Goldman Sachs (14.64%), UBS AG (11.39%), Artemis Special Situations (7.2%) and Citigroup Global Markets (6.06%) (Sanctuary 2007, p.23). Throughout this period, uncertainty over Sanctuarys future generated not only managerial changes and fundamental changes in ownership, but also resulted in a series of approaches from potential buyers, all from within the music industries. Both EMI and Warner Music were identified as potential buyers, and talks with the latter were believed to have taken place in 2005 (Stevenson 2005). In 2006, an offer was made by the Mama Group (Milmo 2006) - a smaller management and live music company based on a similar model to Sanctuary - which the Sanctuary board concluded was without merit (Sanctuary 2007, p.2). Almost a year passed before the eventual acceptance of the offer by the Centenary Music Group in June 2007, which saw the subsidiary of the Universal Music Group pay 45 million and take on around 60 million of debt (Fildes 2007).

68 69

the management company of Elton John, previously purchased by Sanctuary

a greater than 3% holding - which until 2005, Smallwood and Taylor had maintained a 10% share each

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In the period since the takeover, Centenary has systematically restructured the assets acquired from Sanctuary, closing the UK recorded music division to concentrate on merchandising, catalogue and management businesses instead (Holton 2007), while other, smaller parts of the business, such as the travel agent, Platinum Travel, were closed. This left Universal with ownership of the management company (Twenty First) responsible for Elton John and James Blunt, the merchandise company (Bravado) which is responsible for major artists such as Slipknot, Alicia Keys and Kanye West and one of the largest live music agencies (Helter Skelter) which books shows for (among others) Red Hot Chili Peppers, Amy WInehouse and Franz Ferdinand, and the intellectual property rights in recordings and compositions acquired by Sanctuarys record label and publishing company. Throughout its history Sanctuary can be seen as an innovative business which, from its inception, challenged the conventional approaches of the music industries - viewing them holistically, looking beyond traditional channels for investment (in doing so paying little regard to perceived notions of independence in the recording industry) and placing an emphasis on the acquisition of rights. All of these pre-dated the major companies taking similar approaches, with Universals purchase of Sanctuary clear evidence of its desire to consider a wider approach to the music industries beyond its previous interests in recordings and publishing. However, understanding Sanctuarys significance requires a closer analysis of how the company was organised during its growth and decline, with specific reference to the strategies which saw it shift substantially from being primarily a management company and record label to the 360 degree company of its later years. To do this requires a closer examination of Sanctuary as a record company, the changing ownership of the business and of the market demographics, as well as its voracious approach to intellectual property rights and the business model that emerged from it.

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Organisation: Sanctuary as a record company The recorded music part of Sanctuarys operation was significant as it was devised out of necessity when a number of Sanctuarys management clients in the rock/ metal field were unable to generate sufficient sales to attract the attention of the major record labels. This allowed Sanctuary to begin a process that, briefly, reversed the traditional relationship between independent record labels and the multi-nationals. Whereas the traditional view was that independent labels functioned a talent scouts and market researchers for the larger companies (see Chapple and Garofalo 1977; Harker 1980), the growth of Sanctuarys recorded music ventures was based on what they described as career artists, which are from a niche musical genre (Sanctuary 2004a, p.10). Two reasons were given for this: first, the lower marketing costs associated with artists who already had identifiable fan bases and, secondly, the resultant ability to predict album sales more accurately. This allowed Sanctuary to offer advances commensurate with the likely sales, resulting in a profit for the record label and the pay through of royalties for the artists. In 2004, Sanctuary claimed that it had only once lost money on a release of a career artist since it established its record division (ibid, p.13). These artists included Morrissey, Dolly Parton, Pet Shop Boys, Idlewild, Alison Moyet and Ocean Colour Scene all instances where the research and development costs had been borne by a major over a long number of years and where the act was well had a well established brand prior to signing with Sanctuary. This marked a radical departure from the situation described by Negus where major record labels embarked on collaborative arrangements, joint ventures and licensing deals (1992, p.16) with smaller companies to exploit their initial sourcing and development of new artists. Sanctuarys model allowed their record label to embark on similar arrangements, both with the major companies, such as their distribution arrangement with BMG in 2003, and

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minor ones, with stakes being acquired in existing independent labels, Rough Trade and Fantastic Plastic. This approach fitted the supposedly low-risk approach adopted by Sanctuary, though it could only benefit from the major companies shedding of established artists for a relatively short period of time before they too adjusted to the changing nature of the recorded music market. The failure of Sanctuarys recorded music division, which saw its turnover slump each year from 2005-7, could be viewed as a combination of the companys laissezfaire approach to the labels it did not wholly own, the problems with their Urban division, and the distorted figures created by the large scale success of individual albums, namely The Strokes Is This it? in 2001/02 and Morrisseys You Are The Quarry in 2004. By establishing joint ventures with labels who had existing track records (Rough Trade and Fantastic Plastic), Sanctuary was able to operate a handsoff approach towards both subsidiary labels and artists, which initially yielded rewards with the success of The Strokes in 2001, but which was later deemed a factor in their wider financial problems when Rough Trade began to post significant losses in 2006 (Wray 2006). This process of buying a stake in smaller independent record companies, while allowing them to retain their own identity, resulted in Sanctuary becoming the worlds largest independent record label (as well as the largest independent holder of intellectual property rights) and taking on the type of rle that major labels had previously adopted with independents, becoming part of a new type of larger, entrepreneurial independent with the resources to provide an alternative to smaller labels not wishing to be bought outright by one of the majors. Ownership, Outlooks, Rosters and Risks It is difficult to locate Sanctuary within the traditional discourses of major and minor / corporate and independent companies within the music industries. Indeed, the study of the history of independent firms (which is, how

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Sanctuary began) in the music industries suggests that survival in a marketplace dominated by large conglomerates can be achieved by taking one of four routes, three of which have played a significant part in the history of the Sanctuary. The first is to remain ideologically detached from external finance and remain a niche / micro-independent label, but each of the others involve diluting the control of the companys founders in exchange for the capital required to expand. These involve either outsourcing functions (such as marketing or distribution) to larger companies to reduce costs, or selling part or all of the company to external investors. The option of selling out (either in part or in full) has always been part of the discourse around independent companies, but it became an increasingly viable option in recent years with, with not only the larger music and entertainment companies interested in buying a part (or all) of successful smaller businesses, but also an increasing number of venture capital organisations showing a willingness to invest in the music industries. During the period 1996-2007, Sanctuary changed from being privately owned to investor owned and was finally bought over by a multinational (Centenary Music /Universal. As the ownership changed the company underwent an intriguing and rapid period of growth, restructuring and investment followed by a series of mistaken investments, accumulating losses and reports of mismanagement. For example, by the point Sanctuarys recorded music division reached its highest turnover in 2004, the group of which it was part was owned by a range of investors with its founders, Smallwood and Taylor each holding just 3.1% of shares issues in the company (Sanctuary 2005, p.18), and overall control being with a board of directors which contained up to eleven members representing different interests and divisions of the company. By way of contrast, The Beggars Group70 contains companies which are either wholly owned by its founder, Martin Mills (e.g. Beggars Banquet and 4AD) or
70

an group of UK-based independent labels of comparable size to Sanctuary circa 2004 (see White 2008).

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joint ventures (e.g, XL and Rough Trade) in which he owns a 50% shareholding, resulting in a greater stability and clarity of vision. Significantly, at a time when both companies saw their turnover drop dramatically in 2005, the Beggars Group managed to increase its profits to 2.2 million from a turnover of 15.6 million (Music Week, 15th September 2007), while Sanctuarys recorded music division posted a loss of 60.2 million on a turnover of 67.7 million (Sanctuary 2005a, p.8). If this highlighted the differing scale and managerial qualities of the two organisations at a particular point in time, the differences extended to both the outlooks of the companies and the type of artists being signed to their labels. Sanctuary had initially adopted what it described as a low risk approach to fostering acts (Sanctuary 2002, p.8) strategy with regards their record label, signing artists who already had an audience, which had usually been developed over a career with a major label. This approach, highlighted in the Groups 2002 Annual Report, claimed the success of their record label was down to what they claimed was a unique form of agreement with the artists, which constituted a partnership. . .to share in the income from revenue streams other than recorded music alone. This can include merchandising and visual rights licensing, audio-visual rights, music publishing, live performance agency and management (2002, p.3). This type of arrangement, the basis of Sanctuarys 360 degree model, also resulted in a reversal of the traditional dynamic between independent and major labels, wherein the independents were perceived as the risk takers and the perception that, according to Kusek and Leonhard, most significant musical trends have had their origins in small independent music labels (2005, p.11). By adopting a low-risk and large scale approach, outsourcing the riskier elements (lesser known artists) of their business to joint ventures with Rough Trade and Fantastic Plastic, Sanctuarys record label offered an approach that was well suited to attracting investment, but which had nothing in common with the more oppositional, post-punk labels

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described by Hesmondhalgh (1996) or the musical innovation associated with one-time independent record labels like Island, Virgin and Mute. Indeed, the differences in approach and outlook between independent and major operators in the recording industry has often been overstated and, in reality, their world view has frequently been remarkably similar (see Negus 1992, pp. 18-19). In this light, Sanctuary can be viewed a logical extension of the type of petit bourgeois entrepreneurial capitalism which Negus (ibid) identified as underpinning the operation of many independent labels in the early nineties. If there is a difference between Sanctuary and some of their comparable predecessors, it is a result of a more formal relationship with the market and the greater transparency required by being listed on the stock market. As a consequence, Sanctuary became more scrutinised (by the media) than many other, smaller companies operating in a similar manner. Demographics and Strategies: Ageing Artists and the Digital Market However, it was not solely the ownership of the company which separated it culturally from many other independent operators. Central to this was Sanctuarys attitude to new technology - in particular, digital means of distributing music - and a resistance to it, which was perhaps a consequence of the type of artists signed to the label. The outcome of signing heritage artists with a sizeable back catalogue and ageing audience was that Sanctuary, like some of the major labels, was slow to respond to changes in the market, something which many other independents used to their competitive advantage. Evidence of this can again be gained by comparison with the Beggars Group, who by the end of 1999 had digitised their entire catalogue and begun the process of negotiating and coming to arrangements with various aggregators (Cardew 2007, p.10). Other larger independents, such as Sheffields Warp Records, had also generated considerable revenue from their WarpMart online store and its subsequent offshoot, bleep.com, a digital retailer for independent labels.

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By contrast, Sanctuarys attempts to embrace digital sales of their catalogue were painstakingly slow. Despite having an in-house licensing department, Sanctuary were slow to realise potential income from the exploitation of both digital music sales and the synchronising of songs for use in television, film and video games. While Beggars Group and Warp were looking to both as a means of increasing their revenues (or at the very least make up for the falling sales of physical products), Sanctuary was lulled into a false sense of security because of their investment in both labels (the Castle and Trojan catalogues) and artists (Lynyrd Skynyrd, Joey Ramone and the Kinks) which were embedded in the vinyl and CD culture of the past. Despite Sanctuary licensing their entire catalogue to the Full Audio Corporation (who at the time were developing the Music Now digital media subscription service) in 2002, this turned out to be one a series of failed early attempts to monetise digital music. A year later, Mike Miller (2003) described Sanctuarys position as one of being technologically agnostic, an indication that Sanctuary had still to be affected by the declining sales of physical product evident in the wider recording industry. Around the same time, the company declared that our long-term process of digitising all our recorded music catalogues is now in its third year, (Sanctuary preliminary results 2004, p.6) and indicated that, eventually, we would expect our digital income to reach similar levels as for the major record companies (ibid). It was not until after the results of Sanctuarys recorded music division began to show a loss 71 as result of what they described as difficult trading conditions since April 2005, particularly in the Urban Records operation (Sanctuary 2005, p.2) that a renewed urgency was shown to maximise their income from digital sales of both their catalogue and new music. Along with Britains other largest independent record labels at the time, the Beggars Group and V2, Sanctuary joined Apples iTunes music
71

Sanctuarys Recorded Music division made a loss of 5 million in 2004, and a more significant loss of 60.2 million in 2005

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service in 2004 (Apple press release, 21st July 2004), but were still admitting in their 2005 Annual Report that our revenues from digital music are still relatively small (2006, p.10). By this stage, Sanctuarys digital sales were well behind the 6% of all sales quoted by the IFPI (2005, p.1) while their record label continued to lose money as a result of a number of factors, some specific to Sanctuary, some a result of global trading conditions over which they had little control - notably lower retail prices for CDs and the continued impact of downloading and CD burning. As well as the failure of Sanctuarys Urban Records division to deliver its key releases on time or on budget, the other consideration was the absence of any big selling albums in the years after 2004. You Are The Quarry by Morrissey, was the biggest selling album released by Sanctuary Records or any of its wholly owned subsidiaries,72 and none of their subsequent releases were able to match the levels of revenue generated by it. As their recorded music division decreased in size, Sanctuary reported in their 2006 Annual Report that they had set a target of 45 000 tracks to be digitised by the middle of 2007 (2007, p.4) while setting a target of 14% of all their sales to be on digital formats by 2008. Shortly before the sale of Sanctuary in 2007, the company agreed a deal with The Orchard, a digital music distributor and marketing company, to facilitate this, a partnership which was never fully developed or utilised. It was not only the slow adaptation to change in the distribution of recorded music that presented difficulties for Sanctuary, but also the placing of the record label - the most traditional and risky part of the 360 degree model - at the heart of the companys wider operations. In addition, despite the rhetoric, the record label offered a standard business model when it came to recording contracts, similar to those which had been adopted by the majors. Artists
72

in this case, the reactivated reggae label, Attack!

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were offered advances against sales, with a royalty being paid after the costs and advance were recouped from sales (Miller 2003). While much emphasis was placed on the low-risk strategy of signing established acts at the peak of Sanctuarys success (ibid), it was at a point when global record sales had been in decline for four consecutive years that Sanctuary decided to invest in the expansion of its recorded music division, in doing so jettisoning the low-risk strategy in an attempt to break into the urban and hip-hop market, and with it the American market. This expansion was primarily the result of the purchase of Music World Entertainment - a management company for artists like Destinys Child, Mary J Blige and Eve, for 6.6 million in 2003 (see Kimbell 2003). As well as purchasing the company, the deal involved the setting up of a joint venture record label through Sanctuary and BMG distribution to develop urban and gospel acts (ibid), and it was this, coupled with the diminishing returns from some of the established acts on Sanctuary, that were to reverse the fortunes of the recorded music division. The takeover of MWE was far from a low-risk deal, and represented a major cultural and geographic shift away from Sanctuarys core business. Prior to this, Sanctuarys record releases had primarily centred on rock music and back catalogue, with the bulk of their sales in the UK, where Sanctuary was the sixth biggest record label with a 1.9% market share in 2005 (Sanctuary 2006, p.10). 73 By contrast, the new urban record label, while also home to some established acts (e.g. Chaka Khan, Earth, Wind and Fire and The OJays) concentrated its launch of albums by Bizarre, Ray J and De La Soul, all of which were delivered late, and which were deemed to be the reason for such poor results in the Recorded Product division in 2005. The Groups Annual Report of 2005 (under) stated that our move into Urban
73

albums released on Sanctuary included new releases by Robert Plant, Saint Etienne and the Blue Nile; Rough Trade enjoyed success with The Libertines, The Strokes and Antony and the Johnsons. Sanctuary also had a series of successful, TV advertised compilations including Reggae Love Songs and Teenage Kicks

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Records was a miscalculation (2005a, p.9), with the explanation that a number of releases in the Urban Records operation were cancelled, and, while, some of those that were rescheduled were released in the second half of 2005, most of the remainder have now been cancelled and the Group will make no further releases under its Urban Records operation (ibid, p.6). This, along with the subsequent problems at Rough Trade, effectively constituted the end of Sanctuary as part of the recording industry. Having sold MWE back to its owner, Matthew Knowles, for less than it paid74 in 2006, the further decline in Sanctuarys Recorded Product division (see table 5.1 below) was attributed to a combination of internal (the 2.8 million loss at Rough Trade being one of them) and external issues. For the first time in the history of its record label, Sanctuary admitted that the failings of its Recorded Product division were partly because of the changing structure of the recorded music industry (Sanctuary 2006, p.4) and that the companys own financial problems made it difficult for them to sign new artists. This came some five years after the company had issued a press statement in response to losses made by EMI, when it claimed Sanctuary is not affected by many of the issues facing EMI and in particular Sanctuary is not in the position of having to cut significant overheads in response to changed economic circumstances (press release, 26th September 2001). The table overleaf illustrates the changing fortunes of Sanctuary in the period from 2004 until its sale.

74

MWE was bought by Sanctuary for $7 million in 2003 and sold for $5 million (Terazono 2006)

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Year

Sanctuary turnover

Sanctuary Prot / loss (pretax) 12.02 15.62 18.36 -26.7 -146.45 -70.14 -6.58

Recorded Music/ Product turnover 49.1 61.7 78 82.1 59 35 16.42

Recorded Music/ Product prot / loss 4.59 9.34 11.32 -4.95 -60.16 -20.61 -1.7

Recorded Music as % of turnover 59.7 52.2 51.4 49.2 39.9 26.3 25.8

Recorded Music as % of prot/ loss 38.2 59.8 61.6 18.5 41.1 29.4 25.8

2001 2002 2003 2004 2005 2006 2007

(6 months)

82.28 118.1 151.68 166.7 148.09 133.1 63.7

Table 5.1 Sanctuary Music Group: Headline Financial Figures (in millions), taken from Sanctuary Group Annual Reports (2001- 2006), Interim Report (2007) While the change in the fortunes of Sanctuarys Recorded Product division was largely in line with that of the group as a whole, its relative importance within the group declined as it constituted a lower proportion of the overall group turnover. In the years when Sanctuary made a loss, the contribution to that loss of the Recorded Product division was roughly in line with its proportion of the Groups turnover. If this suggests that the record company was not the sole source of Sanctuarys problems, then the refusal to accept the prevailing market conditions and the ability to piggy-back the investments of major companies in the immediate post-1999 period, gave an inflated sense of well-being to Sanctuarys activities in the recording industry in the early part of the decade. Notably, the willingness to continue investing in new acts - often at arms length through Rough Trade and the Urban Records label - was one of their miscalculations, but more significantly, the effects of the downturn in sales

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of recorded music were less noticeable at Sanctuary in the early part of the decade because of their insistence on signing established acts, whose fans were most likely of an age group who would be slowest to respond to the advent of digital music distribution. However, it was the abandonment of their low-risk signing strategy with the Urban division, combined with the diminishing returns from what were perceived as failed artists, which were the key factors in the demise of Sanctuarys record label. Significantly, by the time the Sanctuary Group was sold to Universal in 2007, the buyer (which was already the largest record company in the world) had little interest in the assets of its recorded music division, having already set up a label, W14, for established artists from all music genres (http:// www.w14music.com, accessed 17th August 2008) whose roster includes some artists previously signed to Sanctuary, including Simple Minds and Alison Moyet. However, it is unlikely that this was the main reason for Universals lack of interest in Sanctuarys recorded music assets. While the sale of minor or independent labels to the majors has been a recurring historical pattern (see Negus 1996, p.43), Cvetkovski notes that, in recent years, the majors have been acquiring fewer labels (2007, p.117)75 . This could be attributed to a number of factors including the weakness of their own financial positions,76 the general state of the market, the wider economic climate, and competition law which could potentially prevent the further growth of the market dominating record companies (Universal and Sony). Indeed, Universals purchase of Sanctuary may well have been part of the development of a new strategy. Having firstly stabilised their market share in
75

This pattern was reversed in 2007 with Universals acquisition of both Sanctuary and V2 Records.
76

In the early part of the last decade, all of the major record companies reduced the size of both their rosters and staff.

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a diminishing recorded music market, they sought to widen their interests across the music industries. Ironically, this came at a point after Sanctuary had determined that their integrated approach to the music industry. . .proved unable to deliver the expected performance (Sanctuary 2006, p.4), though arguably Universal have a much more robust financial and organisational structure in place to expand their interests than Sanctuary had circa 2003. To this end, Vivendi, the owners of the Universal Music Group, claimed that Sanctuarys merchandising and artist management businesses will provide a springboard for UMGs expansion into music related businesses (Sanctuary 2007, p.26). In essence, the recorded product division was an integral part of the Sanctuary Group story and the focus of the companys generally positive media attention as it grew during the period immediately following its stock market listing. Subsequently, its failure and decreasing value 77 meant that it also played a significant part in the wider failure of the Groups 360 degree model. At the outset, applying a strategy of cautious acquisitions, appeared to work as it both grew in turnover and remained profitable at a point when other record labels were struggling to deal with the technological shifts in the market. However, this approach was in many ways incompatible with the vision of the owners of the company and there was considerable pressure to expand this part of the business along the lines of the entrepreneurial capitalism described by Negus (1992, p.18). By raising large amounts of capital and embarking on a series of large scale acquisitions (most notably MWE) to pursue turnover and increase shareholder value, Sanctuary managed temporarily to camouflage its financial position to potential investors, while simultaneously undermining its own, potentially workable approach to the post-1999 recording industry.
77

Universal paid !12 million for the recorded product division of Sanctuary and !67 million for the Artist Services division. See also the declining % of Sanctuarys overall turnover generated by the recorded product division in table

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Sanctuary and Intellectual Property While identifying the performance of, and approach to, the recorded product division as one of the key factors in wider failure of the Sanctuary Music Group, it is important to locate this within Sanctuarys overall strategies during the period of its stock market listing, namely the acquisition of intellectual property rights as the basis for a 360 degree music industry model. Crucially, during its time as a publicly listed company, the Sanctuary Group chose to define itself in terms of rights acquisition. In its preliminary results for the year ending 30th September 1999, it described the company as one of the UKs leading developers of intellectual property rights (IPRs) (Preliminary Results 2000, p.1), something which had expanded by 2007 to allow it to describe itself as a leading developer of music intellectual property rights making it one of the worlds largest independent owners of IPRs (http://www.sanctuarygroup.com, accessed 7th February 2006) At various points during its growth Sanctuary even claimed, with over 150 000 copyrights under its control, to be owner of the worlds largest independent recorded music catalogue (Sanctuary 2003, p.i).

While there was a significant change during the period from the acquisition of general media rights (including in television and film) to a more focussed approach on music, the company always considered the acquisition of catalogues and rights as integral to its growth, claiming in 2000 that we will continue to acquire catalogues which fit within our areas of specialisation and where there are significant opportunities to enhance shareholder value (Sanctuary 2000, p.1). While its acquisition policy continued until 2005, and it is clear that this remained driven by shareholder expectations, it was through investing in rights outside their areas and genres of specialisation (notably urban music) that Sanctuarys initial success ended. This provides the evidence that Sanctuarys world view of the recording industry was more centred on the potential proceeds brought about by

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ownership of rights in the master recordings for their exploitation than more traditional aspects of talent acquisition described by Negus (1992, pp.48-51). By being ahead of the major record labels in recognising the importance of rights across the music industries in a market where physical sales were declining, Sanctuary laid the foundations for what ought to have been a successful business model. Significantly, they were also early adherents to the type of approach expounded by Andersons Long Tail (2006), which highlighted the importance of catalogue exploitation in the recording industry. Sanctuarys initial investments in record labels concentrated on companies with proven catalogues in the rock/ metal and reggae/ dub genres. In the former, Castle Music, CMC International and Modern Music were acquired in 2000 and 2001, resulting in greatly increased turnover and profits, while the purchase of the Trojan Records catalogue in 2001 for 10.4 million and Creole Records for 1.34 million in 2003, allowed Sanctuary to make their mark in the reggae market. An example of the exploitation of these acquired catalogues was the success of the Reggae Love Songs series, the first of which sold nearly 300 000 copies in 2003. However, after raising 20 million from investment bankers Merrill Lynch and Highbridge International in 2003 and acquiring MWE around the same time, Sanctuarys policy of acquiring music catalogues became unsustainable. There were a number of reasons for this, not least Sanctuarys own financial problems, but also the increased value of independent catalogues 78 as the major companies began to pursue a similar strategy. Interest from venture capital consortia in music catalogues further increased competition, making it more difficult for Sanctuary to continue acquiring rights. In addition, they had to become ever more resourceful in the attractive repackaging of previously released material, as with the series of compilations and reissues to mark the

78

For example, Warner Music paid $67.5 million for the independent label, Rykos catalogue in 2006. Sanctuary bought the Trojan catalogue for 10.3 million in 2001 and the Creole catalogue for 1.34 million in 2003.

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40th Anniversary of Trojan Records in 2007. With much of the material already available and sales of recorded music still in decline, returns from such catalogues were diminishing through time. There were also a number of wider issues connected to Sanctuarys approach to intellectual property which were not highlighted in the companys reporting to shareholders, namely their frequent use of out of copyright material and purchases of catalogues wherein the creators were frequently unidentified or unpaid to maximise return without payment to the artists. The former strategy was most evident in the companys approach to classical music, while the former raised its head in their exploitation of reggae and hiphop catalogues. Sanctuary Classics consisted of eight record labels, most of which released, at budget prices, music which had been created in the period prior to the fifty year copyright term on sound recordings. For example, Living Era Records released music which was recorded from the twenties to the fifties, while ASV Records and Resonance released catalogue classical recordings. Sanctuary was therefore able to use these labels for the release of recordings which were in the public domain and needed no payments to be made for their acquisition. As UK based labels, advantage was taken of the shorter copyright term on sound recordings in the European Union than in the USA,
79

with many of the CDs ending up in the American marketplace. This was a

factor in Universals decision to close these labels as part of their purchase of the Sanctuary Group. Scheduled releases like a Hits of 1957 album were removed from the schedules, as Universal would have to pay for the use of such tracks in the USA, making them non-viable, while also sitting uncomfortably with the attempts of the record labels to extend the copyright term in sound recordings in the EU.

79

the length of copyright term on sound recordings in the USA has been 95 years since the Sonny Bono Copyright Term Extension Act of 1998

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If this was one area where Sanctuary was able to exploit copyright with no or limited payments to the creators or owners of the works, they were also able to take advantage of the opacity of ownership of much of the catalogue material they had acquired. For example, much of the music acquired on Castle and Trojan, prior to their sale to Sanctuary, had been acquired from a range of small labels, some of whom operated on the margins of acceptable business practice. As ownership of the copyrights moved between companies, the likelihood of Sanctuary being able to track the original rights owners decreased, making them subject to a number of claims in both the American and French courts. Sanctuary were pursued by Sylvia Robinson of the US. label, Sugar Hill Records, over unpaid royalties on the Sugar Hill catalogue which was acquired by Sanctuary in 1995. An initial judgement rescinded the contracts while the court ordered an inquest into the amount due to Sugar Hill in damages. Sanctuarys lawyers estimated that these would have been in the region of $300 000 to $5 million (Sanctuary 2005, p.49), while a potentially larger amount (around !9.4 million) was claimed in French courts by assorted reggae artists. These artists claimed that they had not given written permission for their performances to be exploited on albums released by Sanctuary, an entirely plausible claim given the scant respect for performers and composers afforded by reggae labels in the 1960s (see Bradley 2000; Katz 2003) and the subsequent dealing in their intellectual property. Though these cases remained unresolved at the time of the sale of Sanctuary, they provided another reason for Universal to end their interest in the recorded product division of Sanctuary. Ultimately, Sanctuary made two major mistakes in their recorded music division, which were responsible for the failure of the wider aims of the company. These were the devolving key parts of their recording industry activities to arms-length companies, over which Sanctuary was not always able to influence decision making or budgets, and the adherence to a model

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that continued to place record sales at the centre of their activities at a time where sales were declining as other music industries grew in size. When this changed in the period after 2004, the losses incurred by MWE and Rough Trade were extensively blamed for the turn round in fortunes of the Recorded Product Division. However, it was not solely these ventures which were unprofitable, as the overall decline in sales of recorded music had began to impact on Sanctuarys releases. With the major labels reducing the dealer prices of CDs to offset the threat of illegal downloading, the returns on back catalogue releases were also in decline and it would appear that the amounts spent on acquiring recorded music catalogues in the early part of the decade were not proportionate to the returns on them. The slow pace of Sanctuarys digitisation of their catalogue also contributed to their inability to maximise their returns on catalogue. When Sanctuary found itself expanding rapidly, in response to positive results as well as expectations from shareholders, its cautious approach changed to one which suggested the company thought itself immune to the wholesale changes in the recording industry post-1999. Their attempts to set up Sanctuary Urban found them growing outside their areas of expertise, while they simultaneously ignored the potentially greater long-term returns of music publishing catalogues on the grounds that the majors have consolidated in music publishing, and in doing so have artificially inflated the price of publishing catalogues (Miller 2003). In placing the emphasis on the shorter-term, product related rights associated with recordings over the longer-term, more exploitable publishing catalogues Sanctuary effectively undermined the viability of their 360 degree model. Sanctuary and the 360 Degree Model Despite the ultimate failure of its recording division, Sanctuary was one of the first companies to set about reorganising in response to the changes in the music industries in the late 1990s and early part of the subsequent decade.

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In this respect, their management background allowed Smallwood and Taylor to recognise that their capital investment was being used by artists to generate brands capable of producing revenue streams (notably performance and merchandise) on which the company generated no return. The outcome of this was, as well as the accumulation of intellectual property rights, a period of diversification, which saw the company expanding their interests to cover records, management, DVD, live agency, merchandising, music licensing, recording studios, composers, TV programming, worldwide touring, music publishing, books, producers, mastering and visual rights licensing (Sanctuary 2002, p.iii), which formed the basis of the what they first labelled their 360 degree model in 2002. This was a notion of an integrated suite of mutually supporting music industries under the umbrella of one company, described by Kusek and Leonhard as a network of connected companies that address all aspects and opportunities in the music industry (2005, p.113). Mike Miller also highlighted the appeal of such an approach to both institutional and individual investors, describing Sanctuary as a unique proposition, not just another record company, producing a whole spread of revenues, not just from one situation, (2003) comparing its strategy against Richard Bransons failure to successfully launch Virgin Records on the Stock Market prior to its sale to EMI in 1992. While Sanctuary were able to lay some claim to the uniqueness of this approach at the time, it was not the new concept that some of the excitable media commentators of the time suggested (see Hopkin 2005; Kusek and Leonhard 2005; Wylie 2005), nor would it remain unique, as other companies, of various sizes and with varying degrees of success, adopted and adapted the model in subsequent years. The origins of the 360 degree model rested in Sanctuarys origins as an artist management company and was something of a throwback to the era in which Smallwood and Taylor first became involved in the music industries. With management being the only sector of the music industries with such a

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rounded perspective on an artists activities and potential income streams, it is unsurprising that Sanctuarys initial moves into business beyond the scope of their responsibilities began during the 1980s when Smallwood and Taylor were managing Iron Maiden. By setting up their own travel agency and concert booking agent, as well as offering their artists investment advice and merchandising services they adopted an unusual approach to the music industries in the late eighties, but one which was based on pragmatism and self-sufficiency (reducing costs and increasing profits for both them and their artists) rather than being part of a wider, 360 degree vision. Notably, in setting up these satellite businesses, Smallwood and Taylor steered clear of both the recording and music publishing industries, instead concentrating on less glamorous parts of the music industries which they believed to lack professionalism (Miller 2003). Though it would be tempting to view this as the starting point for their 360 degree approach to the music industries, by the early nineties, their strategy appeared to change substantially, with the emphasis moving away from music towards a wider accumulation of media rights. The emphasis on rights saw the company shifting away from its music management core to start a joint venture TV production company, Cloud 9, which produced a number of predominantly childrens TV programmes. By 1996, around 40% of Sanctuarys income came from their interests in television, and though this was to subsequently decline, Sanctuary retained their interest in the accumulation of intellectual property rights and it was on this basis that they offered shares in the company on both AIM and later the Stock Market. After dalliances with television, the company returned to its original focus on music. However, some aspects of this expansion seemed to draw parallels with the expansion of record companies into other parts of the music industries in the late 1960s and early 1970s. Frith claimed that in this period the major

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recording companies had begun to swallow up other area of the music business (1978, p.113). Examples of this included EMIs interests in record distribution, television (they had a controlling interest in Thames TV), equipment manufacturers, retailers and ticket agencies) in order to claim indirect benefits to their core business and integrate the companies both vertically and horizontally. While it remained common for the major record companies to have interests in other parts of the music industries (usually publishing and distribution) the following decade saw increasing disintegration, with the outsourcing functions and the disposal of assets, particularly during the period of decline in global sales of recorded music between 1979 and 1983. EMI sold their interest in Thames Television in 1985. Though these models saw record labels expanding to, at least temporarily, embrace a wider view of the music industries, Sanctuarys growth into such a company was different in at least two key ways. The first was that a management company, rather than a record label was the starting point for the expansion, the second that as an independent company, Sanctuary was able to attract the kind of external investment, through the Stock Market, that, in the past, would only have been available to the major record companies. Though the move into the recording industry was another pragmatic move on Sanctuarys part - to provide a platform for artists they managed which no longer had an outlet for their music through the major labels - it was, along with their flotation on the Stock Market and the attraction of external investment, at the centre of what was to become their 360 degree model, first mentioned in their Annual Report of 2002. Although Sanctuary could lay claim to being the first to use the terminology, their version of 360 degree model was largely unsuccessful, though the concept is still at the core of much contemporary thinking about the music

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business models 80. It is therefore worth considering how the model, as developed by Sanctuary, has been adapted by larger companies like Live Nation and Universal, and whether it represents a sustainable approach to the music industries. When Sanctuary first used the term, Executive Chairman, Andy Taylor, described it as a unique and successful music business model and I am happy that we now have all the components in place in our truly international 360 degree approach, reducing the need for further acquisitions (Sanctuary 2002, p.5). In spite of this, the following year saw Sanctuary continuing to aggressively acquire other businesses, but tellingly their financial success in the period 1998-2004 came largely before the model was fully realised,operational or publicly named. However, Sanctuarys commitment to such a model could not withstand the companys changing financial fortunes, management changes and declining share price. Announcing the companys results for 2004 early the following year, Andy Taylor claimed that the company had built a long term music business that benefits from all revenue streams associated with the music industry (preliminary results for the year ended 30th September 2004, p.2), but two years of substantial losses saw the announcement of a change of approach at the start of 2007, when Taylor detailed an end of the integrated approach to the music industry (Sanctuary 2006, p.4). Noting that this model proved unable to deliver the expected performance and, in particular, did not demonstrate sufficient synergy benefits to outweigh the large central overhead structure (ibid), the Sanctuary Group was then split into three autonomous divisions - Recorded Product, Merchandising and Artist Services with aim of reducing core administrative structure (ibid). At the heart of this was the interdependence of the different parts of the
80

as subsequently embraced, to greater or lesser degrees, by Warner Music, EMI, Universal and Live Nation, as well as a number of smaller companies.

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business, meaning that the problems in the recording industry had a significant knock on effect on the other areas in which Sanctuary operated more successfully (notably in live music). This revised operations structure was to be the basis of the sale of the Sanctuary Group to Universal in 2007, though as a major record company with few interests in many of the areas of Sanctuarys diversification, it was telling that as Sanctuary was moving away from an integrated model in order to maximise the value of Sanctuary in the interests of Sanctuary shareholders, (Sanctuary / Centenary Music - press release, 15th June 2007, p.4) this was the very part of the company that appealed to potential suitors. It is also worth noting that, in this instance, the sale bore no resemblance to the traditional methods of acquisition/ subsuming of independent record companies by majors as detailed by Lee (1995, p.26). Indeed, the number of companies reported with an interest in the purchase of Sanctuary in the run up to its eventual sale, provided evidence of the interest in and acceptance of their business model despite the poor trading results. Among those companies were venture capital groups (Crosby Capital Partners, Silk Route Asset Management and Music Copyright Solutions), other smaller 360 degree music companies (Mama Group) and three of the four major recording companies (Universal, Warner Music Group and EMI)81 . The eventual sale to Centenary Music Holdings, a wholly owned subsidiary of Universal, valued the company at 44.5 million with a share price of 20p per share (Allen 2007b), highlighted the nature of Universals interest in Sanctuary. In the accompanying statements, it was clear that Universals interest was in the artist management, live agency (Helter Skelter) and merchandising (Bravado) companies owned by Sanctuary and not their record label. The offer document spoke of Sanctuary offering an attractive opportunity for Universal . . broadening the scope of its operations to build a diversified music entertainment company (ibid, p.1), while Universal CEO, Doug Morris,
81

see Milmo (2006), Quinn (2006), Kleinman (2007)

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spoke of a great opportunity to strengthen and advance Sanctuarys position as a significant player in artist management, agency and merchandising as consumers appetite for for music grows worldwide (ibid, p.2). Universals subsequent actions: the closure of Sanctuarys Recorded Product division and other ancillary business such as Trinifold Travel and the development and integration of the management and merchandising arms of the business suggest their commitment to the type of 360 degree model increasingly favoured by the major operators. For example, Bravados subsequent recent large scale agreements have both been with Universal artists, Dolly Parton and The Killers, while Universal is now reported to be taking a share of touring and merchandise revenues in 90 per cent of contracts it signs with new artists (Gapper 2008).

The advance of this type of 360 degree thinking can also be viewed across the other major recording companies. Sony have acquired the German management company, MTS and booking agency, Bucardo (Spahr 2007), while Warner Music has embarked on a number of multiple rights arrangements, not least with estate of Frank Sinatra (Chaffin 2008) allowing their Rhino label to exploit recording and merchandising rights. The CEO of Warner Music, Edgar Bronfman Jr. has indicated their wider enthusiasm for what he has describes as true partnership with artists and a commitment to nurturing and growing all facets of their careers, (transcript of Warner Music fourth quarter Earnings Call, 29th November 2007) while EMIs chairman, Guy Hands, has also spoken of the need to develop revenue streams both for our artists and for EMI that come from many channels and not just from CDs (letter to staff, October 2007) along the lines of their existing arrangement with Robbie Williams. By 2007, even BPI were accepting that their members are now developing 360 degree music business models and are diversifying to generate greater income from revenue streams outside those arising from recorded music (http:/www.bpi.co.uk, accessed 7th February 2007), suggesting that, at least temporarily, there was an

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acceptance that the 360 degree model is a viable organisational structure for record labels despite its failure in the case of its pioneer, Sanctuary. While each of the majors has indicated their interest in 360 degree models, arguably the most significant development was the formation of Artist Nation, a subsidiary of the worlds largest concert promotion company, Live Nation. Artist Nation claims to have redefined the music industry with a unified rights model (press release, 16th October 2007) and has grabbed headlines with a series of deals, signing major artists whose contracts with major record companies are on the point of expiring. The first artists to sign to Artist Nation were Madonna, Jay-Z, U2, Nickelback and Shakira, indicating their intent to develop high-profile global partnerships with established artists, using their touring activities as the centre of the 360 degree deal rather than the release of records. This shift will be examined in more detail in the subsequent case study of Live Nation, but the type of model pioneered by Sanctuary allowed for a concert promoter, for the first time, to become one of the major companies in the music industries. However, despite the widespread adoption of variants of the 360 degree model, as deployed by Sanctuary, it remains an unproven and problematic model. Conclusion: Sanctuarys success, failure and significance In the context of previous study of companies within the music industries, where the focus has been firmly on the operation of major (see Negus, 1992, 1999) or independent record labels, (Hesmondhalgh 1997, 1999; Lee 1995) Sanctuary Music Group marked a considerable point of departure in terms of the origins, outlook, structure and organisation of firms within the music industries. By creating a new organisational structure, Sanctuary offered a business model which, through its innovation, rather than success, has subsequently been adapted and modified by many of the major operators in the music industries, including the two largest music businesses, Universal and Live Nation.

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Historically, it is easy to view Sanctuary in terms of the transition from a company which was privately and independently owned (in the period prior to the sale of shares on the Stock Exchange) to one which was investor owned (from 1998-2007) with the managerial, ownership and organisational problems this posed, before being taken under the corporate umbrella of Universal in 2007. Although Universal subsequently closed Sanctuarys record label, they have become the owner of the vast number of copyrights as well as Sanctuarys other substantial business interests to diversify their own music industries portfolio beyond records and publishing to include live agency, merchandise and artist management to move them closer to the type of 360 degree model pioneered by Sanctuary. While, in some ways, this process can be viewed in narrow terms as simply a more convoluted transition from private to corporate ownership of the type experienced by independent record labels throughout the history of recorded music, this case study has shown that Sanctuary has a much greater significance when trying to understand the disorganisation which the recording industry (primarily) and the wider music industries have exhibited in the wake of two major technological changes - the ability to make digital copies of music and the ability to transfer and share these easily using the internet. Though there have been other companies operating along similar lines in the last decade, Sanctuary was the first, largest, boldest and most high profile example of a radically reconfigured music business. This chapter argues that its significance as a case study rests in three main areas - background, approach and structure:

(i) the companys background as a management company. Both Caves (2000) and Hesmondhalgh (2007, p.210) have highlighted the growth, across the cultural industries, of functions described by Hesmondhalgh as mediation between the cultural industry and the pool of creative

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workers (ibid). As managers and agents, Sanctuary succeeded in placing themselves at the centre of the wider music industries (in particular with their expansion into the recording industry in 1996) by creating a business model that was heavily reliant on this type of function. This preempted the weakening of such sectoral / industrial barriers in the music industries in post-1999 period and provided the starting point for their 360 degree model. It also allowed them a period of relative success at a point when record companies were struggling to deal with declining sales due to their spread of interests. However, this would be short-lived as Sanctuary was only able to benefit from the problems of the major record companies over a relatively short period of time, before the prevailing market downturn would impact on their own recording business. (ii) their approach to, and understanding of, the music industries as a risk industry of the type described by Frith (2001, p.46) wherein failure is the norm, compensated for by occasional, large scale successes. By placing the focus on the acquisition and control of intellectual property rights, described by Lash and Urry as the main form of capital in the cultural industries, (1994, p.136) Sanctuary aimed to reduce these risks and maximise their income. Rather than accepting this status quo, Sanctuarys entrepreneurial approach considered this realisation the kind of discovery of error described by Kirzner (1973, 1979) and made it a central part of their business strategy. These attempts at risk avoidance, as illustrated by their early ventures into the recording industry, was one half of the approach which differentiated them from the type of company described by Frith as indulging in the type of portfolio management (2001, p.46) which ways up potential success against inevitable failures. Nevertheless, there were conflicting ideologies at work, which were to be at the centre of Sanctuarys subsequent problems. These centred on their early attempts to reduce risk opposed to the risk taking which characterised their later activities. Accumulating intellectual property rights is an inherently risky business, and Sanctuary found itself paying inflated prices for business

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and catalogues during its period of rapid expansion, to satisfy shareholder demand for growth in turnover, often at the expense of profitability. (iii)their organisational and financial structure. Although Sanctuarys multiple rights / cross industry model was not unrelated to the strategy of the majors in the sixties and seventies described by Frith as dealing with risk by making sure that whatever money was made out of music, it would have a cut (2001, p.48), the major difference in its implementation was a result of the type of ownership of the company. This was largely dictated by the sale of shares in the company which meant that the company ultimately belonged neither to the label owner(s) or a small number of entrepreneurs, but to a large number of investors and interested parties. By the 2006, neither Smallwood or Taylor retained a position or shareholding in the company. This clearly impacted on their later decision making and appointments, but Sanctuarys significance was also as one of the first independent companies within the music industries in the UK to successfully raise money on the stock market and. In doing so, it removed itself from the aesthetic and political positions historically often adopted by independent. Though independent of large corporations, Sanctuary saw itself as a well positioned competitor, and in some instances, co-operator, with the major music conglomerates, rather than being in any way oppositional.

Understanding Sanctuarys successes and failures is integrally tied to their founders entrepreneurial outlook and understanding of the changes in the music industries, which created a company imbued with the type of rights, cross-industries portfolio and partnerships which the worlds largest record company, Universal, lacked and could only achieve through the purchase of Sanctuary in 2007. While Sanctuary ended both as a failed company and was absorbed by one of the companies it sought to compete with, its background, approach and organisational structure all differed greatly from the established major companies in the music industries. By seeking finance

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from beyond the traditional sources in the media and cultural industries, it was able to produce a new model for companies operating across the music industries which, while unsuccessful, was viewed by their competitors as a failure of management rather than concept. With each of the worlds largest music companies (Universal, Warner Music, Sony, EMI, and Live Nation) all now adopting elements of the 360 degree model, Sanctuarys vision is still considered a possible solution to many of the problems faced by the music industries, albeit one which remains unproven, as the subsequent case study of Live Nation will illustrate.

CHAPTER 6: LIVE NATION ENTERTAINMENT - A CASE STUDY FROM THE LIVE MUSIC INDUSTRY Introduction to Live Nation Live Nation Entertainment has, in its five years of operation, rapidly emerged, through a series of large scale acquisitions to soon become - at least in terms of turnover - the largest company within the music industries.82 This case study will argue that Live Nations significance is not only in terms of scale, but in a combination of its roots in the live music industry and the changing strategies, approaches and organisation which have been evident in its relatively short history. It will do this by adopting a similar approach to that used in the previous chapter: firstly contextualising it within the global live music industry, then providing an historical account of Live Nation which highlights the problems and risks associated with the business before examining the approaches and organisational structures which have been adopted to deal with these. It will then characterise these as overlapping strategic combinations which began with the type of acquisitions and conglomeration typical of cultural industries firms of equivalent size, through
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if not already, this will certainly be the case after the completion of the merger with Ticketmaster in 2010. The combined 2009 turnover of the two companies was $5.66bn (Live Nation 4th Quarter Earnings Report 2009, p.1) - compared the biggest established company (UMG) had a turnover of !4.36bn (approx. $5.36bn) in the same period (Vivendi 2010, p.8)

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a period of high risk growth strategies (which saw them briefly engaging with Sanctuarys 360 degree model) before moving towards an approach that retreated towards their core market in live entertainment and maximising the revenues that could be created from it. These rapid changes make Live Nation a good example of the type of disorganised, debt-ridden, internally competitive and financially volatile firms emerging in the music industries. Context: Contemporary changes in the Live Music Industry It is helpful to initially place Live Nation within the wider changes which have been taking place in the live music industry, especially in the context of its increased importance within the wider music industries. It is also worth noting that the huge growth in corporate activity around live music in the last decade is both an indicator of the buoyant nature of the industry in recent years, but also a source of potential problems at a time of recession in an increasingly consolidated and globalised industry, which traditionally has very low profit margins. Despite the indicators, it remains difficult to survey the scale of these changes from the perspective of the live music industry. There have been few definitive studies of the market, and though there is some evidence to support the idea that the live music market is growing, along with the income generated from music publishing and rights (Page 2008) at a pace greater than the decline of the recording industry, it is uncertain whether this is due to increased demand on the part of consumers or simply the result of extensive consolidation and reorganisation within the concert promotion industry. Historically, studies of the music industry have tended to over privilege the recording industry (as the dominant sector/ industry) with other music industries receiving scant attention. Frith argues that there are economic and socio-cultural reasons as to why live music has been largely ignored or analysed as a sector in decline (2007, p.1). The former stemmed from the economic analysis of Baumol and Bowen (1966) and the belief that live music can achieve neither the economies of scale nor the reduction of labour

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costs to compete with mass entertainment media (Frith 2007, p.1) while socio-cultural analysis of the time suggested that the increased domestication of home entertainment through newer and better technology reduced the interest in live music events. This was reflected in the way in which live music was viewed by artists and record labels until these recent changes: traditionally, live music was seen as an area in which only the most successful artists can make a profit, with touring often viewed a promotional expense which had to be borne by record companies by way of tour support / subsidy. However, the last decade has seen this situation which has almost completely reversed, with live music often subsidising recording costs for a much larger number of artists. While there is a variety of data available on the live music market, both globally and locally, what there is ought to be viewed with considerable caution for the same reasons as it is necessary to be sceptical about recording industry data. These are the scale and global reach of the industry (only the major markets have yielded detailed data); problems in defining what exactly constitutes live music revenue (notably whether these figures should only reflect ticket sales, or should also include sponsorship and merchandise revenues) and the fact that the majority of the information is either collected by or for the industry itself. Even allowing for these caveats, there is still a substantial volume of evidence to indicate a growth of concert revenues both globally and in individual markets in recent years. The IFPIs definition of the broader music industry (2007b, p.1) is indicative of this, describing how the recording industry is the engine helping to drive a much broader music industry, worth more than US$130 billion globally (ibid) of which the value of the global live music industry was estimated at $17 billion in 2006, an increase of $3billion on the previous year. However, this global figure is simply extrapolated from data on the North American Concert Industry collated by trade magazine, Pollstar, which has

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reported a Compound Annual Growth Rate in the North American Concert Industry of 12.5% in the period spanning 1995-2007 and eight successive years of record concert ticket sales up to 2006, with the total gross revenue from the industry rising from just under $1 billion in 1995 to $3.9 billion in 2007. They estimated that this will continue to grow to a level around $4.5 billion in 2009 (Live Nation 2008b). This has been a result of a combination of factors: larger shows with higher capacities in arenas and stadiums (as well as huge growth in the number of outdoor festivals), the above inflation rise in ticket prices 83 and the ability of concert promoters to derive additional revenue from the wider live music experience, particularly through sponsorship, booking fees, merchandise concessions, and even car parking. In addition, concert promoters have increasingly moved to charge premium rates for packages allowing exclusive access and VIP privileges to those attending concerts (see Sisario 2010) and from the growing secondary ticket market. Though the majority of research to date has focused on the North American market, the trends appear to have been replicated in the other major markets. In Germany, Ehmer and Porsch claim that the live music market has grown by 18% in the period since 1995, with the number of festivals having increased from 136 in 1994 to 360 in 2007 (2008, p.3). In the same period, they claim that the value of the live music market has overtaken that of recorded music to the point that the generated turnover (of live music is) nearly twice as high as (recorded music) in 2007 (ibid). In the UK, market research conducted by Keynote reports the value of the UK market for concerts, theatres and commercial shows increasing from 1.15 billion in 2001 to 1.4 billion in 2005 (2006, p.121), though this figure includes theatrical performances, musicals, stand-up comedy and pantomimes. Nevertheless, Page (2007, p.7) makes a similar estimate
83

Krueger (2005) calculated that the average ticket price for the 100 largest concerts in the USA increased by 82% in the period between 1996 and 2003, while consumer prices in the USA rose by 17% in the same period.

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(extrapolating data from PRS revenues from live performance) that UK live music market is worth in excess of $1 billion and claims that if current trends continue, the tipping point between live music and recorded music in the UK (where the former becomes the larger industry) will take place within the next three years (2007, p.8). However, it is not only the increased volume and cost of concert tickets that make the live music industry worthy of further study. It also presents the opportunity for job creation and short-term, economic boosterism as well as a range of spin-off revenue streams, including secondary ticketing, sponsorship and merchandise. For example, in many small countries like Scotland, the live music industry is the only global music industry to offer inward investment (see Williamson, Cloonan and Frith 2003) with large scale, global operators (notably Live Nation, Gaiety Investments and Ticketmaster) establishing a presence during the last decade at a time when investment by the record companies declined. The interest of development agencies (in this case, Scottish Enterprise) also shows that live music is also of benefit to the wider economy both in terms of expenditure and job creation. For example, a Scottish Enterprise commissioned report (2006) estimated that the annual T in the Park festival in Balado contributes 18 million to the Scottish economy (Dalgarno 2006), while research in Scotland showed that in employment terms, the live music industry was a larger employer than the recording industry in the country (Williamson, Cloonan and Frith 2003, p.36).

Of these spin-off revenues, the most important is sponsorship, which has accelerated the growth of the live music industry through artist endorsements and the branding of venues and festivals, on the understanding that mutual benefits for the various parties can be achieved. For those artists and promoters in a position where performing or promoting a show or a tour is likely to result in a loss, the receipt of a financial contribution (usually in return for assorted branding rights) can result in a considerable reduction of risk, whereas for the sponsors, targeting particular live events can provide

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both short term and long term benefits. The association of a particular product with an event or venue can often result in the former, as seen in the branding of music venues and festivals by beer companies - for example, T in the Park or the Carling Weekender. In both these instances, the sponsors are able to not only achieve a high profile for their products, but to sign exclusive distribution deals with the promoters allowing for the distribution of their product. An example of this was the recent partnership between Tuborg lager and the Academy Music Group84(http://www.musicweek.com/story.asp? sectioncode=1&storycode=1036482, accessed 18th December 2009), wherein the brand paid 4.5million to exclusively supply beer to the companys eleven venues, replacing the previous sponsor, Carling. Tuborg extended this deal in 2010 to cover all Live Nations UK venues and festivals (Masson 2010b). While beer companies are able to benefit immediately (through sales) from this kind of deal, the live music market is particularly attractive to companies attempting to reach young (and particularly) male customers. In another deal involving the Academy Music Group, the mobile phone company, O2 has paid 22.5 million for five years for the naming rights to the same venues, tying in with the launch of a priority ticket scheme for O2 customers (Swiney 2008), highlighting the value of such sponsorship deals to large-scale venues. O2 have also committed resources to naming the London venue, The O2, for which they paid 36 million, as well as sponsorship of the Wireless Festival in Hyde Park. These deals are typical of the type of arrangements which companies from the consumer goods sector come to with events producers, and, as yet, there is no evidence that the downturn in consumer spending has impacted on the amount spent on sponsorship, though it would appear inevitable that this will eventually impact on the live music industry. Though detailed figures are
84

Academy Music Group is co-owned by Live Nation (51%), Metropolis Music and SJM Concerts

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difficult to extract, the IEG Sponsorship Report (2010) reported that the North American music sponsorship market had increased in size to $1.09 billion in 2010 (Chipps 2010), a small rise from the previous year (Waddell 2009). This has been partly been driven by the emergence of new, more wide ranging forms of sponsorship across the music industries. As well as artist, event or venue specific sponsorships - for example, Lexus support of the recent Alicia Keys tours, Shells sponsorship of the New Orleans Jazz and Heritage Festival or the aforementioned O2 Academies - multi-faceted sponsorship arrangements have seen large companies investing more in sponsorship of the music industries in exchange for a greater array of rights. As the worlds largest concert promoter, Live Nation, has been in a unique position to extract this type of revenue. Sponsorship, along with catering, service charges applied to ticket sales, car parking and merchandising85 have all become integral to the profitability of large-scale concerts in 2009, as ticket sales have begun to decline for the first time in recent years, with Live Nation reporting a 22% drop in North American concert attendance in the first quarter of 2009 (Lewis 2009). The subsequent study of both the history and organisational changes within Live Nation will explain how these have become increasingly important to the company as part of their shifting strategies to deal with both the low profit margins in concert promotion and changes in the global economy. Live Nation - a short history Live Nation was formed in 2005, as a spin-off86 from Clear Channel Communications, and now describes itself as the largest live entertainment

85

sales of t-shirts and other ephemera where promoters / venue owners can often charge both a concession fee for allowing artists sell their good or/ and have a share in the profit (e.g. in the case of Live Nation, via their merchandising offshoot, Trunk)
86

term used on U.S. financial markets when part of a larger company is detached from its parent company to form a new legal entity

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company in the world (2010, p.6).87 It dominates the global market, with sales of around 140 million concert tickets (worldwide in 2009 (ibid) and has a turnover that has grown by 42% in the period since its formation (Live Nation 2008b). By way of comparison, Live Nations 2008 turnover amounted to $4.16 billion (Live Nation 2009, p.4) while EMI, the smallest of the big four had a turnover of $2.9 billion (EMI 2008, p. 99), making Live Nation bigger than all but the largest of the four major record companies, Universal. The recent merger with Ticketmaster ought to make Live Nation Entertainment by far the largest music company in the world. As well as through the sales of concert tickets and wider income from the live music industry (as a promoter, venue operator, merchandiser, ticket agent and online retailer), the company now has interests in recorded music a result of its Artist Nation division, which also handles merchandising, websites, digital marketing and sponsorship for individual artists, dependent on the acquisition of the appropriate rights. Since 2007, the company has used a variant on Sanctuarys 360 degree model, entering into multiple rights agreements with major artists including Madonna, Shakira, Nickelback and U2, which assign a number of rights to Live Nation in exchange for the type of advances which major record labels are unable to match.88 However, to fully understand the issues surrounding the growth of Live Nation, it is essential to establish its corporate origins within Clear Channel Communications. The Clear Channel organisation has expanded rapidly since 197289, when Lowry Mays and Red McCombs, under the guise of the San Antonio Broadcasting Company, acquired the radio station KEEZ-FM, the first step towards it becoming the diversified media company (2007, p.3) of today. By the end of 2007, Clear Channel posted a profit of $1.6 billion on

87

In 2009, Live Nation also promoted over 21 000 concerts, partnered with 850 sponsors and attracted 25 million unique monthly users to its online operations (Live Nation 2010, p.6)
88

the value of the deal with Madonna was widely quoted as being worth $120 million to the artist (Smith 2007), which included 1.8% of the companys stock (ibid).
89

It was actually incorporated as Clear Channel in 1974

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a turnover of $6.8 billion, having built up a substantial portfolio of radio stations and outdoor advertising site. Their growth in the radio market was the result of extensive horizontal integration and the use of media deregulation legislation in the USA during the late eighties and nineties, notably the Telecommunications Act of 1996, which allowed companies to own more than two radio stations in each geographic market. This allowed them to build up an extensive portfolio of radio stations, initially across the USA, though expanded globally in the following decade. By 2004, Clear Channel owned over 1200 radio stations in the USA and more than 240 in the rest of the world (Williams 2006, p.8), and while the ongoing sale of stations has continued in recent years, they remain the market leader owning 717 core radio stations across the USA and a further 288 non-core stations (Clear Channel 2008, p.3), which are for sale at the time of writing. As well as developing their portfolio of radio stations, Clear Channel made two key acquisitions, which saw them vertically integrate into outdoor advertising and the live entertainment market. The first was their acquisition of the More Group PLC in 1998, which was their starting point in outdoor advertising 90, but of more interest in examining the roots of Live Nation, was their acquisition of SFX Entertainment Inc. in 2000. SFX, purchased for $4.4 billion (which included $1.1 billion of debt), was the largest integrated concert promotion and venue owner in the USA, owning 120 large arena/ amphitheatre sized venues in key US markets. At the time of acquisition, Mays explained the logic behind the acquisition as being our entry into live entertainment operations allowed us to take advantage of the natural synergies between radio and live music events and to gain immediate industry leadership (Clear Channel Annual Report 2000, p.8). The purchase of SFX resulted in the formation of arguably the most powerful company in the history of the music industries, a result of their control over both venues and radio play in many markets. The nature of the
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in the same year, Clear Channel also acquired the Universal Outdoor advertising company.

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company attracted both legal conflict and bad publicity. For example, an antitrust suit was filed against them by the Denver concert promoter, Nobody in Particular Presents, in 2001. Though this was settled out of court with no financial penalty for Clear Channel, both the companys dominance of the market and close links with the Bush administration resulted in considerable amounts of negative publicity (see Boehlert 2001; Cave 2004), largely a result of its ability to buy into other related areas of cultural industry production to ensure cross-promotion (Hesmondhalgh 2007, p.22). As well as the horizontal and vertical integration evident in Clear Channel Entertainment, the company also expanded internationally for example, In Italy, where they took over Milano Concerti and the Trident Agency in 2001 (Koranteng 2001) and in the UK, where having acquired MCP (Midland Concert Promotions) as part of the SFX deal, they moved to buy the Mean Fiddler Group in 2005. This deal, a joint purchase with the Irish promoter, MCD, was referred to the OFT, but the decision was made not to refer it to the Competition Commission, allowing the takeover to take place. Similarly, the Dutch concert promoter, Mojo, which was also owned by Clear Channel, was investigated by the anti-cartel organisation, NMa, in 2004 over allegations of price fixing (van Gool 2004). By 2004, Clear Channel had achieved mixed results in the live music sector. While achieving a market share of 50.4% (Music and Copyright 2005) in the USA and a live music related turnover of $2.7 billion (Clear Channel, 2005), the live music component (Clear Channel Entertainment) was the smallest part of the company both in terms of turnover and profit ($95 million in 2004). With accumulated debt in Clear Channel Communications of over $6.6 billion, it was decided to spin off the live music, theatre and sport operation. This process involved the setting up of a temporary subsidiary of Clear Channel Communications called Clear Channel Spinco, which was a vehicle to the transfer of share on the New York Stock Exchange, prior to the new, independent company being spun off and commencing trading. CCE

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Spinco began trading on 10th August 2005, with Live Nation Inc. coming into being on the 21st November 2005. Though it retained the vast majority of staff and key employees and shared some infrastructure services with Clear Channel, Live Nation was formed as a multi-billion independent company, specialising in live theatre, music and sport (Smith 2005). Subsequent to the spin-off, Clear Channel continues to operate with interests in radio broadcasting and outdoor advertising, but has been downsized and restructured in subsequent years. After the sale of the company to a private equity consortium for $26.7 billion in 2006, it announced plans to sell off all of its television stations and around 40% of its smaller radio stations to concentrate on major markets (Foley 2006). This process has begun and the company is currently split into three divisions with radio and advertising both accounting for 50% of the companys sales, with the latter being split into two separate divisions - one covering the Americas, the other the rest of the world. The company has a combined turnover of around $6.8 billion (ibid, p.36). Live Nation - Initial Strategies Having spun off from Clear Channel and begun trading in its own right on 21st December 2005, Live Nation inherited interests in live music, theatre and sports/ event management. However, it immediately set out to shift its focus to the live music component of its business, which accounted for around $2.3 billion or 78% of the turnover of Clear Channel Entertainment (Live Nation 2006, p.6) at the time of the spin off. 91 This change of focus has been implemented through a number of strategies employed by the Live Nation management in the interim, which have changed substantially as the company has grown in subsequent years. After capitalising the new business through a $610 million credit agreement with a syndicate of banks (ibid, p.14), the company set out to vertically
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By comparison, their theatre and sports interests yielded relatively small turnovers at $317 million (11%) and $298.5 million (10%) respectively (Live Nation 2006, p7)

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integrate the live music experience and divest the company of some of what it describes as non-core interests. Since its inception, moves to sell off parts of their non-live music interests have been ongoing, curtailed only by tax restrictions associated with our spin off from Clear Channel Communications (Smith 2007). A sale of part of their sports management business was announced almost immediately on 26th January 2006, while plans to sell the majority of their North American theatre venues were announced in March 2007 (ibid). In 2008, both their motor sport division and non-music events division were sold, raising a further $183 million (Live Nation, quarter three Earnings Call Transcript, p.4). While this shift in focus towards live music has been consistent, the companys strategy within the music industries has changed during the same period a response to their own financial situation as well as global economics and the changing nature of the these industries. The changes in both the business outlook and stated mission of the company can be seen in their self-description, shifting from being the worlds largest live music company (press release, 27th April 2007), to a company involved in the buying and producing artist rights and monetising these rights via our global distribution pipe in 2008 (press release, 27th October 2008). The broadening of the scope of the company was also reflected in their stated mission, which, in the same documents, changed from inspiring passion for live music around the world in 2007 to maximising the live concert experience for artists, fans and sponsors in 2008. In order to analyse these changes, which, like Clear Channel previously, involved horizontal and vertical integration, the accumulation of rights, corporate entrepreneurship and collection of rent, it is necessary to locate the inherent problems of both the concert promotion business (which made up the bulk of their live music activities) and those specific to Live Nation. It will then be argued that the companys subsequent expansion into other aspects of the music industries, embracing elements of the type of 360 degree, model associated with Sanctuary, represents a significant and fundamental

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change, making Live Nation the first transnational major music company to emerge in a post major-recording company context, where a business which is centred on wholly on the type of intangible products and experiences described by Styven (2008). It is also the first company of its type where its roots and emphasis are on live music, rather than recorded music. Risks and problems The live music industry has traditionally been organised around the interaction between four parties artists, promoters, booking agents and venues. Promoters negotiate with the booking agents (representing the artist) to organise tours or one off appearances on either a local, national or, in recent times, international level. While the booking agent can normally negotiate a guaranteed fee for the artist (and take a percentage for their own work), it is only the promoter who stands to lose money if ticket sales and other revenues do not exceed the costs of promoting the show which would include the artists fees, venue hire, insurance and marketing. This makes live music promotion a high-risk business with a low operating margin92. In the case of Live Nation, it is possible to identify a number of risks that are general to the promotion of live music and some which are specific to the company. The subsequent development of Live Nation can be viewed as an organisational strategy geared towards minimising these risks, while simultaneously attempting to increase revenues and margins and reducing capital expenditure.

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Live Nations operating margin of 4.3% (Investor Presentation, 22nd May 2008) is slightly higher than the 4% regarded as standard within the industry (Cohan 2008)

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External Problems In the former category, the most significant threat to Live Nation comes from general economic conditions. There is considerable debate over whether the recent economic downturn has impacted on the entertainment industries and live music in particular. In spite of its growing turnover, Live Nation has made a loss in each of its trading years (see table 6.1 below), attributing the latest to the increased cost of artists and a decline in ticket sales (Live Nation 2009a, p3). In many quarters, the huge growth in revenue93 in the live music industry has seen it portrayed as a boom industry (see Anderman 2006; Brown 2007), but the reality is more complex, and other commentators (see Sullivan 2008) have questioned this and pointed towards industry concerns about the economic climate.

Financial Year Ending 31st December 2004 31st December 2005 31st December 2006 31st December 2007 31st December 2008 31st December 2009

Turnover $2.81 bn* $2.93 bn $3.69 bn $4.18 bn $4.16 bn $4.18 bn

Net Loss

-$130.6 m -$31.4 m -$ 60.1 m -$231.8 m -$11.9 m

Table 6.1 Live Nation Financial Results (2004-2009)

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In the same period, Live Nations revenue has grown from $2.57 billion in 2005 (Live Nation, 2006) to $4.16 billion in 2008 (Live Nation 2009)

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While revenues have increased, this is not necessarily down to increased demand for concert tickets, rather higher prices for larger concerts (outdoor summer shows in stadia and festivals have been a particular growth area), and more artists playing more concerts 94, in part to compensate for decreased revenues from the recording industry. Pollstar data covering the top 100 tours in the USA and Canada has shown record revenues for nine successive years, reaching a total of $3.9 billion in 2007 (Hau 2008). Nevertheless, all recent forward looking market research has suggested that the revenues generated by live music will continue to grow, although there is some dispute over the likely rate of such growth. In the UK, Mintel predicts a growth of between 8-10% per annum in attendances for the next five years (2007, section 2), while Keynotes research on the music industry suggests a slower growth of 20% in the period between 2006-2010 (2006, p.132). However, none of these accounted for the subsequent economic global downturn which suggests that the reality will involve either much smaller growth or a slight decline in revenues. This is reflected in the uncertainty as to the impact of the global economic downturn on the live music industry, with commentators divided as to whether the music industries, in general, are resistant to recession. Clarke et al report that anecdotally, cinema box office returns go up in a recession and that seems to be true for other events as the live business is reporting good results across most sectors (2008, p.10), before producing some limited evidence from the ticket agencies and larger venues to suggest that there has been no marked decline in sales. Nevertheless, Live Nation regard the economic situation as one of the major risks to their business, as it is depends on discretionary consumer and corporate spending (Live Nation 2007, p.30), the implication being that a general slowdown will reduce sponsorship revenue from companies outside the live music industry, even if ticket sales remain at the same level.
94

In the period 2000-2007, Goldman Sachs estimated the compound annual growth rate in the number of concerts to be 17% (Live Nation 2008b).

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Beyond the worries about the market conditions resulting in artists seeking larger payments for performances and audiences being less willing to spend money on tickets, Live Nation also identified risks to their business from the movement of key personnel who hold important personal relationships with artists, the impact of fluctuations in the currency exchange rates on their international business and increased competition from other concert promoters (Live Nation 2007, pp.25-44). In addition, the seasonal nature of the live music market (the majority of tickets are sold at larger, outdoor shows in the summer) and the fluctuation in revenues as a consequence of the variable numbers of major artists touring each year, are likely to impact on concert promoters revenues, and make direct year on year comparisons hazardous. Internal Problems While elements of these are common to all concert promoters, Live Nation also has a number of potential problems specific to its own situation, and history. These are the indebtedness of the company, the vulnerability of their share price, internal conflicts, issues arising from their separation from Clear Channel and legal and regulatory threats to the business. The companys debt at the end of 2008 amounted to $925.7 million (Live Nation 2009, p.51), resulting in it having to make large repayments each year, which in turn make it less able to raise finance to make further acquisitions and investments and more vulnerable to economic, financial, competitive, legislative, regulatory and other factors that are beyond our control (ibid, p.26). The terms under which the companys debt is secured also limit their ability to engage in a number of activities potentially important to their growth, particularly in relation to acquisitions, mergers, issuing of stock and incurring additional debt. Live Nations stock market performance is also a source of instability, with considerable fluctuation in the market value of the company since becoming listed in December 2005. Shares began trading at $11, peaking at $24.18 in

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February 2007, before commencing a steep decline, which saw shares reach a low of $2.47 in March 2009. After a 30% decline in share value in 2008, the company has subsequently seen further variation in their value, and at the time of writing (May 2010) the share price had increased again to $12.23. Nevertheless, the fluctuations have had a major impact on the companys value and credit worthiness. Share prices were also adversely affected by the conflict in 2008 between the two major figures in the company chairman, Michael Cohl, and chief executive, Michael Rapino who clashed publicly over the future direction of the company. While this dispute specifically centred around the companys use of the 360 degree model, Cohls eventual departure was also significant for other reasons. At the time of his departure, he was the largest of the noninstitutional shareholders 95 and his personal relationship with established artists was seen as integral to the development of the company, evidenced by the nine-year non-compete clause which was part of the deal which brought him to the company in 2006, when they bought his Canadian concert promoter, Concert Productions International Inc. for $123 million in stock and $10million in cash (Smith 2008). The companys history as part of Clear Channel is another factor in their results to date and may yield further problems in the future. They acknowledge that the separation could result in significant tax liabilities to both the company and its shareholders (Live Nation 2007, p.42) and that since the spin off they have been unable to benefit from the economies of scale enjoyed by being part of a larger organisation, and being subject to a lower credit rating than Clear Channel, making borrowing more expensive and difficult than it would have been otherwise. The final barriers to the development of Live Nation come from competition legislation and legal proceedings instigated by competitors and customers alike, as a result of the companys perceived market domination. In the USA,
95

Although Cohl owned 14 474 788 shares, 94% of Live Nation shares were held by institutional and mutual fund owners

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Clear Channel was subject to a number of lawsuits claiming anti-competitive practices, notably the case of Heerwagen vs. Clear Channel, which was brought by ticket buyers, claiming that by their business practices, Clear Channel caused inflated, artificially high ticket prices. Clear Channel and subsequently, Live Nation, won this case in 2003, and the various appeals against the ruling in 2006, making them confident of success in a number of similar actions, which have been brought in other U.S. markets (see Live Nation 2007, p.44). Globally, the threat to Live Nations continued expansion has tended to come from governments rather than individuals or their competitors. For example, in the UK, the OFT and Competition Commission (CC) intervened in Live Nations attempt (in partnership with Gaiety Investments as Hamsard 2786 Ltd) to acquire a controlling interest in the twelve venues that made up the Academy Music Group in 2006. The initial OFT referral was based on concerns about the horizontal integration of venue ownership, particularly in the London area, while the final report of the Competition Commission claimed that the takeover would lead to a substantial lessening of competition in relation to certain live music venues in London, resulting, in particular, in rentals at the venues concerned being higher than would otherwise be the case (press release, 23rd January 2007). As a result, Mean Fiddler (which is owned by Hamsard) was forced to sell either the Brixton Academy or Hammersmith Apollo and either the Shepherds Bush Empire or the Forum as a condition of the takeover being approved. The Forum and Hammersmith Apollo were were subsequently sold to the Mama Group in March 2007, allowing the takeover to be completed, though the remainder of the Mean Fiddler group was also sold to Mama in August 2007 (Bowers 2007). Live Nation Structural and Organisational Changes To assess the growth of Live Nation since its formation in response to these challenges, it is helpful to consider some of the structural and organisational

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traits of what Herman and McChesney (1997, p.53) describe as the second tier cultural industries - those companies outside the big seven cultural industry corporations (see Hesmondhalgh 2007, p.163) but with turnovers of greater than $1 billion. Hesmondhalgh also describes the two major corporate strategies employed during the period in which the cultural industries have emerged as major players in the wider economy. These are conglomeration and vertical integration both of which are important in the understanding of Live Nation. By Hesmondhalghs account, both of these strategies have changed considerably in the last two decades, with conglomeration in the cultural industries in recent years resulting in large companies now building a portfolio of related industries, whereas in the 1960s and 1970s the trend was for non-cultural industry conglomerates to buy into the cultural industries (ibid, p.164). This type of change is exemplified by the growth of the large scale conglomerates centred around the media, leisure and information/ communication industries (ibid) where the mergers and purchases have been between companies engaged in similar activities in some cases straddling different cultural industries, but largely remaining within the wider context of the cultural industries. Although Live Nations growth has seen it diversify far more than any other major concert promoter, it is significant that the majority of its growth has been within the music and cultural industries. In terms of the other key corporate strategy of vertical integration, which Hesmondhalgh claims derives from the need to control relationships with fickle audiences and create artificial scarcity for cultural products, (ibid, p. 168) there have been similar changes which are also pertinent to the growth of Live Nation. In this instance, Hesmondhalgh acknowledges that vertical integration is not a constant process (ibid, p.170) and that it is variable through time depending on legislation, technological change and more general trends, but that it remains a significant factor in the market and media power of the major cultural industry corporations (ibid). Alongside the

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changes in conglomeration, Hesmondhalgh sees a shift from the kind of vertical integration based on the marriage of content creation and distribution (ibid, p.168) that was to the fore in the 1970s and 1980s towards a one based on an understanding of the importance of intellectual property (ibid). Having established these as the most significant aspects of corporate growth within both Live Nation and the wider cultural industries, both of these are underpinned by a number of other strategies employed by cultural producers. As well as the increasingly corporate nature of the firms, these include internationalisation and the expansion of markets for effectively the same product, and a combination of the six strategies outlined by Murdock (2003, p.27) namely the increased use of market research, the extension of branding, greater merchandising opportunities, widening the number of formats of consumer goods, investing more heavily in marketing and the protection of intellectual property rights. At the centre of this is what Murdock describes as the need of cultural industries producers to maximise the value of each product (ibid) to reduce the risk involved, something Live Nation has attempted to do with its core live music business, with the emphasis on branding, merchandising and acquisition of additional IP rights. As a consequence, the growth of Live Nation is typical of the type of a cultural industries organisation which has grown from within the cultural industries and with its focus largely on the accumulation of intellectual property rights. However, it is also important to note the fluidity in both the structure and strategy of the company, with a number of obvious changes in recent years. There is considerable evidence that Live Nation has repeatedly changed both its structure and strategy in response to the challenges facing their business model. Again, this is not atypical of cultural industries firms and Hesmondhalgh notes that strategies in conglomeration in the cultural industries are often prone to revisions and even reversals (2007, p.167).

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Strategies - (i) Acquiring Businesses After their spin off from Clear Channel, Live Nation inherited a company with interests in live music and theatre, with some smaller interests in representing sports stars and the production of and distribution of TV shows and DVDs. At the outset, the company declared that its strategy was centred on increasing shareholder value (Clear Channel, 2005, p.13). While this may have remained constant during the subsequent period, the means employed to achieve that have changed. Although live music was the smallest and least profitable of the three divisions of Clear Channel96, it still accounted for 79% of the new companys revenues in 2005 (Live Nation 2006, p.6). At the time of the spin off, the company retained the majority of Clear Channel staff and business infrastructure, with a number of Clear Channel executives taking their place on the Live Nation board of directors 97, inheriting interests in the live music and theatre industries, with some smaller interests in motor sport and the representation of sports stars. Initially, Live Nations strategy seemed in line with the type of audience maximisation and overproduction that was identified as a strategy across the cultural industries by Hirsch (1972). Their initial strategy was described in their first Annual Report as the pursuit of a tighter focus on pursuing pursue all revenue lines that transpire from the live event (Live Nation 2006, p.13) 98. The means of achieving this were listed as creating additional content for their global network of venues, increasing ancillary revenue from the live shows (identified as sponsorship, food and drink sales, ticketing, merchandise and digital), making greater use of the their database of music

96 97

live music, outdoor advertising and radio

these include Clear Channel chairman and founder, L.Lowry Mays, and his son, Randall Mays, who is Vice Chairman of Live Nation
98

the main periods of, and strategies involved in Live Nations growth are shown diagrammatically in Appendix 4

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fans and selectively pursuing investment and acquisition opportunities (ibid). The first and last of these were achieved through a rapid period of horizontal integration in the live music market, with the targets of Live Nations interest representing a desire to increase market share in the North American market but also to extend their international interests. The most significant deal was the purchase of House of Blues, the second largest promoter99 in North America in deal that cost Live Nation around $350 million (Duhigg 2006), while other investments in 2006 included buying major concert promoters in Canada (Concert Productions International) and Spain (Gamerco). Live Nation also invested in the UK festival promoter, Angel Festivals, to add to its existing UK interests, which had been inherited from the SFX takeover of the major promoter, MCP (Midland Concert Promoters) in 1999. However, even in 2006, there was evidence that Live Nations growth was not going to be solely horizontal and limited to the purchase of other concert promoters. There were three significant deals during the course of the year, which were to give some indication of the direction in which the company would move in the future. 51% stakes were bought in the music merchandising company, Trunk Merchandising, and the online business, musictoday.com, which specialised in extracting value from artist brands and live music, through the management of fan clubs, sale of premium/ VIP tickets and merchandise. While these moves fell broadly in line with the stated aims of the company, the third deal, was somewhat at odds with their previously stated intentions. By entering into a joint venture with EMI and the band, Korn, Live Nation was making its first investment directly in an artist and its first move towards the 360 degree model as utilised by Sanctuary. In doing so, they were the first company from the live music industries to start buying into rights traditionally associated with (and fiercely protected by) the recording industry. By
99

sold around 7 million tickets in 2005 and owned 8 amphitheatres and 10 smaller clubs

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investing $3 million, Live Nation took a 6% stake in all the revenues generated by the band, including those from recordings and publishing, as well as securing the rights to promote their future tours. In this instance, and unlike the type of deals Sanctuary agreed, Live Nation was able to gain revenue from all aspects of the bands career, as no rights were assigned outside of the joint venture. Live Nations business strategy was re-articulated in their 2006 Annual Report to reflect some of these moves, with new stated corporate aims of divesting non-core assets, increasing their North American and International platforms, improving the profitability of our existing core business, and extending relationships with artists, fans and sponsors (2007, p.2) as well as offering a renewed commitment to developing online and ancillary services and cultivating brand awareness (ibid). While there was evidence of all of these in the companys activities in 2006-2007, there was little to suggest further direct investment in artists and a wider accumulation of rights as a means of either expanding or avoiding risk. Given the disorganisation and uncertainty in the recording industry, such a move appeared unlikely. Indeed, the 2007 developments initially seemed to follow much the same pattern as those in 2006, with further acquisitions of both North American (House of Blues Canada) and international (Jackie Lombard, France) promoters to increase the turnover of their North American and European concert businesses, as well as the purchase of the remaining shares in musictoday.com and Trunk as part of the mechanism for establishing closer links between the artists and fans through an extensive online brand. Within the live music industry, the takeover of Academy Music Group (with Gaiety) in the UK and the purchase of the promotion rights for fifteen years at Wembley Arena showed that venue ownership and leasing were still an important part of the live music plans though 2007. This period also saw Live Nation continue the process of disposing of a significant number of non-core assets. Donnington Park race track and various other sports interests were

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sold, while the process of selling the companys North American theatre venues began, with the final sale, for $90 million, being completed in early 2008 (see Smith 2007, 2008). (ii) Acquiring Rights These moves were expected, but Live Nations move into multiple rights deals with artists of which the Korn deal was only a tentative step only became publicly evident with the announcement of their agreement with Madonna in November 2007. This was the first of a series of deals where Live Nation attempted to buy rights to as many aspects of a superstar artists work (or brand) as were available. The value of the Madonna deal was quoted as being $120 million in exchange for rights in live performance, recording, and merchandising over a period of ten years (Chaffin and Edgecliffe-Johnson 2007), while a number of similar deals were entered into over the following six months with major artists Nickelback, Shakira, U2 and Jay-Z. There are a number of notable features about these deals: they have redefined Live Nations business model; the scale and extent of them would appear to be beyond the reach of even the largest of the major record labels; the exchange of rights and cash/ stock involved in each of them is significantly different (making it problematic to compare them on a like for like basis) and the execution/ viability of them has become a source of conflict within the company. The primary reason for Live Nation having moved towards this multiple rights model is one of financial necessity and the realisation that the 4% margin achieved in the North American concert market is the most expensive and lowest-margin artist right (Live Nation Q1 2008 Earnings Call Transcript, 2008, p.3). By acquiring other rights, Live Nations revised business model is now driven by monetising our global distribution pipe serving three clients artists, fans and sponsors. Our distribution pipe has two levers, acquiring,

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producing artists rights at the correct economic price and, two, optimising and expanding our pipe (ibid, p.2). Live Nations ability to secure the involvement of such established acts is partly a result of existing relationships each of the five multi-rights deals have been with artists who have worked successfully with Live Nation in the concert industry and their ability to exploit the weakness of the recording companies. Each of the five acts involved to date find themselves at a stage in their career when they are selling more (or at least generating more money through) tickets and selling fewer records. At the end of Madonnas contract with Warner Music, the label refused to match Live Nations deal arguing that to embark on something similar would not make financial sense and let down shareholders, (Allen 2007a). Madonnas deal committed Live Nation to releasing three albums during the term of the contract. However, these multiple rights deals have varied considerably in both size (financial) and scope (the number of rights assigned by the artists), often dependent on the commitments of artists involved to other companies. As each of the five are established acts, it is unlikely their existing contracts assigning rights to third parties will be of the same length or expire at the same time. For example, Live Nations deal with Nickelback assigns 11 separate artist rights (Live Nation Q2 2008 Earnings Call Transcript, 2008, p. 2) which include touring rights (concert promotion, tour merchandise and sponsorship, VIP travel packages and secondary ticketing), recorded music rights, broadcast and online rights along with other sponsorship and merchandise rights. By Live Nations projections, such a deal will earn the company $700 million over the course of three album / tour cycles, their anticipated profit in the region of $60 million, at an overall margin of 9% (ibid). The deal with Shakira assigns ten artist rights to Live Nation, while the Jay-Z agreement is reportedly the most wide-ranging, with Live Nation reportedly providing funding some of his non-musical entrepreneurial ventures (which

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have previously included a clothing line and a chain of nightclubs) as well as his assorted artist rights for around $150 million (see Swash 2008; Rushe 2008). The U2 agreement may appear comparatively modest in value at $100 million, but Live Nation have failed to secure any recording or publishing rights, merely accumulating touring, merchandise and website rights in a 12-year deal (Sandoval 2008). Nevertheless, while each of these deals involves Live Nation expanding into different parts of the music industries, there are a number of caveats which make them an uncomfortable fit with the notion of a 360 degree model and which would also cast some doubt on the sustainability of the deals something which was at the heart of the aforementioned dispute between the companys Chief Executive, Michael Rapino, and the chairman, Michael Cohl, which resulted in the latter leaving the company in July 2008. By concentrating on established artists with existing deals, it is highly unlikely that Live Nation will ever be in a position to accumulate all the artist rights associated with a global superstar or operate as (for example) a record label in the conventional sense. Despite the inclusion of the recording rights in most of the forward-looking deals, many of the acts have existing commitments to their current labels 100. while in the case of U2, the rights to their publishing and recording remain with Universal, effectively leaving all the groups assets shared between the two largest global music companies. That Live Nation was willing to enter into such a deal reflects on the relative unimportance of the recording rights under their model as reflected in Rapinos subsequent assertion that we have no desire to be in the record business (Smith 2008, B1). At the same time, he stated that Live Nation will broker a deal with a third party or parties to distribute the music without all the infrastructure costs of being in the business (ibid), suggesting that the infrastructure of the Artist Nation division, may be largely superfluous (see Lauria and Garrity 2008). The head of Artist Nation, Bob Ezrin, the only Live
100

Madonna owes Warner Music another album and a greatest hits compilation; Shakira owes a further two albums to Sony.

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Nation executive with extensive record industry experience, left in 2008, adding to the sense that, in spite of acquiring all the rights related to the recording industry, Live Nation attached little real value to them in isolation and were highly likely to sub-contract or sell them on in the future. (iii) Risk Taking and Corporate Entrepreneurship There is some evidence, by mid 2008, that even within the risk-taking culture of Live Nation, these deals were being viewed as increasingly unworkable. Rapinos vision of the company and his caution over the quantity of these multiple rights deals were cited as the reasons for Cohls subsequent departure in July 2008 (see Smith 2008). The risks involved can be loosely split into two categories those general to the companys place in the market, those others specific to the type of artists they have entered into partnership with. In the former category the deals, though headline grabbing, are underpinned by a company in considerable debt whose share value has fluctuated considerably in the past two years which is in a competitive market place during times of economic recession. Having previously stated the concert business was largely unaffected by recession and that theres no correlation between recession downtimes and declining ticket sales (ibid), Rapino seemed to indicate that this was no longer the case, when he suggested in November 2008 that ticket prices may have to be discounted in 2009 (see Adegoke & MacMillan 2008) and noted that in the last month, Id say its gotten a little worse than just the average recession (Live Nation 2008c). Indeed, in 2009 Live Nation introduced a number of schemes in the USA to mitigate the impact of the economic downturn on customers. These included No Fee Wednesdays (see Jones 2009) where service fees 101 Wednesdays. were removed from the price of tickets bought for Live Nation shows on

101

These are charges added to the cost of the ticket to cover the costs/ admin involved in their sale. In some instances, these may be up to 20-25% of the face value of the ticket

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Significantly, the crisis in the consumer and banking industries are likely to have a significant knock-on effect in Live Nations sponsorship business. By aligning themselves so closely with other corporate interests - for example the strategic marketing alliance with CitiBank (press release, 13th February 2008)102 - Live Nation is structurally linked to other major agents in the global economy and susceptible to changes in their trading and operating conditions. Leaving aside the wider economic concerns, the risk involved in the deals is substantial. By not securing all the rights for the artists and with the recording industry in transition, with both sales and revenues declining, it would appear that the success or otherwise of the deals remains most closely tied to the low-margin concert business. On that basis, it would appear that the amounts of cash and stock involved in securing the rights are extremely high for the likely returns, especially considering the market profile of the artists signed. However, the superstar strategy has other risks attached. Madonna and the four members of U2 will be over sixty by the time their deals expire, and each of the five acts is of decreasing significance in the recording industry. In addition, Live Nation is not able to secure rights to exploit their back catalogue, making it likely that their previous record labels will continue to reap benefits from the touring and ongoing promotion provided by Live Nation. The expected returns from the recording industry parts of the deals seem disproportionate to the likely diminishing returns both on the grounds of market conditions and the demographic of the artists and their audiences, this representing a form of premium the company had to pay in order to entice the artists in the first instance.

102

Citi received the title of official credit card partner at Live Nation in return for benefits for card holders (see http://www.privatepass.citi.com) in a deal reportedly worth $100 million to Live Nation.

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(iv) Revision and Reorganisation Tellingly, as the risks involved in the multiple rights deals became more evident, Live Nations strategy seemed to shift its emphasis again in 2008, with the focus moving back towards the live music industry, albeit towards the peripheral but lucrative areas of ticketing, sponsorship and catering. Live Nations move in to the ticketing business is a logical step, rationalised by Michael Rapino as a great vertical expansion (Live Nation 2008c, p.14), and one that had been widely anticipated (see Fildes 2008). Nevertheless, it is another shift which has not only caused considerable disruption within both the live music and wider music industries but has resulted in further internal reorganisation within Live Nation. Underpinning the move into the ticketing market are the more attractive margins generated by large booking fees and service / convenience charges levied on the relatively low-cost business of selling tickets by phone and online, and an opportunist move on the part of Live Nation to not only improve its own profitability but to damage those of an indirect competitor. Rapino estimated the margin on ticket sales to be closer to 25% compared with the 4% achievable on promoting the concerts themselves (ibid), though this, in part, was a result of the market domination by Ticketmaster, which was achieved as a result of exclusive deals done in the past103. Ticketmaster, which was part of the conglomerate IAC (Inter Active Corp) until its spin off in 2008, had seen both the quantity and value of tickets sold increasing on an annual basis in keeping with the upturn in the live music market since the companies (SFX and Ticketmaster) signed an exclusive deal in 1998. In 2006, Ticketmaster sold 119 million tickets, valued at $6 billion, the following year this increased to 142 million tickets at a value of $8 billion, with Live Nation its biggest client, accounting for around 14% of all the companys revenues (LaMotta 2008a).
103

SFX and Ticketmaster signed an exclusive, ten year deal in 1998 which was taken on by Clear Channel and then Live Nation. At the time of the expiry of the deal, Live Nation was Ticketmasters biggest client, accounting for 14% of their revenue (LaMotta 2008a)

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Rapino had used Live Nations growing power to improve the deal with Ticketmaster over a number of years, but when it expired at the end of 2008 in the USA and 2009 in the UK (Music Week, 9th January 2009) Live Nation was able to become a major part of the concert ticket market. As part of these earlier negotiations, Live Nation had initially secured the right to sell 10% of tickets for its North American shows directly to audiences through their website, resulting in the development of a ticket retailing infrastructure within the company, which could be adapted and expanded on the return of the rights. As well as providing a ready made alternative when the deal expired, this allowed Live Nation to acquire valuable data on their customers, which had previously been held by Ticketmaster. While the loss of Live Nations business was clearly going to have a considerable impact on both Ticketmaster and the wider ticket market, this was accentuated by Live Nations typically expansive and aggressive entry into the business. A parallel agreement was struck with the venue operator, SMG, Ticketmasters second biggest client, to sell tickets on their behalf for a period of five years from late in 2009 (Van Buskirk 2009), further reducing Ticketmasters market dominance. A smaller deal was done with the Roseland Ballroom in New York and it was anticipated that Live Nation would continue to seek ticket selling partnerships with other venue operators to boost further its market share in North America, and subsequently, internationally. Live Nation claimed that its ticketing operation would dominate the North American concert ticket sales market from 2009, with the company expecting to sell 13 million tickets in North America in 2010 Q3 2008 Earnings Call Transcript, p.4). The advent of Live Nation Ticketing also resulted in considerable change at Ticketmaster, with share value falling by almost 18% on the announcement of Live Nations departure (LaMotta 2008a, 2008b). The company then responded by attempting to redefine itself with another variation on 360

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degree model, diversifying its interests along the lines of the model pioneered in the live music industry by Live Nation. This redefined the relationship between the two companies as rivals, both seeking to be the key intermediary between artists and consumers (a rle once dominated by the record companies) as opposed to the previously symbiotic partnership between the two. Evidence of this competition came in October 2008, when Ticketmaster announced that it had acquired the ownership of Front Line Management, a company that managed over 200 artists including major concert attractions The Eagles, GunsnRoses and Christina Aguilera (Pandey 2008, C6). Veteran record company executive and artist manager, Irving Azoff, was appointed head of the new division, Ticketmaster Entertainment Inc, in exchange for around 4.5% of stock in the company. While it was not immediately clear the impact this would have on Ticketmasters operations, it looked certain to create conflicts of interest between the two companies at the top end of the concert industry, as they attempted to broaden their interests in the music industries and increase their respective market shares 104. The Worlds Largest Live Entertainment Company: Live Nation Entertainment However, the threat of competition between the two and the possible damage this may have done to either or both companies through a forced lowering of charges and threat to margins may have been the motivation behind their eventual reconciliation, and the announcement of a proposed merger as Live Nation Entertainment105 in March 2009 (Van Buskirk 2009). While this was initially referred to the Federal Trade Commission in the USA and Competition Commission in the UK because of the size of the proposed new
104 105

for example, artists managed by Ticketmaster may have been promoted by Live Nation.

This new company makes Ticketmaster a wholly owned subsidiary of Live Nation and make the combined entity the largest live music company in the world.

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company, opposition from regulators and competitors has subsequently been overcome. In the USA, the Department of Justice approved the proposed merger in January 2010 with some modifications 106 , while in the UK, the Competition Commission finally gave approval in May 2010 after its initial decision in favour was challenged by one of Ticketmasters main competitors, Eventim. These outcomes offer Live Nation an improved return on ticket sales and the service and other charges applied to them, than they would have achieved under the previous Ticketmaster agreement. In the lead up to the merger, the advent of Live Nations ticketing division has, nevertheless, allowed them scope to develop still further another area of concert related income through sponsorship. Their sponsorship platform sells the possibility of brands being associated with all aspects of the companys activity, including endorsing artists and their products; tours and festivals; acquiring naming rights for venues; access to tickets and branding of their digital/ online and broadcast content in return for payments to Live Nation. The most significant deal of this type is the arrangement between the promoter and Citi Cards in February 2008, which was valued at around $100 million (http://www.sponsorship.com, accessed 7th May 2008) and allows the bank a number of different sponsorship products as official credit card partner of Live Nation (press release, 13th February 2008). Citi are now able to not only offer a variety of unique benefits to Citi customers (ibid) including preferential seating and ticket packages at Live Nation shows, but are also in a position to participate in future initiatives such as venue naming rights and tie-ins with Live Nations new ticketing operation (ibid). A similar deal in 2009 saw Coca-Cola become the official soft drink of Live Nation (Ebenkamp 2009). In the first three months of 2010, Live Nation Entertainment announced that it had concluded 375 sponsorship deals, generating $21.2
106

LNE was made to licence its ticketing software to competitors and Ticketmaster was forced to sell its Paciola ticketing company (Van Buskirk 2010)

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million (Live Nation 2010b, p.2). A final part of Live Nations strategy to increase revenue from their existing live music operations, catering, saw the company concluded a deal with SMG-SAVOR (the catering division of SMG) and Aramark in October 2008, to manage the food and drink concessions at 34 American arenas for a five year period commencing in 2009. The company estimated the value of food and drink sales in the venues covered by the deal to be worth around $100 million per year, and predicted further growth of around 20% (Press Release, 27th October 2008) in this area, while justifying the deal in terms of risk avoidance and increasing profit. Though this emphasis on live music and extracting the greatest possible profit from the experience appears to represent a return to the initial aims of Live Nation, and act as something of a sop to concerned shareholders, it also marks a retreat from the 360 degree / multiple rights deals advocated most strongly by Michael Cohl. In doing so, Live Nation has withdrawn slightly from their high-risk approach to one that appears more geared towards the avoidance of risk during times of economic downturn and share price uncertainty. Tellingly, Live Nations strategy towards acquisitions has changed substantially in the period 2005-2010, resulting in structural changes in the company, which suggest a fluid and complex business model, influenced by key personnel, shareholders and global economic conditions in the period since 2008. Live Nations Strategic Changes Throughout Live Nation's history there have been a number of marked shifts in the company's strategy, with a range of organisational changes implemented to reflect and administer their new priorities. The changing nature of both their strategic priorities and internal organisation, as reflected in their Annual Reports and Quarterly Earnings Reports, These provide

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evidence of a company that initially conformed to the familiar characteristics of the second tier cultural industries operators as defined by Hesmondhalgh (2007, pp.163-170), most notably through conglomeration and vertical integration, but which has subsequently behaved in a manner that is not fully incorporated in such an account. Indeed, using Live Nations company filings and reports to shareholders, it is possible to identify three distinct phases in the company's development to date. These can be defined in terms of: (i) the acquisition of competitors and rights during the first 2-3 years of operation (ii) a period of risk taking, marked by the rapid period around 2007-8 and the acquisition of artist related rights in Artist Nation. (iii) an entrenchment in subsequent years towards their core business and the extraction of more revenue from it, through opening new channels of income around live music. This section will attempt to describe these changes and then make sense of them within the wider context of the strategies employed by large businesses in the cultural industries and corporate entrepreneurs. Each of these has resulted in fundamental changes to the company's outlook and structure, resulting in the acquisition and divesting of large sections of the business with accompanying changes in the business structure. In analysing these, it is possible to identify some new strategies and approaches, which have been applied by the company over time-specific periods, alongside those which have been integral to its operation throughout its existence. Phase 1: Conglomeration and Vertical Integration The initial strategy for Live Nation, as set out in the 2005 Annual Report, was one centred on growth and achieving increased revenues and market domination, offering general aims rather than focusing on specific parts of the

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company. It spoke of an overall goal to increase shareholder value by maximising our cash flow from operations (2006, p.13) and the need to secure, promote and market live content to fill our global network (ibid). This was to be achieved by a combination of selectively pursuing investment and acquisition opportunities (ibid) and the growth of ancillary income around live music, specifically in relation to the opportunities presented by digital distribution and the ability to connect directly with audiences. Mention was also made of sponsorship, food and beverage, ticketing and merchandise (ibid), but tellingly, no mention was made of narrowing the scope of the business to focus almost exclusively on live music. As has been detailed previously, the first year of Live Nation was one which was characterised by rapid growth, in the shape of both vertical and horizontal integration, most notably involving the takeover of the second largest concert promoter in North America, House of Blues, before, towards the end of 2006, it became clear that the company was moving into a period of consolidating its position and shifting its focus to its core activities, namely the promotion of live music events. In terms of strategy, this manifest itself in new objectives, which included the raising of brand awareness, and a combination of growth in some sectors of the business and contraction in others. The former set out the need to increase the size of both their North American and International platforms as well as concentrating on the need to increase profits in core activities. The development of online and ancillary income remained a priority as did the need to extend the relationship with artists, fans and sponsors (Live Nation 2006, p.2). To fulfil these ambitions, the company's structure changed into three reportable business segments (ibid, p.5), now made up of an Events division which covered live music, theatre and sports events, Venues and Sponsorship, and Digital Distribution, which was established to manage third-party ticketing relationships, in house ticketing operations and online

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and wireless distribution services (ibid, p.6)107. These suggested not only the first change in strategy, with the new emphasis on ticketing and digital distribution reflected in the structure (if not the revenues) of the company, but highlighted the structural fluidity - a characteristic of Live Nations growth - as it attempted to establish itself as a global market leader in the music industries. This lack of the type of rigid structure that is typical of more mature firms was evident again in the next round of changes in 2007. While these resulted in a further reorganisation of the company structure, with six new divisions formed (North American Music, International Music, Global Artists, Global Digital, Global Theatre and Other Activities), this did not reflect a substantial shift in the source of the company's revenues. The income from theatre dropped just below 10% of revenue, and digital income remained a negligible part of their turnover, while the emergence of the Global Artists division, served only to shift some of the income from live performance from the North American and Global Music areas and while Live Nation was, for the first time, looking at wider artist revenue streams, these remained predominantly tied to touring and live performance. Strategically, Live Nation's priorities remained largely the same in 2007, continuing to emphasise the importance of core activities and their profitability. As before, it was articulated that this would be achieved through a combination of developing ticketing and online activities, the building of global live music platform (Live Nation 2007, p.2) and the development of closer relationships between, on the one hand, artists and sponsors, and on the other artists and their fans (ibid). Simultaneously, efforts continued to divest non-live music assets and/ or under performing live music assets (ibid) in order to reduced the company's indebtedness (see table 5.1

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A small amount of revenue (around 1%) during 2006 came from the sports management business, which had been largely sold by the end of the year.

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below). In spite of the creation of the Global Artists division and the announcement of the deals with Korn and Madonna, the major restructuring which was announced in October 2007 was indicative of the fundamental change in outlook within the company. Phase 2: Growth and Risk Taking The launch of the Artist Nation division, which was described as being to partner with artists to manage their diverse rights, (Live Nation press release, 16th October 2007) pre-empted the structural changes and conflict which affected the company in 2008. The restructuring meant that, as well as Artist Nation, Live Nation was made up of the North American and International music division, as well as a new ticketing division and one for the remaining parts of the business and those parts which they were seeking to sell. The structure of Artist Nation also marked a shift in strategy, as it had its own Chief Executive and Chairman, Michael Cohl, and five further divisions within it, which reflected Live Nation's move away from a model that was associated primarily with live music revenues to one which was increasingly based on buying multiple rights packages with major artists. To this end, Artist Nation was set up in a way which allowed for the application of something close to a 360 degree model, with divisions covering recorded music, merchandise, artist fan sites and ticketing, broadcast and digital media rights and sponsorship and marketing, the structure accurately reflecting the main revenue sources in the contemporary music industries. However, the realignment of the business, with the incorporation of recorded music rights in many of the high-cost, high-risk deals signed with major artists, was a source of conflict as well as growth within the company. The resignation of Michael Cohl in June 2008 and subsequent departure of Bob Ezrin show the importance of individual managers in the direction of the company. Although Cohl remains as a consultant to the company, and has a

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non-compete clause in his contract, his loss of influence is likely to end the entrepreneurial, high risk growth that his part of the company appeared to instigate. The subsequent reigning in of the strategy was almost certainly a response by Rapino to the concerns of the shareholders, as reflected in the company's decreasing share value over the early part of 2008, and the problems associated with that. Phase 3 : Consolidation and Control These problems could be seen in a number of areas. Lauria and Garrity (2008) suggested that this retrenchment could result in job losses at Artist Nation, not least because it employed almost 200 staff, many in promotion, marketing and radio, but that it was unlikely to be involved in a record release until at least 2010. The declining share price also undermined shareholder confidence, including that of some of the major artists signed to the company. Prior to releasing a record or producing a tour for Live Nation, U2 cashed in $25 million worth of shares in December 2008 (Goodway 2008), which had been issued as part of their deal with the company. The drop in share price in the interim period 108 meant that the shares (the price of which had been guaranteed) were only worth around $6 million, and that Live Nation had made a considerable loss prior to generating any revenue from its deal with U2. Rapino confirmed (ibid) that only Madonna and U2 of the major deals had been given stock at guaranteed prices. After Cohl's departure it was claimed Artist Nation remained an integral part of Live Nation's strategy along with the growth of their concert platform and the launch of their ticketing business, and despite their problems, Rapino maintained that the company would remain committed to acquiring additional artists rights beyond the concert tour, including unified rights deals with select artists (Heffinger 2008). However, there has been no evidence of

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Share value of Live Nation has dropped by 83% since the signing of Madonna's multiple rights deal in October 2007.

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this and indeed, Artist Nation ceased to exist as a separate division of the company early in 2009, its functions and staff being absorbed within the North American Music and International Music divisions. In 2009, acquisitions of both new businesses and new rights have also been notable by their absence, in line with Rapino's need to appease shareholders with promises of a lower-risk, disciplined financial approach (cited in Heffinger 2008). Conclusions Live Nation is an example of one of a number of large scale companies in the music industries which has persevered with some aspects of the multiple rights / 360 degree models of Sanctuary, but its unique position comes from its starting point as a concert promoter. The companies which have dominated the music industries in the past have all been rooted in the recording industry, but Live Nation has expanded at a pace which means its turnover is now greater than all but the largest of the major record companies, Universal. This type of expansion would appear to offer some evidence of the nearing of the type of tipping point described by Page (2008) whereby the live music industry overtakes the declining recording industry in terms of value. However, it would be over simplifying the analysis of Live Nation to attribute its new found significance as arguably the most innovative and entrepreneurial corporation in the music industries to the fortuitous nature of its timing. At the time of Live Nations formation, the live music industry happened to be undergoing a period of uncharacteristic growth, fuelled by rising ticket prices, the growing number of festivals and a wide range of new revenue sources, primarily derived from sponsorship and ticketing. Though there was no conclusive evidence of increased demand for live music, there was considerable anecdotal evidence of opportunities to extract more turnover from activities related to the promotion of live concerts and it was through doing that Live Nation initially began to expand.

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Besides its background as a promoter and history as part of two large entertainment conglomerates (SFX and Clear Channel), Live Nations growth and related lack of profitability can be attributed to a some of the traits of corporate entrepreneurship which the company has adopted in its short history. These are considered in more detail in chapter 7, but can be best illustrated by examining the approach of the company and the continual reworking of its business structure to create the new business units described by Vesper (1984). Live Nations strategy has been not dissimilar in some ways to that of Sanctuary, despite the differences in scale and origins. This has alternated between the adoption of high risk strategies, followed by a retreat towards a more cautious, managerial and bureaucratic style when faced with problems as a result of failure to make profits, falling share prices and internal disputes between key executives. The component parts of the strategy have tended to revolve around driving turnover through acquisitions and international expansion of the business and the accumulation of a wider array of intellectual property rights as a consequence. Such a strategy has also impacted on the organisational structure of the business, which has also been of the fluid, unstable type often found within large organisations engaged in the type of corporate venturing, innovation and proactivity which Zahra et el (1999) describe as the main element of entrepreneurship within a large firm. Consequently, the shift of strategy has seen Live Nation close, reconstitute and create new divisions, most notably with the advent, and subsequent disbanding of, Artist Nation between 2007 and 2009 to assume control of their growing interest in rights associated with recordings, merchandise and fan clubs/ database management. A similar strategy was and restructuring was evident in the formation of Live Nation Ticketing to accommodate their move in to the sale of concert tickets in 2009. Despite these transformations in the nature of the business, its strategy and organisation, Live Nation is still encumbered with a debt approaching $1 billion and there is no evidence that the changes in the business model

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towards higher margin activities are sufficient to turn round the combination of historical debt (from the Clear Channel spin off) and the results of some of the considerable risks the company has taken in acquiring businesses and rights. Changing economic conditions have also had a negative impact on the sale of concert tickets, and may also hamper the companys ability to raise corporate sponsorship, as businesses cut back on non-essential expenditure. Live Nation has advantages over Sanctuary as result of scale and timing, and it is worth noting that it has re-imagined, rather than merely implemented, the 360 degree model as defined by Sanctuary. By at least briefly attempting to acquire as many rights as possible related to the individual artist, it could be argued that Live Nation actually came closer to implementing a full, 360 degree operation. Nevertheless, the different size and background of the two companies makes it is impossible to make precise, like for like comparisons between them, but the failure of both to succeed using a similar combination of rights accumulation, business acquisition and risk-taking casts considerable doubt on the sustainability of the 360 degree approach within the music industries. However, both companies are important examples of the type of business models which have become popular across the music industries since the downturn in the recording industry from 1999, by embracing all aspects of the music industries (or as many as they are able to acquire the rights to) by trading in rights and taking risks using funds raised through the stock market. In the case of Sanctuary, mismanagement, coupled with the limitations of their implementation of the 360 degree model, wherein they were only able to acquire some rights for each of the artists they signed because of existing contracts, and excessive risk taking during a period of relative success resulted in the demise and ultimate sale of the company. A different approach, adopted by Warner Music, is to sign new acts to 360 degree deals, ensuring no leakage from their potential revenue streams to

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competitors (see Williamson 2008), but this comes with uncertain sales and high associated risks. By contrast, Live Nation has opted for higher profile, less complete versions of the same template. In doing so, and in spite, of the large number of artist related rights they have accumulated, their five major artists all continue to make money for their competitors while taking advances against uncertain future activities from Live Nation. If Sanctuarys contribution to the reorganisation of the music industries was in its innovative structure, then by entering the wider music industries as a concert promoter and venue owner, Live Nation had the advantage of having fewer ties to the declining recording industry, yet the failure of its business model to yield sufficient margins or profits through live music alone saw it also move into a multiple rights model, which also involves recording rights of some major artists. Faced with market and shareholder volatility, Live Nation is the most prominent and fastest growing example of the new type of music businesses, and though its scale and corporate nature may offer some survival options not available to Sanctuary, it, along with the major record companies, is still engaged in a highly risky business model which, while offering a solution of sorts to declining sales of CDs, remains unproven in terms of both profitability and sustainability in a turbulent and transitional marketplace. CHAPTER 7: RECONSIDERING THE CONTEMPORARY MUSIC INDUSTRIES Introduction At the outset of this investigation, Shukers analysis of the music industry as a cultural industry using a political economy approach was taken as a point of departure. While this provides a number of explanations for historical patterns that can be used to explain the behaviour of the major firms operating within a disorganised capitalist system, the argument here is that adopting such a broad approach is only helpful as a starting point when dealing with the contemporary music industries . This thesis argues that the

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changes in the music industries (defined and outlined in chapter 4) and reflected in the two case studies (in chapters 5 and 6) mean that while studying the music industries within the wider contexts of the cultural industries and disorganised capitalism offers a number of useful insights, it underplays the importance of the three themes (intellectual property, rentseeking and entrepreneurship) at the centre of this work, each of which plays an increasingly important part in (the understanding of) the music industries. This is not deny the similarities between the music industries and some other cultural industries. Hesmondhalghs characterisation of the distinctive features of the cultural industries can all be applied to the music industries: the high risks involved with the low success to failure ratio, the tensions between creative and commercial concerns, the high production costs and low reproduction costs and the creation of (artificial) scarcity around cultural goods (2007, p.18) are all, to varying degrees, apparent in the production and sale of music. While each of these themes has been integral to many of the major works on the music industries (Longhurst 1995; Burnett 1996; Negus 1999; Cvetkovski 2007; Shuker, 2007), the case studies of Sanctuary and Live Nation suggest that these, in isolation, can only offer a limited explanation of how the transnational companies at the centre of the music industries now operate. Indeed, the studies of Sanctuary and Live Nation strongly suggest that it is unhelpful to view such music industries companies primarily in terms of the ownership of the firms and the tensions between art and commerce. It now makes more sense to examine, not only who owns the firms, but what they actually own; to see how they attempt to generate income in the light of declining sales of the physical, tangible products on which the industries have been based and, lastly, to study who makes the decisions within them (often assumed, incorrectly, to be the owners). It will be argued that the answers to these questions, within the companies studied (and more broadly) lie in:

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!the acquisition and protection of intellectual property (in particular, copyright on both compositions and sound recordings) !the extraction of rent, with an attendant increase in the lobbying of governments in order to achieve this this aim. !the increasing importance of entrepreneurship, within both small businesses and large corporations. This chapter will draw on the evidence of the previous two to make a case for the importance of each, not just within Sanctuary and Live Nation (where all three approaches were visible to different degrees at different times), but to argue that the same claims are more universally valid across the music industries. (i) Intellectual Property and Copyright - definition and purpose As reflected in Chapter 2, intellectual property (and, in particular, copyright) is the most studied of the three approaches with regards the music industries, and the aim here is to adequately define the facets of intellectual property relevant to the industries, to examine in more detail how it has been studied historically and to reflect on how it has impacted on the the organisation of the industries and firms within them in recent years as the focus has moved increasingly towards the collection of income from copyright. Crucially, the scope and extent of copyright has become the central consideration in the organisation of both the recording and music publishing industries. At the outset, it is worth highlighting the differences between the overarching notion of intellectual property and the more narrow field of copyright, which will be the focus of this discussion. Definitions of intellectual property inevitably vary. Hesmondhalgh breaks it down to three categories each of which protects a particular type of knowledge or idea, (2007, p.149) these being patents (for protecting new ideas that may be exploited by industry), trademarks (for protecting symbols used to distinguish competing products

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and companies from each other) and copyright which he notes protects those expressions defined in law as literary and artistic works (ibid). The report of the Gowers review adds a fourth category - design (2006, p.13) applicable to the physical application of a piece of knowledge, but of the four, it is copyright, which covers a wide range of creative or artistic forms (ibid, p.14) which is at the core of the cultural industries. Copyright It is also worth, at this stage, highlighting the history of copyright, if only to note the difference between the way in which it is used now, as a means for large conglomerates to establish ownership rights and maximise the income they can receive from them, against the more modest aims of the earliest copyright legislation. Copyright has it roots in the book publishing industry, and in the UK, the first copyright legislation, the Statute of Anne (1709) set up a limited monopoly (at that point lasting 14 years 109) which attempted to create a balance between what Towse describes as a trade off ..between the cost of monopoly (higher prices) and its benefits (the incentive to create and publish works of literature, art and music) (2004, p.57). Though this has been at the core of all subsequent debate on copyright, legislation has repeatedly served to extend either the length or scope of copyright. For example, the 1842 Copyright Act extended the term to 42 years or the life of the author plus seven years, and by 1911 this was extended to the life of the author plus fifty years before the implementation of an EU Directive at the start of 1996 increased this to its current length of life plus seventy years. Similarly, with the advent of new technologies, copyright law has changed to include them, often increasing the number of rights associated with the protected works. In considering the debates surrounding copyright in the contemporary music industries, these patterns and arguments remain central. As the scope of copyright has increased (along with the associated revenues from it), conglomerates and rights
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this was extendable for a further 14 years on the agreement of both author and publisher

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organisations have supported this on the basis of providing greater incentive and reward for creators (as opposed to framing it in their own interests) while opponents point to the problems as the monopolies this creates and the closing of access to works which would otherwise eventually enter the public domain. Studies of the music industries have generally been slow to recognise the importance of copyright, perhaps obscured by industry statistics, which traditionally measured success or failure in terms of sales, and the opaque nature of many of the contractual arrangements within the industries. Hesmondhalgh is correct to note that copyright is a vital, but often neglected aspect, of the cultural industries (2007, p.149) given that, by his own account, copyright has underpinned the ownership of cultural commodities and, therefore, the cultural industries as a whole. (ibid) However, in spite of this attention, it remains an insignificant part of many accounts, only really becoming a focus of attention at around the same time as these industries became an integral part of government strategies under the guise of the creative industries strategies. It is in this context that contemporary commentators have finally elevated the importance of intellectual property in both the music industries and wider cultural industries. The first evidence of a paradigm shift in studies of the music industry came in the work of Frith (1993) and Lash and Urry (1994) with both offering the prospect of a move away from the type of analysis which had been based around the political economy of the industry and the modes of production therein (for example, Negus 1992; Bennett 1996). Although this added substantially to accounts of the the production of music (see Toynbee 2004; Thberge 2004), the importance of copyright vis vis the music industries has been somewhat limited in its scope, with the most important contributions being primarily historical (Laing 2004) or legalistic (Greenfield and Osborn 2004) without necessarily fully teasing out the implications for the wider structure of the music industries.

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Lash and Urrys Economies of Signs and Space, (1994), which actually predated the popularity of the term creative industries and the advent of a creative industries policy by the New Labour government in the UK, was more direct in identifying the centrality of copyright to the cultural industries, suggesting that the majority of transactions therein involve the exchange of finance in return for a bundle of intellectual property rights (1994, p.135). For them, intellectual rights are the main form of capital in the culture industries, (ibid, p.136) and the main source of added value for their outputs. They argue that the output / product of the cultural industries is a number of reflexive objects (1994, p.134) which become intellectual property before they are ready for the market, meaning that firms can only exploit or make money from cultural objects when they have been juridically converted into intellectual property (ibid). This serves two purposes for the copyright holder: it allows them to profit from the copyrighted products, while, equally significantly, it prevents competitors from being able to profit from them. It would appear that this is central to understanding the contractual arrangements which underpin these industries. Tellingly, their definition notes that the exchange is often between two culture firms, rather the between the firm and the producer of the work: as the cultural industries have grown in economic significance, these transactions have become larger in scale and value. For example, the sale of the multitude of copyrights owned by the Sanctuary Music Group to Universal Music Group in 2007 (discussed in chapter 5) is best understood as a series of acquisitions of intellectual property, resulting in the ownership of so many rights that only the largest company in the industries at the time could afford to buy them. Furthermore, Lash and Urry highlight the importance of intellectual property specifically in the music industries as being even more crucial than in some of the other cultural industries, arguing that there is no economic sector for which rights are more important than the music industry, (1994, p.135) and

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claiming that the main purpose of industry bodies (such as the BPI and IFPI) is the protection of intellectual property rights (ibid). In recent years, the debates around intellectual property in the music industries have, like the cultural industries more generally, served both an expansionist and protectionist purpose. Lobbying by music industries bodies has focused as much on extending the length of existing copyrights (notably in sound recordings) as it has in the rhetorical battle against piracy and the infringement of such rights, which has become more widespread in the advent of the internet, mobile phones and the sharing of digitised music files by means of peer to peer file sharing and downloads, both made easier by the wider availability and lower cost of higher speed broadband connections. Lash and Urry are not alone in placing great import to the position of copyright in the music industries. Indeed, Frith, in the introduction to Music and Copyright reflects on what he describes as an analytic redefinition (1993, p.ix) of the music industry wherein what was treated in the 1960s and 1970s as manufacture, an industry primarily selling commodities to consumers, came to be treated in the 1980s as a service, exploiting musical properties as baskets of rights (ibid). He also notes that researchers have been slow to both recognise this and have been guilty of taking for granted assumptions about industrial statistics and policy making (ibid). Similarly, and in the light of the DCMS Creative Industries Mapping Documents (1998, 2001), which marked the first official recognition and definition of the creative industries in the UK, Garnham notes that in recent years the cultural sector has become a major area of economic growth in the global economy, the outcome of which is the creation of a coalition of disparate interests around the extension of intellectual property rights (2005, p.15). In the second edition of Music and Copyright (2004), Frith and Marshall still feel the need to state that it is necessary to move away from the traditional views of themusic industry as a business in which success is measured in

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record sales, music business problems by record sales decline (2004, p.1) towards one which is centred around the buying and selling of intellectual property rights. By their definition, copyright provides the framework for every business decision in the industry (ibid) and is more important than any other concept in making sense of the variety of social practices that make up the music industry (ibid). This is an argument that no longer needs to be made, rather the starting point for all discussions of the wider music industries. However, to fully understand the way in which the industries operate also requires an understanding of how copyrights are organised within them. Explaining music copyrights There are a number of reasons for placing copyright at the centre of any investigation of the music industries, though the most significant is the number of rights which are attached to both composition and recording of music. Indeed, the history of music copyright is one of continual expansion (both in terms of scope and revenue) from its origins as a means of preventing the reproduction of musical scores without permission, to the multi-billion dollar industry that it now underpins. While the growth or decline of the music industries have traditionally been measured in terms of sales to the consumer, the real patterns can perhaps be more accurately viewed by considering the revenues generated by publishers and record companies through the sale of rights associated with their songs and recordings. Copyright as it applies to music has expanded along with technological developments (for example, the advent of recorded music at the start of the twentieth century and the digitisation of it at the end of it), with rights assigned not only in the composition but also in the recordings. Music copyright is perhaps best understood by considering separately the rights bestowed in the compositions themselves and the recordings of them. In general, composers can assign or license their songs to music publishers who collect payment on their behalf for a range of uses of their songs

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including the public performances and broadcast110 , and the mechanical reproduction of them (in both physical and digital forms). In return for a combination of advances and royalties, songwriters transfer ownership of the songs and the bundle of rights around them for either a finite or infinite amount of time (in perpetuity) allowing the publishers to collect (and charge commission on)111 royalties for the composer when their songs are, for example, manufactured as CDs, played on radio or television or synchronised for use in film soundtracks and advertisements. However, throughout the late twentieth century not only the length, but the scope of copyright on music was extended with the introduction of neighbouring rights, which bestow similar rights to the producer as the composer. This is described by Frith and Marshall as a right related to the original composition but subsisting in the recording itself rather than the underlying musical work (2004, p.8). In most instances, the producer to whom this right was legally attached tended to be owned by the company that organises and publishes the recording (ibid) rather than the composer allowing record companies (for it was primarily them who benefited) also to receive payments for the recordings when they are heard in public, broadcast, used in other recordings (by way of sampling) or when used in film, television and advertising. In addition, two further sets of rights, both of which are relatively recent additions to UK law, are worth noting in this context - performers rights and moral rights. The former, introduced under the EC Rental Directive which the UK government adopted in 1996, means that not only the featured musicians but all the musicians (including those paid session fees) are entitled to a share of monies collected by producers on the broadcasting of a recording on which they played. The second is moral rights - the right of the
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this has been expanded to include some online income from streaming and blanket license agreements with some of the major digital retailers.
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The split between composer and publisher in most publishing contracts is usually 75-85% in favour of the writer

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author to be identified as the author of work (regardless of who owns the rights to it) and their right to object to derogatory uses of their work - which only became enshrined in UK law under the Copyright Act of 1988, largely to fall into line with other European Union countries. Collection of Music Copyrights Having established the importance and complexity of copyright within the music industries, this presents another problem in that the majority of payments due (for example, for the public performance of song in a shop or a play on the radio) are very small, making them close on impossible for the composer to collect. Caves describes this situation as localised to the music industry (2000, p.297) and a consequence of the lumps of rent being very small, very numerous and hence feasible to collect only through some cooperative organisation (ibid). The outcome has been the formation of a series of national collection agencies, which began with the formation of SACEM in France in 1850, after a number of composers had banded together having heard their work being performed by an orchestra in a cafe - their refusal to pay the food bill on the ground of not being paid for the performance was upheld in court and established the principle of a performing right (see Attali 1985, p.77). Similar societies formed around the world, their scope expanded with the advent of a market for recorded music and the growth of radio in the early part of the twentieth century. Caves describes how the history of such societies could be written as series of conflicts between the rights holders and those who stand to benefit from the use of musical works (for example, radio and television stations, and more recently internet streaming applications) noting that no substantial group of payers ever gave in without litigation (2000, p.303) and that such collection societies have become virtual monopolies often at odds with competition /antitrust legislation in individual countries. While the European

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Union has taken some small measures 112 to weaken such monopolies, these have generally been tolerated on the grounds of economies of scale that, as Caves puts it even a large independent publisher doing its own licensing could not touch its scale economies (ibid). The collection societies are, as a result, in a position to issue blanket licenses which allows the user unlimited use of the whole repertoire assigned to (or licensed by) the collecting society (Towse 2004, p.64). These licenses have been contested by broadcasters and in recent times internet music users 113 but have remained in place despite occasional interest from antitrust investigators. In the UK, a report by the Monopolies and Mergers Commission (MMC) into performing rights claimed that the PRS did enjoy a monopoly situation (1996, p.3), though the majority of the (mainly critical) recommendations focused on improving the managerial efficiency of the organisation, rather than ending the monopoly. The outcome has been a number of changes to the organisation, which have been both structural and presentational. In the light of the MMC report, the PRS and MCPS (Mechanical Copyright Protection Society) created an alliance in 1997, which finally merged in the form of the rebranded, PRS for Music in 2009. Value of music copyrights While a degree of caution has to be used when handling industry generated statistics (see Harker 1997) there is considerable evidence that that the collection agencies have (until the recent economic downturn) been able to increase their revenues despite the overall decline in the value of the recording industry in the years since 1999. While not comparing like with like (the method of computation has changed to include both digital sales and the revenues from performance rights), the IFPI figures suggest that the retail

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record labels may now use any European collection agency for the payment and collection of mechanical royalties, regardless of their location. For example, UMG use the Belgian rights agency, SABAM, for processing mechanical rights across Europe.
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For example, recent dispute between You Tube and PRS for Music, see http:// www.guardian.co.uk/media/pda/2009/mar/09/digital-music-and-audio-youtube/print

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value of recorded music dropped from $38.6 million in 1999 (IFPI 2000) to $29.8 million in 2007 (IFPI 2008), meaning that, as a result, fewer copies of works were being made and the amount collected in mechanical royalties fell in line with this (see also appendix 2). Nevertheless, the major collection societies have still been able to report record amounts of income and distributions to members. In the USA, the two major rights collection societies, ASCAP and BMI both reported record r e c e i p t s o f $ 9 9 5 m i l l i o n ( h t t p : / / w w w. a s c a p . c o m / p r e s s / 2010/0503_Financial_Results.apx, accessed 30th May 2010) and $905 million (BMI 2010, p.2) respectively. In the UK, PRS for Musics revenue for 2009 grew by 2.6% to 623 million (PRS for Music press release, 15th March 2010). These figures are all the more remarkable given steep decline in income from recorded music (down 13% in the first half of 2009 (PRS for Music press release, 24th July 2009), and is evidence of both the growth of revenue from live music114and the ability of the rights organisations to extract more income from broadcasters and public performances. Indeed, PRS for Music have been the subject of much criticism and adverse press coverage over their tactics in seeking license payments from small businesses to this end. After a consultation with the Federation of Small Businesses, whose members had become increasingly irked by PRS for Music collection strategies 115, it was announced that there was to be a reduction in tariffs for small businesses (PRS for Music press release, 18th February 2009), but the trade off seems to have been a more aggressive pursuit of businesses, and an interpretation of what constitutes a public performance which is primarily geared towards raising revenue rather than within the spirit of the legislation (see for example, http://news.bbc.co.uk/1/hi/scotland/edinburgh_and_east/ 7029892.stm, accessed 6th August 2009).
114

PRS for Music estimates that the value of live music in the UK has increased from 251 million (2005) to 403 million (2008) largely due to large increases in ticket prices (Music Week, 29th June 2009)
115

there is a lengthy discussion of this on the Federation of Small Businesses (FSB) members forum at http://www.fsb.org.uk/discuss/forum_posts.asp?TID=599&PN=1

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With parallel growth in the revenues collected by PPL, which collects royalties for record companies and producers on public performance,116 there is plenty of evidence to suggest that not only does the exploitation of music copyright continue to be conceptually central to the music industries, but that it is becoming an increasingly important part of the overall revenues generated by the recording industry (it is now included in IFPI figures calculating the value of recorded music sales, totalling US$802 million in 2008). Clearly, one of the many responses of the recording industry to the decline in physical sales has been a stepping up of its attempts to increase yields from public performance and broadcast royalties, through a more rigourous interpretation and policing of existing legislation, coupled with ongoing lobbying in an attempt to extend the length of the period covered. Intellectual Property and Legislation The most important point here is that as sales in the recording industry have gone down, the revenues generated from the ownership of rights has increased, placing increased emphasis on the acquisition and retention of large catalogues of recorded material. It is this shift from the remnants of a manufacturing industry to one based on rights that has been the most significant change in the contemporary music industries. By increasingly basing their business model on rights acquisition means that recent years have seen the notion of the recording industry as one based on manufacture as increasingly tenuous. While sales of recorded products have decreased substantially, firms have been able to mitigate some of these losses in revenue by both becoming involved in other aspects of the industries and enjoying increased returns on their existing catalogues. However, to continue to achieve this requires protection of the copyrights that they own: not only does it become important to own as many of the rights associated with a

116

their revenue from public performance in the UK rose by 11% to 54.2 million in 2009 (PPL press release, 11th May 2009).

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particular work as possible, it become important to own as many works as possible for as long a period as possible. This is generally done in one of two ways: the first is carried out by the firms themselves, by restructuring contracts with artists and writers, and embarking on a process of catalogue acquisition (both by signing new artists and gaining to rights to previously released works), but to maintain control for a longer period requires changes in the law. This has become an increasingly important part of the function of the music industries, not least as (in the UK) the fifty year term 117 relating to the copyright on sound recordings has begun to expire on the first major recordings of the rocknroll era118. This is at the centre of the link between the first two, previously identified characteristics of the music industries - acquisition and protection of rights and rent-seeking, as the desire for the former pre-empts the need for the latter. Nevertheless, this creates a number of difficulties, not least because of the globalised nature of the music industries (and the large corporations involved) having to deal with nation states, each of which has different levels of protection and enforcement. Global Variations This section outlines the issues surrounding copyright legislation on a global level which have become the main site of rent-seeking in the music industries. This has resulted in closer links between the industries and legislators/ governments on a state-by-state basis, but tellingly much of the drive for copyright extension has come from international treaties rather than decisions taken at a nation state level. One outcome of this has been an inequality across international boundaries of the duration of copyright, meaning that one of the main arguments used by proponents of copyright
117

the copyright on a song lasts longer - for the life of the author plus 70 years - it is only the copyright on the sound recording which lasts for fifty years
118

early works by Elvis Presley, Cliff Richard, Roy Orbison and Jerry Lee Lewis are now in the public domain. Early work by The Rolling Stones, Bob Dylan, The Supremes and the Beatles will all follow in the next five years.

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term extension in the UK is the greater protection offered to rights owners offered in other countries. Of course, using this logic, copyright reform can never result in a decrease in term lengths, only its continual extension. At the core of this is a more general move away from copyright legislation created at the level of the nation state to that which (in the case of the UK) stems from decisions taken on a European or global level. Attempts to standardise copyright across international boundaries have been an ongoing quest since ten countries signed the first Berne Convention in 1886, which allowed reciprocal protection for a range of cultural products (including music) across the signatory countries. Subsequently more countries signed the Berne Convention (and the 1961 Rome Convention which introduced both performers rights and the rle of producers in the recording industry), though the most significant changes to global copyright laws came during the 1990s with the TRIPS (Trade Related Aspects of Intellectual Property) agreement of 1993119 and the WIPO Copyright Treaty of 1996. Frith and Marshall describe the outcome of TRIPs as being the strengthening of copyright by establishing minimum levels of both protection and enforcement (2004, p.13) and the increased power of countries who are net exporters of copyright (for example, the USA and UK) to impose crosssectoral trade sanctions on those countries which fail to enforce copyright protection (ibid). In addition, TRIPs also established minimum levels of protection, which national legislatures had to incorporate into their own laws. This, however, has not resulted in a parity of provision: for example, in the UK, songwriters and composers enjoy greater protection than producers and performers: the song is copyrighted for the length of the author plus seventy years, whereas the sound recording is only protected for fifty years from release. Across global boundaries, the duration of copyright on sound
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TRIPs was part of the General Agreement on Tariffs and Trade (GATT), to which members of the World Trade Organisation are bound. 153 countries are members of WTO in 2009 (http://www.wto.org, accessed 4 August 2009)

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recordings also differs: the USA extended their protection to 95 years under the Sonny Bono Copyright Term Extension Act (1998), while Brazil and Australia both protect for seventy years (see Gowers 2006, p.49-50), as does the extent to which performers benefit. While in the UK royalties are paid on all plays on both radio and in bars and restaurants, US legislation exempts all but digital radio stations and the majority of bars, restaurants and shops from paying a performers royalty. In 2009, the European Union was considering extending the term on sound recordings, though this has been a lengthy process, which has seen considerable conflict between both member countries within the EU and between the music industries lobbying groups and academics. In the lead up to the vote in the European Parliament, IFPI and IMPALA argued for extension of the term to 95 years (press release, 16th July 2008), siting the disparity with U.S. term length as central to their case. In the European Parliament, a vote on a compromise seventy year period (supported by the British government) passed its first reading, but was subsequently blocked in the Council of Ministers by a minority of nine member states. Indeed, while these countries argued that their should be no extension, France, Spain and Germany backed the 95 year term and the UK government appeared to waiver between the no change position recommended by the Gowers commission in 2006 and the seventy year term which it endorsed (Ashton 2009b). With the presidency of the EU falling to the anti-extension Swedes, it would now appear unlikely that there will be any immediate change in the term length. However, the process does highlight the power of the lobbying bodies within the British music industries. Having seen their submissions fail to result in the recommendations they wanted from the Gowers Review (he concluded that The European Commission should retain the length of protection on sound recordings and performers rights at fifty years (2006, p.6), they turned their attention to the European Union, where Commissioner, Charlie McCreevy,

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was a willing advocate of their position. Although, as yet unsuccessful, the music industries need to increase the term on sound recordings is greater with the impending expiry of key 1960s copyrights, while their arguments for harmonisation of global copyrights are predicated by the understanding that this can only mean extension rather than the contraction of copyright. Besides the research conducted by the University of Cambridges Centre for Intellectual Property and Information Law (2006) for the Gowers Review and the more wide ranging study conduced by the University of Amsterdam for the EU Commission (2006), the majority of the arguments against extension of the copyright term came from academics (see Kretschmer 2008) and lobbying groups including the Open Rights Group (ORG) and Electronic Frontier Foundation (EFF). Unsurprisingly, both found that the major beneficiaries of any copyright extension would be not the performers, but those who need it least: already wealthy performers, and their estates and record companies (Kretschmer, 2008, p.4), with Killock claiming that 80% of any additional revenues generated by a change in the term length would end up in the hands of the recording companies (2009). Indeed, if there is a flaw in Krestchmers argument, it is only in as much that the record companies may in reality be the most needy, if not the most deserving, stakeholders in their current predicament: with the decline in sales over the course of the last ten years, the importance of exploiting (or retaining) the value of their historical assets has become greater. Though the arguments surrounding copyright term extension have been at the centre of recent discussions of music copyright, they do offer some telling insights into both the wider importance of copyright for the industries as a whole and the need for firms within them to extract as much value as possible from the rights that they currently own (or intend to acquire in the future). However, though intellectual property often provides the legal framework within which music industries companies (particularly record labels and music publishers) generate income, it cannot alone explain the

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actions of such firms. It is, therefore, necessary to conduct a wider exploration of the way in which the firms operate, and it will be argued that the real use of copyright within the music industries is as a means of seeking, and collecting rent. (ii) Rent-seeking In attempting to define rent-seeking, it is helpful to locate it both historically (in terms of its use by economists) and to examine the way the concept has been used to explain more recent activity in the cultural industries. After examining rent-seeking in the cultural industries, this chapter examines why it is a helpful concept when used to explain, specifically, the nature of the music industries. Pinnock (2007) noted that the notion of rent-seeking has, after a period of popularity in the wake of Buchanan, Tollison and Tullocks (1980) essay collection, Toward a Theory of the Rent-Seeking Society, become an increasingly neglected part of cultural economics. Noting that scant, if any, reference is made to it in recent discussions of the cultural industries by the likes of Throsby (2001) and OHagan (2005), he posits not that this is not because rent-seeking behaviour has ceased, but rather that it is embedded in the literature now (2007, p.278) making it difficult for non economists to follow because it is not so emphatically signposted (ibid). Definitions of rent and rent-seeking are helpful in establishing the potential of the concept within this discussion, but, perhaps more important, is that it attempts to address and explain two of the previously flagged issues facing the music industries at present: their relationship with government and their attempts to gather residual income from already owned work. After examining the economic definitions of rent-seeking and rent in relation to the cultural industries, it becomes possible to provide an explanation of a lot of recent patterns in the contemporary music industries within this framework.

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Buchanan et als definition of rent-seeking offers a useful starting point distinguishing it from the behaviour of landlords who collect rent on property (1980, p.3), instead arguing that it describes behaviour in institutional settings where individual efforts to maximise value generate social waste rather than social surplus (ibid, p.4). Tollison adds to the definition by highlighting two important, but connected differences - the first between rent collection in the market and those rents collected artificially (1982, p.575), then by using thus to explain the difference between rent-seeking and profit-seeking. By Tollison, rents arise either naturally in the price system by, for example, shifts in demand and supply curves (ibid) and, secondly, artificially through, for example, government action (ibid). He notes that such artificial or contrived rents still involve costs and are often competitive - the competition for artificially contrived transfers (ibid, p.576) being the basis of the theory of rent-seeking. Tollisons definition accepts that pursuit of rent or profit in a competitive market is a normal part of economic life (ibid, p.577) but argues that rent-seeking often involves competition (and consequently, spending money) for the creation and maintenance of monopolies through the lobbying process, the outcome being that these expenditures create no value from a social point of view (ibid). Rent-seeking and the cultural industries A number of writers have attempted to link rent-seeking to the cultural industries, with Grampp, who concentrates on rent-seeking as it relates to government involvement in the arts, defining rent-seeking as the use of the government to improve ones economic position (1989a, p.206). He goes as far as to suggest both that rent-seeking is an important reason why governments assist the arts (1989b, p.113) and that the economic structure of the arts is more favourable than not to rent-seeking (ibid). In addition, he argues that by seeking to encourage greater demand for and involvement in the arts, rather than generating the type of scarcity that would result from a decrease in supply, governments are complicit in both reducing the costs of

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rent-seeking and increasing the amount of it (ibid). As a result of this, he claims that the assistance which the arts get from the government is principally to the benefit of those who solicit it and is of little or no benefit to others (ibid, p.117), the type of scepticism which underpins the work of Cowen, who argues that that the arts thrive as a result of being part of a market economy and from the associated benefits of technological advances, rather than state support, which makes them more bureaucratic and less dynamic (1998, p.40). Pinnock (2007, p.280) follows Grampp in identifying two types of rent in the cultural industries, what he terms p-rent and e-rent referring to political and market-economic forms of rent, (ibid) though he acknowledges that in many situations it is not necessary to differentiate between them. Nevertheless, it is helpful to consider the characteristics of rent-seeking and rent seekers within the cultural industries and then consider how these play out within the contemporary music industries, with particular regard to the shift towards political rent-seeking by industries bodies. Pinnock also sees rent-seeking as coming at a social cost when lobbyists generate a profit by recovering in government subsidy larger sums than they had spent on the lobbying and public relations activities needed to secure subsidy (ibid). He also examines the type of organisations, companies and individuals which are best placed to extract the maximum amount of both political and economic rent. When it comes to extracting money from governments, he points out that this is generally the domain of organisations rather than individuals, as political rent-seeking is expensive both in time and money terms (ibid, p.281) and that it is a form of organisational behaviour, which emerges when the economically powerful hire professional rent seekers to do the job on their behalf (ibid), in the process creating new organisations. These professional rent-seekers, or lobbyists, occupy a particularly prominent rle in the cultural industries, with Pinnock describing them as notoriously energetic and well-resourced (ibid, p.283) and, as a group, are

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generally engaged in a range of activities connected to the strengthening and enforcement of copyright, the introduction of levies and tax benefits and attempting to head off anti-trust investigations whenever these are threatened (ibid, p.284). Among economic rent-seekers in the cultural industries, Pinnock identifies stars and those promoters and organisations which hold a monopoly as being the most significant actors. Stars are able to extract the greatest amount of rent as a consequence of their branded rather than generic talent (ibid, p.281) and consumers willingness to pay more for branded goods. As a result of the scarcity of superstars relative to market demand, established stars can charge what Pinnock calls a purely economic rent (ibid, p.283). In this situation, rent-seeking is as competitive where star artists and their rent-hungry retinues appeal via arts promoters to the ticket and product buying public, (ibid, p.282) as it is in the funded sector where non-profit arts promoters put pressure on their managerial-bureaucratic counterparts in government (ibid). In the final of Pinnocks rent-seeking scenarios, some promoters (usually in smaller cities or towns) find themselves in the position of being able to hold a monopoly of supply (ibid), where the primary beneficiaries are senior members of staff (ibid) and where both established and non-established artists suffer: the former are by-passed and the latter exploited. In this situation, he describes a scenario where the monopoly promoter retains most of the rent, paying the artist only as much as wider market logic demanded (ibid). Across the cultural industries, the ability to extract rent (of whichever type) successfully comes through a combination of the economic power of large conglomerates or organisations combined with the market value of the stars with which they work, the very type of dynamic which has powered the growth of the major music conglomerates and which is evident in the studies of Sanctuary and Live Nation.

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The music industries and rent-seeking Rent-seeking has always been central to the music industries, but the argument in this chapter is twofold: in the first instance that it has increased substantially in recent years as a result of the turbulence in the market and secondly, that the type of rent-seeking has moved towards political rentseeking rather than the largely economic rent-seeking which characterises Caves (2000) account of the music industries. He considers rent-seeking as beginning in the music publishing industry with song-pluggers in the early twentieth century, whose job involved getting songs owned by the publishing companies performed in public by popular singers. This allowed for both singers being able to extract rent from the publishers, and publishers colluding to restrict the transfer of rents to singers (2000, p.288). This period saw the establishment of trade organisations (for example, the Music Publishers Protective Association in 1917) whose purpose was to increase the value of their members copyrights. With the nascent recording industry becoming the target of the publishers attentions (as recorded performances of songs were more valuable than stage performances) in the 1920s, the collection of mechanical royalties became an increasingly important source of revenue for the publishers. This was invariably collected through large collection organisations 120 (often managed by the publishing companies) to resolve the problem identified by Caves that, in the music industries, the lumps of rent are very small, very numerous hence feasible to collect only through some co-operative organisation (ibid, p.297). Indeed, for Caves, these copyright collectives resulted in a combination of corruption and litigation. The former was largely

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ASCAP, BMI, SESAC, Harry Fox Agency in the USA, PRS, MCPS and their successors in the UK

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in the form of the payola which historically underpinned radio promotion 121 while he describes how each of the technological developments (notably, the advent of radio, television, the synchronising of music with movies and the internet) has resulted in conflict. By Caves description, rent-seeking is always highly litigious (ibid, p.303) and no substantial group of payers ever gave in (ibid) without taking their case to the courts. The monopolies (or near monopolies) of the collection societies and their ability to issue blanket licenses have been challenged in courts and investigated by anti-trust bodies in various countries, but while they have brought about some changes in the way they operate, such as when the US Justice Department brought charges of pooling, price-fixing and discrimination against ASCAP, BMI, NBC and CBS in 1950 and in the wake of the afore-mentioned MMC report on the PRS in 1996 in the UK, they have not fundamentally altered either their dominance of royalty collection or their ability to do deals on behalf of all their members. New forms of rent-seeking in the music industries: Lobbying Though most of the exploitation of music copyrights previously discussed could be viewed as economic rent, the nature of copyright - whereby its extent is largely at the behest of national governments - means that the music industries have had to increasingly turn to political rent-seeking in an effort to replace some of the revenues which have been lost in recent years. And, while the nature of this type of rent-seeking has intensified in recent times, it actually pre-dates the 1999 downturn in sales of physical products. Cloonans (2007) study of the relationship between the state and popular music in the UK offers some confirmation of successful moves by industries organisations to increase their links with government and influence policy
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examples of this were most prevalent when a House Committee investigated broadcasting industry practices in the USA in 1960, destroying the reputation of prominent DJs including Alan Freed and Dick Clark. In more recent times, 3 of the major music conglomerates (Warner Music, Universal and Sony BMG) settled out of court with the New York Attorney Generals Office after being found guilty of using third party independent promotion companies to offer inducements to station directors in 2005-2006.

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making. He argues that this process began around the time of the Copyright, Designs and Patents Act of 1988, but was accelerated during the following decade, and most apparent after the coming to power of the New Labour government in 1997. For him, the relationship between government and the music industries is a symbiotic one as government saw the need to support an economically important sector and the industries saw the need for a new concordat with government (2007, p.48). To achieve a place at the centre of government policy making, which the music industries in the UK have sought since the 1990s, has been achieved by a combination of costly window dressing and lobbying to change the perception of the recording industry, in particular, as being unscrupulous and exploitative. The BPI was largely responsible for this, with a series of government ministers attending the Brit Awards ceremonies, and the development of a number of initiatives - particularly in education (with the setting up of the Brit Trust charity in 1989 and the Brit School122 in 1991) designed to give the industry an outward appearance of both professionalism social responsibility. These initiatives were augmented by an increased expenditure on public relations, often centred around the Brit Awards and other events which they sponsored 123. As both Frith (2000) and Cloonan (2007) have discussed, there was a major problem with the BPIs original mission statement, which allowed them to discuss matters of common interest and represent the British record industry in negotiations with Government departments, relevant unions and other interested parties, (htpp://www.bpi.co.uk/categoryabout-us.aspx, accessed 8th August 2009): namely that main stakeholders in the recording industry (and by extension, BPI) are multinational companies, one only one of which

122

a non-fee paying performing arts school in Croydon. Much has been made of the success of former Brit School students, including Amy Winehouse and Adele.
123

for example, during the 1990s the BPI was a sponsor of Radio 1s Sound City festival

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(EMI) is British owned. In Friths words, the BPI had become a national lobbying agency of a global industry (2000, p.81). Tellingly, the BPI has moved from being a trade organisation to a lobbying one: it now defines its rle as to lobby Government and, where possible, work collaboratively with other organisations to implement BPI policy and ensure the future survival and growth of the music business, (http:// www.bpi.co.uk/category/policy-and-lobbying.aspx, accessed 9th August 2009) listing the key areas of lobbying as being copyright extension, reducing copyright infringement, copyright in the digital age and education and skills (ibid). Other organisations, of which the BPI is/ or has been part, including British Music Rights and, more recently, UK Music, are discussed in more detail in Chapter 4, but these have served to legitimise the sense that industries are speaking with the one voice that former DCMS minister, Estelle Morris demanded in 2004 (http://www.musicweek.com/story.asp? sectioncode=1&storycode=7328, accessed 13th September 2009). There is no doubt that lobbying by the music industries in the UK has resulted in a number of new initiatives (for example, the New Deal for Musicians), organisations (British Music Rights, The Music Industry Forum, the Live Music Forum and UK Music) and has brought powerful music industries personnel into much closer proximity to government ministers, though it less clear whether the lobbying has been particularly effective. Although the government has often provided rhetorical endorsement for the positions of the music industries 124 there has been little return in terms of legislation. In general, moves against both copyright infringers and to extend copyright terms have been hesitant and ambiguous. By initially seeking a memorandum of understanding between the ISPs and copyright holders to tackle such issues, the government avoided new legislation through coregulation, but found that this was largely rejected by the ISPs. For example,
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for example, Estelle Morris claimed that Piracy is theft-pure and simple (BPI newsletter, 6th May 2004) and assorted government ministers have indicated support for copyright term extension

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in their submissions to the Digital Britain review, Orange noted that it does not accept that it has any existing legal obligation. . to assist in the enforcement of private legal rights (Wray 2009) while BSkyB claimed that an ISP is not and should not be the arbiter of whether the content accessed by their customers is lawful or not (ibid). In the wake of Gowers opposition to term extension, which was initially accepted by the government, it then appeared that the government had given in to pressure from the lobbyists when Andy Burnham, the then Culture Secretary, announced that the government had changed its position and now supported the extension of copyright term in sound recordings to seventy years at the end of 2008 (Ashton 2008). However, by the time the issue came to the vote in the European Council of Ministers, the government had added a number of caveats designed to protect the performers, and failed to support the attempts to increase term extension (see Sabbagh 2009) much to the chagrin of the music industries bodies, with the BPI, PPL and Musicians Union issuing a statement criticising the government for its apparent change of position (ibid). By way of some belated reward for the copyright industries, one of the last acts of the Labour government was to pass into law the Digital Economy Act, which, among other provisions, allowed for more punitive measures against repeated copyright infringers (Arthur 2010). However, the bill was widely criticised for both its contents and lack of detailed discussion (ibid), and the Liberal Democrat Party opposed the bill 125. The previous UK governments uncertainty about the issue seems to reflect the wider discursive shift in government policy towards the cultural industries from one that intervenes when it views the greater economic good as different from the needs of the market, to one which relies entirely on the market (and major actors in it) to determine what is for the economic good.

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The new UK government, which includes Liberal Democrats, has yet to announce its plans (if any) for the Digital Economy Act. It was, however, supported in the previous Parliament, by the dominant coalition party, the Conservatives.

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Despite the questionable success of the lobbying in the UK lobbying by industry organisations in the U.S.A perhaps puts the scale and success their UK counterparts in perspective. In 2007, the RIAA spent $2 million lobbying Congress (Bangerman 2008), a sum which increased to over $6.5 million (Center for Responsive Politics, http://www.opensecrets.org, accessed 8th August 2009) the following year,126 as they, along with each of the major record companies, the collection societies and other other interest groups across the music, television and film industries spent $99.8 million dollars on lobbying the US legislature on a range of issues. These were mostly centred around copyright, and in particular, the pro-IP Act which was signed into law in 2008 as the Prioritizing Resources and Organization for Intellectual Property Act. This increased the penalties for IP infringement and allows the Department of Justice greater resources an to co-ordinate federal and state efforts against counterfeiting and piracy (Condon 2008). This followed the pattern set by other recent U.S. copyright legislation - notably the Digital Millennium Copyright Act (1998) and The Copyright Term Extension Act (1998) both of which were the product of extensive lobbying from the computer, film 127 and music industries. (iii) Entrepreneurship Having argued that the music industries have become focused around copyright and rent-seeking goes some way to explaining the structural changes in them, but, like many previous accounts, fails to fully explain the rle of individual agents within them. This thesis argues that acquiring rights and seeking both political and economic rent is a process that lends itself to the involvement of entrepreneurs, a group who have been largely written out of accounts of the music industries, but for whom the disorganisation and turbulence within them has created numerous opportunities, both as individuals, but more importantly, as part of larger firms.

126 127

lobbying expenditure often increases in the final year of the four year US election cycle. Disney was one of the key protagonists behind the Copyright Term Extension Act

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Having highlighted the top down nature of many of the analytical approaches to the cultural industries, the study of entrepreneurship is a means of building an analysis of the music industries which places a greater emphasis on the rle of individuals within the management of firms. While accounts of and by entrepreneurs in the music industries are manifold (see, for example, Rogan 1988; Loog Oldham 2001; Wilson 2002), academic accounts tend to acknowledge their existence in both the cultural (Hesmondhalgh 2007, pp.174-175) and music industries (Frith 2000, p.391) industries without much further explanation of their characteristics or rle. Despite of some of the problems of definition associated with entrepreneurship, the study of entrepreneurs and entrepreneurship in the context of the music industries is important for a number of reasons, some of which are identified by Hesmondhalgh when he notes the continued presence of a large number of small companies in the cultural industries, which is partly because of the relatively small scale and inexpensive nature of the creation of texts. Studies of the music industries (Dane et al 1996, 1999; DCMS 1998) have also shown the large number small operators at work, while Hesmondhalgh also credits technological reasons, noting the rise of a discourse of entrepreneurialism in the economy as a whole (2007, p.174), the increased availability of venture capital and the disintegration of large vertically integrated companies as factors in encouraging the start-up of small, entrepreneurial businesses in the economy as a whole. The case studies have shown all of these to be relevant (to varying degrees at different times) within the music industries, but to fully benefit from the use of entrepreneurship studies in explaining them, it is necessary to disassociate entrepreneurship with small businesses. Although this is often the case, many of the entrepreneurs in the music industries work for large conglomerates, meaning that it is necessary to view entrepreneurship in the music industries, not solely in terms of opposition to big business (the type of institutional autonomy described by Toynbee 2000, p.19) but often in

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cahoots with it. To achieve this requires a more detailed account of entrepreneurship as a concept and the different types of it which can be seen across the music industries. Definitions of Entrepreneurship Like the cultural industries themselves, entrepreneurship is an increasingly studied, but ill-defined concept, which has been identifiable in writings predating the emergence and dating back to the earliest phase of industrial capitalism. Nevertheless, Shane and Venkataraman bemoan the continuing lack of a conceptual framework (2000, p.217) and the multitude of necessary, but not sufficient, factors that compose entrepreneurship (ibid), which contribute to making it such an elusive notion. They even go beyond this to claim that the study of the field is hampered because data are difficult to obtain, theory is underdeveloped, and many findings to date are the same as in other areas of business (2000, p.219). While trying to adequately define entrepreneurship is beyond the scope of this work, it is, however, important to identify the history of entrepreneurship as an idea and, in doing so, to extract the recurring and widely accepted traits of both entrepreneurs and entrepreneurial organisations as increasingly evident within the music industries. Entrepreneurship has been studied in a number of areas, including sociology and psychology, but for the most part, these definitions come from economic theory, with Cantillon, writing in 1755, widely regarded as the first to identify the rle of the entrepreneur within the economy describing them as riskbearers, involved in the creation of new businesses. Other economists offered different labels and descriptions of a similar function. For example, Adam Smith subsequently labelled those who formed new businesses for profit making purposes as enterprisers, while Jean Baptiste-Say added to the idea of entrepreneurs as risk-takers by introducing the idea that entrepreneurs were decision makers (often managers in firms) whose rle

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was to combine different elements of production in order to create new products or services (see Iversen et al 2008, p.1). All of these were pre-cursors of the work of the Austrian economists, Joseph Schumpeter and Israel Kirzner in the twentieth century which are the starting points for contemporary studies of entrepreneurship. Schumpeter describes entrepreneurship as carrying out new combinations (1934, p.74) and also distinguished between managers and owners of established businesses from entrepreneurs, pointing out that the former loses that character (of the entrepreneur) as soon as he has built up his business, when he settles down to running it as other people run their businesses (ibid). Furthermore, Schumpeter argues that entrepreneurs had to be involved in one or more of the the following: the creation of new goods or qualities, creating a new method of production, opening a new market, capturing a new source of supply or creating a new organisation or industry (1949, p.66). This not only offers the possibility of entrepreneurs operating at different levels both of innovation and within a particular business, but also addresses one of the problems surrounding entrepreneurship since it was first discussed - the distinction between entrepreneurs and other capitalists. In this respect, Schumpeters focus on their innovative traits offers a means of separation, while it also allows for the possibility of entrepreneurs existing within larger organisations and not necessarily being synonymous with the persons who own a firm (Davis 1968). Kirzners work offers a slightly different perspective and tends to privilege the the individual characteristics of the entrepreneur over their place in an organisation or firm, preferring to concentrate on his idea of the pure entrepreneur who is a market participant whose decisions are entirely incapable of being subsumed under the category of Robbinsian economising 128 (1979, p.38). There are three aspects of entrepreneurship as detailed by Kirzner which are of interest in the context of this thesis. These
128

based on the work of early twentieth century British economist, Lionel Robbins.

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are his notions of alertness and arbitrage and his tacit recognition that failure is an important part of the entrepreneurial make up. By Kirzner, alertness (ibid) is the main characteristic of the pure entrepreneur, who is a decision-maker whose entire rle arises out of his alertness to hitherto unnoticed opportunities (ibid, pp.38-39). This increasing awareness of information (ibid, p.146) forms the basis of both the entrepreneurs decision making and exploitation of opportunities, and it is by subconsciously identifying and then exploiting such opportunities that his entrepreneur makes a profit from previously unrealised combinations. For Kirzner, this alertness separates entrepreneurs and other capitalists, with awareness of opportunities being the characteristic exclusive to the entrepreneur. This is different from Schumpeters idea that innovation sets the entrepreneur apart, as in many instances, the entrepreneur is not actually involved in the production of goods or services, instead merely exploiting pricing anomalies within the market to generate a profit, while minimising personal risk by borrowing from and later repaying capitalists to fund the opportunity, a process described by Kirzner as arbitrage (1973, pp.49-50). A further point of note is the rle of the entrepreneur within the wider economy: while neo-classical economics assume the economy is in a continual state of equilibrium, Schumpeters entrepreneurs, in their pursuit of innovation move it towards disequilibrium. By contrast, Kirzners (1973) work suggests the opposite: that the economy is in a continual state of disequilibrium caused by unexpected and unpredicted global economic events that result in a state of utter ignorance, in which entrepreneurs can operate. For Kirzner, the rle of entrepreneurs is one of moving the economy towards equilibrium, (Iverson et al, 2008, p.3) with this being achieved when there is no more information to be discovered and the state of ignorance therefore removed. In summarising the various attempts to pin down a definition of entrepreneurship, Iverson et al offer the useful synopsis that it is a multidimensional concept, involving aspects of uncertainty-

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bearing, innovation, opportunity-seeking, management and enterprising individuals (ibid, p.5). By subsequently examining the location of entrepreneurship within the contemporary cultural and music industries, all of these elements play a part, with a particular emphasis on risk-taking and opportunity seeking in times of uncertainty, though it is worth noting that these characteristics are often mutually exclusive: entrepreneurs may be good at raising capital and taking risks, but poor management skills often result in a high incidence of business failure. Entrepreneurship in the cultural industries: from impresarios to the cultural entrepreneur While general studies of entrepreneurship present a number of problems, the contention here is that the type of entrepreneurial traits described by Iverson et al are highly visible in the contemporary cultural industries, and specifically within the music industries, as a consequence of recent market turbulence. To successfully make the link between general notions of entrepreneurship and the music industries, this chapter will use the work of Becker (1982) and Swedburg (2006) to identify the relationship between entrepreneurs, artists and the cultural industries, resulting in a definition of cultural entrepreneurship. It will then consider the work of Peterson and Berger (1971) and Aggestam (2008) to locate entrepreneurship in the music industries, before arguing that while each of these contributions are useful, their limitations of time (Peterson and Berger were describing the early phases of the American recording industry) and place (Aggestams study is limited to the Scandinavian countries) mean that they do not fully explain the nature of entrepreneurship in the contemporary music industries. It will then argue that some of the work on corporate entrepreneurship offers a more complete version of the type of entrepreneurs at work in the new type of firm in the contemporary music industries. In Art Worlds, Howard Becker discusses the importance of individuals in the distribution of art, and places great importance on the rle of what he terms

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impresarios (1982, p.119) in the performing arts. Although this notion as fully formed as subsequent studies of cultural /art entrepreneurs, there are two elements of his description of such figures that deserve further consideration in the light of subsequent developments in the cultural industries in general, and the music industries in particular. The first is the manner in which they work in areas which involve the sale of not objects, but tickets to see something done (ibid) and the second centres on both the similarities and differences between them and wider definitions of entrepreneurship. Beckers impresarios may appear, at first glance, to most closely represent the functions of the live music promoter, seeing as they rent the space the performance will take place in, do the necessary advertising, sell tickets, handle finances and make sure that the necessary auxiliary personnel are there (ibid). However, there are a number of characteristics of the impresario which appear more benign and altruistic than the more risky and capitalistic traits of entrepreneurs. Becker talks of how the impresario provides the opportunity to display work to an informed and appreciative audience (1982, p.120) and how their ambition is limited to selling enough tickets for the performance to bring profit to him and a living to the performing artists (ibid, p.119). Indeed, this is further diluted suggesting that, in reality, this may only be an income sufficient to allow more work to be done (ibid). Tellingly, Beckers impresarios have more limited ambitions than the type of entrepreneur which may be seen in the contemporary cultural industries. The risk involved is limited to the difference between the artists fee and what he has actually taken in (1982, p.120) and in many cases the entrepreneurship function is actually separated from the impresario with the risk being undertaken by the venues themselves (rather than the organiser/ impresario), or what he describes as quasi-governmental organisations (ibid) or in some cases, the performer themselves. In this respect, the impresario performs a rle closer to that of a manager or agent,

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often as an intermediary between the producers and consumers of the art, where their involvement is more about co-ordinating the people required to make events happen and perhaps receiving some reward for their efforts either at the time of the event or in the future. This often informal and catalytic rle is at odds with both the nature of the wider cultural industries, especially as Becker uses Hirschs definition of profit seeking firms producing cultural products for national distribution (1972, p.642). In addition, Hirsch sees these companies as dealing with audiences which Becker considers as large, unknown and unpredictable, making them far removed from the comparatively close relationship the impresarios have with both the artists and audiences, which, in turn, is less personal (1982, p.122) than relationship between art dealers and their clients. The argument here is that Beckers impresarios represent an important step towards understanding of the importance of both (entrepreneurial) individuals and strategic agency within cultural industries firms. The case studies of Sanctuary Music Group and Live Nation suggest that, within the music industries, the rle of the impresario has been marginalised to those operating on the fringes of the large scale companies in the recording, music publishing and live music industries, while entrepreneurs have taken on a much greater rle, both as individual operators and, more significantly, within large corporations which produce cultural goods. Economic and Cultural Entrepreneurs Before looking more closely at the rle of cultural entrepreneurs, two further points are worth making by way of explaining their importance within the cultural industries. These relate to the previous debate about the difference between academic and government definitions of the cultural/ creative industries. While entrepreneurs have played a minor part in accounts emerging from sociology and cultural economics, they are increasingly at the

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centre of creative industries policy. The bridging of this gap between the theorisation and reality of the cultural industries is another convincing reason for at least considering the importance of entrepreneurship in the music industries. Klamer (2006, p.1) highlights this lack of interest in entrepreneurs, by noting their absence from important work on the economics of culture by Caves (2000), Throsby (2001) and Towse (2003), while they are given the most fleeting of mentions in Hesmondhalgh (2007), while, with the exception of the aforementioned work by Peterson and Berger and Aggestam, they have been peripheral to discussions of the music industries. However, this is at odds with policy making, where it is not difficult to find evidence of the importance attached to entrepreneurs and entrepreneurship in the discourse around the creative industries,129 particularly when applied by economic development agencies as part of attempts to boost both local and national economies. For example, NESTA (National Endowment for Science, Technology and the Arts) in the UK places great emphasis on the significance of entrepreneurship, having recently published a report Creating Entrepreneurship: entrepreneurship education for the creative industries (2007), while DCMS set up an Entrepreneurship Task Force, which reported on entrepreneurship education in further and higher education (DCMS 2006). In Scotland, the Scottish Arts Council and Scottish Screen 130 talk of the individuals who are at the heart of the creative process (2006, p.1) listing entrepreneurs alongside the artists, producers, performers and visionaries who are our creative lifeblood (ibid). The main economic development agency in Scotland, Scottish Enterprise, has also emphasised the rle of entrepreneurs, running a competition to find Scotlands best business idea (press release, 6th November 2006), with their director of Enterprise
129

this is usually the preferred term among policy makers for what has otherwise been referred to as the cultural industries
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the two major funding bodies for the arts in Scotland, soon to be merged as Creative Scotland

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Services, Linda Hanna, recognising that we need to do more to encourage the entrepreneurial spirit (ibid). In this respect, Aggestams claim that the increased involvement of governments and associated bodies, with their emphasis on increasing corporate venturing and closer co-operation between art-entrepreneurs and business, (2008, p.41) is common to many European countries and increasingly worthy of attention in relation to the music industries. The importance of entrepreneurship to both governments and economic development agencies offers an important justification for its study with regard the music industries, as they increasingly seek to lobby and receive support from such bodies. However, it is worth considering the different types of entrepreneurs at work within the economy in general, but also within the cultural industries, as there have been major changes in both industry and prevailing political ideologies since Schumpeter and Kirzner described their entrepreneurs. This is best summarised by Bjerke and Hultman who note that they were writing both before the emergence of the cultural industries and prior to the change in the dominant economic/ political ideology from what they call Keynesianism to a radical pro-market ideology (2002, p.51). Swedburg (2006) offers some assistance in both accepting entrepreneurship as an integral part of the cultural industries and by distinguishing between what he describes as economic and cultural entrepreneurs. In essence, Swedburg uses Schumpeters The Theory of Economic Development (1911) as well the work of Weber, Durkheim and Simmel to create an account of cultural entrepreneurship, based on the differences between culture and the economy and between the entrepreneur or artist and the static majority (2006, p.250). A number of important points of difference emerge, firstly in his identification of the motivations of entrepreneurs and secondly in their impact on the economy, before he separates the different type of entrepreneurs at work in the cultural industries.

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Although entrepreneurs may be driven by a desire for financial gain, Swedburg points out that, according to Schumpeter, this is not their only motivation, and that they may be motivated by a combination of existing traits, including non-monetary forces such as the desire to form a personal empire, the desire to get things done, and so on (p.246). He also notes that Schumpeter regarded the rle of entrepreneurs within static and dynamic economic behaviour, viewing entrepreneurs as being integral to economic change, where the economy can both be conceptualised as being moved by forces from the outside, towards equilibrium, and as being moved from within by the entrepreneur (2006, p.250). Within this dynamic, Swedburg argues that Schumpeters elements of combination, and the creation of novel combinations, is what connects economic entrepreneurship and cultural entrepreneurship, with one important difference. While economic entrepreneurs primarily aim to create something new (and profitable) in the area of the economy, (2006, p.260) cultural entrepreneurs create something new (and appreciated) in the area of culture (ibid). This qualified version of entrepreneurship within the cultural industries sits comfortably with Beckers impresarios, and, according to Swedburg, it is, therefore, entirely plausible to draw from Schumpeters work, that the true artist. . should presumably be conceptualised as an entrepreneur (ibid, p.249). Entrepreneurs in the Recording Industry: A Contemporary Picture As one of the few to have studied entrepreneurship in the music industries in recent years, Aggestams (2007) study of the Scandinavian music industry produces a number of connections between the entrepreneurial process and the music industries, though, in spite of making links between the two, her work is limited in its scope - both by geography and it is focus almost exclusively on the recording industries in Denmark, Finland, Iceland, Norway and Sweden. As a result, her optimistic view that the high economic yields (2007, p.50) of the Scandinavian creative industries has been in part

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down to investing in art-entrepreneurs (ibid) cannot necessarily be held to be true across the global music industries: while she is correct to highlight the increasing importance of such individuals, their success across the music industries, where failure often appears to be a part of the business strategy131 , is less quantifiable. The most useful aspect of her work is in identifying and describing a kind of operator who is easily recognisable within the music industries, but who rarely features in existing accounts (for example, Negus, 1992, 1999) which focus heavily on the employees of the major companies. By describing the music industry as an entrepreneurial-venturing process (Aggestam 2007, p.31) based on actors who have an interest in particular music production and the commodification of its products (ibid), she considers music a risk industry well suited to those creative individuals and holders of tacit knowledge (2007, p.31) who can use this to commodify new opportunities and ways of thinking. Much of this is achieved by corporate venturing, which results in the creation of new businesses - sometimes within existing businesses and sometimes out with - as a result of what she calls partnerships and co-operation both within the music industry itself and between the internal and external actors from related industries including the public sector (ibid, p.38). More generally, corporate venturing is the process by which larger firms create new, entrepreneurial businesses separately from the mainstream activity (Burns, 2008, p.13) sometimes within their own operations and sometimes by investing in, or taking over existing, smaller companies. Within this process, Aggestam regards the process of art entrepreneurship as being, in itself, creative, claiming that the entrepreneurs construe situations corporately (ibid, p.39) and their entrepreneurial orientation is creatively driven (ibid).
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Caves (2000) uses the slogan nobody knows to describe the nature of industries where Garnham describes a model that relies on a small number of hits pays for the larger number of flops (2005, p.19).

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However, Aggestams view of art entrepreneurs is restricted by its worldview. Her conclusion - that by investing in art-entrepreneurs, individuals and companies have built many important bodies of work involving the promotion and connection of various avenues of music (ibid, p.51) - views the music industry (and in her study, this is primarily, the recording industry) as a creative industry of the type held in government circles as a reliable source of both profit and employment. In doing so, she quotes the UKs DCMS definition of the creative industries as an area which has potential for wealth and job creation through the generation and exploitation of intellectual property rights, (2007, p.30) thus neglecting the more complex approach to the cultural industries as described by the likes of Mige (1989), Throsby (2001) and Hesmondhalgh (2002, 2007) which looks at the production and consumption of culture in terms of what Galloway and Dunlop describe as creativity, intellectual property, symbolic meaning, use value and methods of production (2007, p.2). Nevertheless, the art entrepreneur and the presence of corporate venturing is increasingly visible in the global music industries as large conglomerates in both the recording, live music and music management industries have spread their interests in recent years working towards the type of multiple rights model developed by the Sanctuary Music Group, and subsequently adapted by larger companies like Universal, Warner Music and Live Nation. However, in these examples, the entrepreneurs may have failed to achieve the high economic yields (2007, p.50) she describes, rather overseeing a period of disruption, disorganisation and emphasis on turnover rather than profitability. While Aggestams analysis is rooted in the type of contemporary analysis of the music industries within the cultural industries as a source of economic growth, it makes for an interesting comparison with the first investigation of entrepreneurship in the popular music industry as conducted by Peterson

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and Berger (1971), which was written at a time when the idea of culture becoming a business was starting to be explored. As with Aggestams work, the focus is primarily on the recording industry, with their research stemming from interviews with record company personnel and producers 132, but its significance lies in is attribution of entrepreneurial functions within the industry, something which became increasingly neglected as the focus of music industry studies became the large corporations which came to dominate the market during the seventies and beyond. Peterson and Bergers account of the late sixties American record companies was not only one of the first to study the organisation of the recording industry, but one of the few to have assigned importance to the rle of entrepreneurs within them. At the centre of their description of the record companies, was the turbulent nature of the industry, Schumpeters ideas of entrepreneurship and an adaptation of both to reflect the experiences of their interviewees. For Peterson and Berger, entrepreneurship was a strategy employed by large organisations to cope with turbulent market environments, (1971, p.97) of the type encountered by the recording industry during the 1950s and 1960s. They attribute this turbulence to a number of interrelated technological, market and organisational changes (ibid, p.102) in the industry, and make explicit the connection between these and the entrepreneurial function. In less turbulent conditions, such as those pre-1955 where a small number of companies dominated the recording industry, entrepreneurial discretion was slight (ibid) and the companies tightly organised, but in the light of significant market and technological changes, entrepreneurs become more active, in pursuit of the opportunities that arise from a combination of change, novelty and uncertainty.

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Peterson and Berger often used this term to refer to record company talent scouts / a&r men

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In the 1960s, this was seen in both the emergence of new, small companies and the restructuring of larger ones. According to Peterson and Berger (ibid, p.98) there were four responses to such disruption in the recording industry: the disintegration of larger companies, individuals setting up small and loosely structured businesses (such as those run by record producers), the creation of monopolies and oligopolies, (where organisations worked together to render the environment non-turbulent (ibid) and the adaption of large companies to entrepreneurial ways. The latter was an early form of the type of corporate entrepreneurship that has been discussed by Burns (2008), albeit one which was limited in its scope. For the most part, the entrepreneurial part of 1960s record companies were well segregated from the business of the rest of the company, with the most turbulent areas often being those which were isolated, often employing a number of specialists and, in fact, using supposed risk takers as a means of avoiding risk to the wider business. Peterson and Berger also note that the recording industry entrepreneurs were often the a&r men 133 and producers, and that a number of limitations were placed on the extent of their ability to take risks with the companys money. The extent of these limitations were often directly related to their track record of success (or otherwise) with previous releases / productions, with close monitoring (via the charts) of their success and what Peterson and Berger describe as the strategy of increasing the number of entrepreneurial decisions, while minimising the investment in each (1971, p.101). As the recording industry was able to produce numerous competing products at low cost, each of which has the chance of being highly profitable, (ibid) these early entrepreneurs were part of a system that understood the irrationality and unpredictability of the cultural industries to the point where failure was as much part of the strategy as success. This, along with the mapping of cycles of turbulence and stability to the recording industry, wherein levels of
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a&r - artists and repertoire - the record company employees most closely involved with the recruitment and development of artists. In the early recording industry, they were almost exclusively male.

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entrepreneurship varied accordingly, was the significant and underemphasised the contribution of Peterson and Berger (1971) to the understanding of the recording industry. Corporate Entrepreneurs However, while their pioneering work recognised that entrepreneurs were at work within large companies, they predicted that their importance would decline and that independent producers would be reabsorbed by the large firms which began to dominate the industry in the 1970s. Perhaps this discouraged further study of entrepreneurs in the music industries in the subsequent period, with many of the discussions of the entrepreneurial function being viewed in terms of resistance to the major companies either through genre or organisational structure (see Hesmondhalgh 1996, 1997) rather than in terms of risk-taking or the creation of new combinations. It is, of course, easy to view large firms and corporations as the antithesis of entrepreneurship - something recognised by Hisrich and Peters when they describe the guiding principles of corporate culture as follow the instructions given; do not make any mistakes; do not fail; do not take initiatives but wait for instructions; stay within your turf and protect your backside (1992, p.45). While there is still often institutional resistance to, and suspicion of such practices in long established firms, Jones notes that, in spite of this potential conflict generated by entrepreneurship in large organisations, there are many situations where it can be institutionalised, ingrained in the culture of the organisation (p.12) and where it can be an appropriate response. Given that the cultural industries continually face uncertain markets and need to encourage change, they match the criteria for the type of corporate entrepreneurship which has been identified more generally in large firms and organisations, roughly coinciding with the period disorganised capitalism as detailed by Lash and Urry (1987).

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While there have been a number of attempts to define corporate entrepreneurship, the study of it, and the acceptance of the possibility of entrepreneurial behaviour in large firms is largely restricted to the last thirty years (see, for example Vesper 1984; Morse 1986; Zahra 1991), with an acceptance that this is a result of attempts to gain competitive advantage by encouraging innovation at all levels in the organisation (Burns 2008, p.12). Nevertheless, this shared aim can still result in a number of different approaches, which emerge from what Birkinshaw (2003) characterises as achieving a balance within the organisation between constraint and chaos, the constraint applied by the amount of direction, space and support given to employees and managers and the number of restrictions and boundaries placed on them. If initially the characteristics of large firms - where there is an emphasis on control, structure, uniformity, conformity and risk avoidance (Burns, 2008, p.15) seem juxtaposed with those of entrepreneurial culture, where the emphasis is on seeking opportunities, innovating and risk taking, a number of attempts have been made to reconcile the two. Birkinshaw highlights four strands of corporate entrepreneurship: intrapreneurship, entrepreneurial transformation, corporate venturing and bringing the market inside (2003, p.8) - all of which have some meaning in the context of the two case studies in this thesis. Intrapreneurship is a concept which emerged in the work of Pinchot (1985) and focuses on individual employees and what Birkinshaw describes as the often subversive tactics (2003, p.8) used by corporate entrepreneurs, as well as the personalities and styles who make good corporate entrepreneurs (ibid). Entrepreneurial transformation discusses the changes in the culture of the organisation in relation to the firms culture and organisation systems rather than the personnel, while bringing the market inside, combines the two: focusing on the structural changes - for example, spin-offs and corporate venture capital operations (ibid) which allow for greater entrepreneurship within the firm. Finally, corporate venturing refers to the practice among larger firms needing to manage new, entrepreneurial businesses separately

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from the mainstream activity, (Burns 2008, p.13) often creating new businesses in the process and protecting the existing, established company from some of the risks associated with an entrepreneurial approach. Conclusion This chapter has drawn on the case studies of Sanctuary and Live Nation to reflect on the impact of the major technological, structural and organisational changes across the music industries in recent years and to seek explanations for these using theoretical frameworks drawn largely from (cultural) economics, without over relying on political economy as a means of theorisation. By studying and linking the pursuit and exploitation of copyright with rent-seeking and by emphasising the importance of individual actors within large companies, it creates an alternative explanation of the main, overlapping logics at work across the contemporary music industries. The attempts to strengthen IP law are integral to these, as they protect both current and future income from the type of rights ownership which underpins the industries. There is plenty of evidence in the previous three chapters to suggest that, as intellectual property has become more important to the industries, they have, with varying degrees of success, reorganised, both individually and collectively, in a manner which allows them to influence legislation to their own ends. They have enjoyed some success as a result of changing attitudes from legislators and the increasing need for governments to act in the interests of industries which can be seen to bring benefits (in terms of revenue and jobs) to the economy. For example, in the UK, Cloonan describes how a situation has now emerged whereby government considers itself an advocate and supporter of the British music industry to such an extent that critiques of the music industries from ministers seem unlikely to be forthcoming (2007, p.52). This changing relationship between the governments and these industries has in turn created a situation which encourages rent-seeking, and the

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pursuit of regulatory and monopolistic advantages through increased investment in lobbying, at time when the same industries are spending less on research and development. On the part of the governments, this has resulted in creative industries strategies, the formation of new departments and the creation of a new type of dialogue with the industries, which have increasingly used their increasing number of thinly disguised lobbying organisations to claim responsibility for creating more jobs and generating a higher share of Gross Domestic Product (GDP). It has also resulted in greater access for cultural industries leaders and lobbyists as they attempt to influence legislation which may to be the benefit of their (largely multinational) companies and interest groups. Unsurprisingly, as some of the core cultural industries, the music industries have been at the forefront of both the exploitation and expansion of intellectual property rights and attempts to increasing both economic and political rent. Finally, by locating and describing the type of entrepreneurs working in large firms within the music industries, this chapter highlights the inherent problems in Shukers assertion the music industries can best be understood as a cultural industry using political economy as a means of explanation. Using the political economy approach of studying the cultural industries from above, by primarily examining the position and structure of companies, without offering an account of the rle of individual actors within the industries, in both minor and major companies, is problematic. In the cases of both Sanctuary and Live Nation, the most influential actors were not the owners, but the managers and executives appointed by, or on behalf of, the owners to achieve maximum value for shareholders. These actors can best be viewed as corporate entrepreneurs, taking advantage of uncertainty in the industries to take risks and exploit the opportunities that emerge from their unpredictable and irrational nature, as seen in the latter day rle of Andy Taylor at Sanctuary and of Michael Rapino and Michael Cohl at Live Nation. However, it is worth noting that this type of entrepreneurship was / is visible not only at the top of such companies, but also within organisational divisions

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and units within them. Such risk-taking instincts, and the poor management skills often associated with them, remain an important element of the music industries. However, this creates conflict, especially at a time when the larger firms are instinctively more managerial and cautious in their approach, as evidenced in the conflict between Rapino and Cohl at Live Nation and in the clash of culture evident in the wake of Terra Firmas takeover of EMI. The point here is not to be dismissive of the work of the likes of Hesmondhalgh, Mige, Throsby and Garnham and others whose work on the cultural industries (as discussed in chapter 2) has provided solid foundations for building an understanding of the way the music industries work. However, as technological change has resulted in fundamental reorganisation of the firms and a wider restructuring of the industries, previous approaches to them no longer have the same resonance, and it is important to view the music industries in less restrictive terms (than as purely cultural industries) and to see them as businesses operating within a market economy. It is in this context that the notions of right accumulation, rent-seeking and entrepreneurship (with it attendant focus on to the rle of individuals within large firms) offer an important shift of emphasis and explanation of some of the changes and patterns evident in chapter 4. CHAPTER 8 : CONCLUSIONS Points of Departure and Approach To conclude this research, it will return to the points of departure and reiterate the approach taken before returning to address the research questions in chapter 1 with a view to producing valid and reliable findings. Those points of departure came from the work of Frith (2000) and Shuker (2007). The former described the need for more and different research into what he labelled the music industry, which moved away from mere market or policy research and that produced an account of the present, rather than predictions as to the future. If this provide the starting point for this account of the contemporary changes in the music industries, then Shukers view that

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the music industry should be viewed as a cultural industry, using an approach based in political economy, is challenged through an analysis of both these approaches and some alternative means of understanding their operation. It concludes that these offer an increasingly narrow prism through which to view an increasingly complex array of factors at work in a substantially changing industries. The foundation for this claim is rooted in taking existing academic accounts and definitions of the music industries, discussing and reconstructing them, then conducting two extensive case studies into the two firms which represent variants of the new business models at work across the music industries with a view to producing new data and explanations for what has been observed. To do this requires both a reconceptualisation of Shukers notion of the music industry, which is dominated by and often conflated with the recording industry, and a simultaneous move beyond the main tenets of political economy, which Wittel describes questions of ownership and ownership concentration, processes of diversification, processes of vertical and horizontal integration, modes of production and distribution, state regulation, and the relationship between corporate power and state power (2004, p.475). While these are all, to varying degrees, relevant and considered here, the case studies have yielded empirical evidence to suggest a need for a reconfiguration of this approach. Findings: Overview The headline findings of the research are that it is no longer helpful to think of the music industry in either singular terms due because of the substantial changes in the organisation and structure of it in the technological, social, economic and political changes outlined in chapter 4. At the heart of this is the decline in economic significance of the recording industry since 1999, with sales of recorded music having dropped to a point where some commentators (Page 2009) are talking of a tipping point where live music overtakes recorded music in terms of revenue generation and value to the

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economy. The changing location of potential profits from music has triggered both the emergence of the new type of 360 degree music companies described in chapters 5 and 6, and a change of emphasis from the existing major companies which were previously focused on the recording industry. Evidence of this can be found in the rapid growth in turnover (though not profitability) of Live Nation Entertainment to become the largest music company in the world, breaking the hegemony of the major record companies, which have (in differing permutations) dominated the business of popular music since the end of World War 2. In the light of this, it is suggested that the most important factors in understanding the workings of the contemporary music industries are the accumulation of intellectual property rights, rent-seeking and entrepreneurship. These combine to provide the dynamic for growth in a context where the music industries are no longer primarily about selling physical products but to ones which Styven describes as more intangible and service-like (2007, p.53). These are visible in the growth of revenue streams from areas like the digital distribution and sale of music, the synchronising of music in films, TV and advertisements and the increasingly wide range of packages centred around the live music experience. Each of these wider themes will be referred to again in more detail in returning to the initial research questions and offering some wide-ranging and general findings drawn from the work in previous chapters. Detailed Findings (i) The music industries have been subject to a number of substantial changes which have had a knock-on effect on the way they have organised and structure their business to deal with the changing nature of the commodities in which the major companies within the industries trade. The most important of these have been technological (the rapid, ongoing digitisation of recordings and their distribution), and legislative, given the control governments have over both copyright and company mergers, both

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of which have been at the heart of the changes in the industries. In addition, there is considerable evidence that the changing uses, means of consumption, distribution and ubiquity of popular music have impacted negatively on sales of recorded music, while simultaneously resulting in an increase in the demand for the use of music as prop in the sales process (through sponsorship and the use of music in advertisements) and for the consumption of live music. This is visible in the growth of revenues from music publishing and large scale events and festivals in the period corresponding to the decline of CD sales. (ii)The speed of these changes have made it extremely difficult for detailed research into the music industries to keep pace, meaning that there has been not only a lack of new research, but a rapid dating of existing work. While potentially valuable approaches are evident within studies of the cultural industries and from approaches to popular music used in economics (Kreuger 2005, Connolly and Kreuger 2006), cultural geography (Leyshon et al 2005) and business / organisational studies (Gander and Rieple 2002, Wikstrm 2005), major works within Popular Music Studies remain largely focused on both the recording industry and approaches rooted in political economy (Cevtkovski 2007, Shuker 2007). (iii)Studies of the music industries have been consistently hindered by a combination of a lack of data, and more specifically, a lack of reliable data. The vast majority of measurements of their economic significance stem from data produced either for, or on behalf of the industries themselves. This is invariably used in a manner which presents these industries in the best possible light, or is used to pursue their wider political aims. There is also evidence throughout - notably in the instances of the work by Oberholzer and Strumpf (2007) and Gowers (2006) of the music industries and their representative bodies attempting to suppress or discredit independent research which does not produce outcomes to their liking. Given the tendency of both the media and politicians to accept industry

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generated data at face value, the need for extensive objective research, devoid of vested interests, into the workings of the music industries remains considerable. (iv)The use of the term music industries throughout is indicative of both the changes in the structure of what has previously been generally referred to as the music industry, and the need to separate discussions of the music industry from those relating specifically to the recording industry. While the widening of the scope of what is meant by the music industry has generally been accepted in recent years, it has seen both changes and similarities in the type of firms at work in the music industries. The thesis argues that the organisation of the music industries has become centred around the accumulation of rights by new, flexible firms, which are involved in a multitude of different activities within them, as represented by those studied in the case studies and the adoption of the 360 degree model by the major recording companies. However, though the activities of the companies may have diversified, the music industries remain dominated by a handful of large, multinational conglomerates, who in turn dominate the organisations which claim to speak on behalf of the industries. This is not to ignore the continued existence of smaller, independent companies, but with the exception of the type of micro-independents described by Strachan (2007), there is considerable evidence of a convergence of ideologies amongst the multinationals, investor-owned and privately owned companies which are responsible for the vast majority of music and concert ticket sales. This virtually eliminates the type of historic, romantic notion of independent labels as described by Hesmondhalgh (1998), as the managers / owners of these firms seek to increase margins and dividends for either shareholders or themselves. While the approach and range of activities undertaken by firms in the music industries have changed, there has been no radical change in their outlook: indeed there may have been a

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narrowing of their focus in the light of both declining sales and wider economic difficulties 134. (v)While the majority of studies of the cultural industries have taken the view that they operate in a substantially different way to businesses in other sectors of the economy, there is considerable evidence provided by the case studies to show that the changes in the music industries can often be understood equally within broader economic concepts, as Caves notes in his claim that economic analysis has the tools for answering these questions (as to how industries are organised), but they have seen very little application to the creative industries (2000, p.2). His use of contract theory and other economic concepts (including rent-seeking) offer a range of useful tools for extending the understanding of the music industries, but are particularly helpful in the explaining the activities of the newer, 360 degree style companies at work in the music industries, where the business are based on extracting rent from a huge repertoires of intellectual property rights, often generating tiny amounts of income individually (but large amounts collectively) governed by wide reaching contractual arrangements. When viewed in this way, Caves assertion that economics can offer more to the study of cultural / creative industries than just the doleful message that costs must be covered for a creative work to be viable (ibid, p.365) and that it can supply an understanding of why art worlds are organised the way they are (ibid) is resonant: in many respects the firms within the contemporary music industries, having undergone the changes detailed earlier in the thesis, can be best understood using this type of approach rather than relying exclusively on the variants of political economy and cultural studies approaches outlined by Hesmondhalgh (2007, pp.30-50).

134

The impact of the global recession of 2008 onwards has not been specifically researched with regards spending on music, though there are conflicting views as to the ability of the entertainment industries to withstand such changes in the wider economy.

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This is particularly the case as firms within the music industries become increasingly connected to, and dependent on, firms from outside the cultural industries. This is especially evident in the partnerships and dependencies created between them through ownership, financial backing, managerial and directorial appointments as well as sponsorship and other commercial tie-ins. The studies of Sanctuary and Live Nation offer numerous examples of outsider input in each of these areas, while the two largest companies in the recording industry are owned by a drinks manufacturer and electronics company135 respectively. In such situations, it is increasingly impossible to separate and the workings of companies from conditions in the wider economy. (vi)This has resulted in a number of shifts in both the structure of the industries and the firms within them, which are consistent with the wider changes in contemporary, disorganised capitalism. The most relevant of these to the music industries are the uncertainty of the market, the struggle for power and position both between and within companies, and the scope for entrepreneurs to take advantage of gaps in the market, often financed by banks and venture capitalists with no direct connection to the cultural or music industries. In this context, the largest companies hold considerable power both within the market136 and in their dealings with governments, often brokered through representative organisations and the rights collection societies, both of which are dominated at a directorate level by representatives of the largest recording and music publishing companies. This influence, both within their own industries and, through lobbying, with legislators allows them considerable power when it comes to both expansion through mergers and lobbying for legislation which is favourable to their immediate political ends - the collection and protection of unearned income.
135 136

Universal Music Group is part of Vivendi; Sony Music part of the Sony Group.

the major music industries remain largely consolidated - Universal and Sony Music dominate the recording industry and Live Nation and AEG do likewise in the live music industry.

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While the nature of the businesses and their representatives is important here, so to is the rle of those who hold positions of power within the individual firms. One of the weaknesses of an approach that is based on political economy is the focus on ownership of the firms: while this is often revealing, the case studies suggest that increasingly there is marked split between those who own the companies (often investors with no real connection to them) and those managers and executives within the companies who are responsible for the decisions which most directly impact on their success or failure. The identification of such decision makers within the firms is increasingly important, as is the study of their background and approach to business. Notably, towards the end of its existence the board of Sanctuary became populated by directors with little direct connection to the music industries but with long track records in other businesses 137. Similarly, the conflict at Live Nation studied in chapter 6 between Michael Rapino and Michael Cohl may also have been influenced by their backgrounds and approaches: Rapino was previously a marketing executive for the Labatt Brewing Company before becoming involved in the entertainment and concert industries, whereas Cohl was a longstanding Canadian concert-promoter. The increased involvement and influence of decision makers from backgrounds outside the cultural and music industries strengthens the case for studying these newer companies in the music industries in a way that reflects the outlooks of both owners and managers who are not necessarily aware of, or governed by, the logics of them 138. (vii)The studies of Sanctuary and Live Nation detail companies which have struggled both financially and organisationally to respond to the changes
137

Bob Ayling, a former Chief Executive of British Airways was its chairman in 2006. He subsequently became chairman of Welsh Water.
138

This was also apparent in the takeover of EMI in 2007 by venture capital company, Terra Firma (see Blakely 2007), and the subsequent clashes of culture which resulted in further problems (Northedge 2010)

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in the music industries, and offer little support for the 360 degree model as a profitable means of responding to them. While both have been successful in rapidly growing in terms of their turnover, both have been burdened by substantial debts, while continually reconfiguring both their internal structures and relationships with external companies in response to strategic changes instigated by managers and executives with in them. While the evidence of two detailed studies is insufficient to render such models a failure, it is nevertheless, surprising to note their continued popularity in spite of the high-profile failure of Sanctuary and difficulties within Live Nation. While, at best, the viability of such business models is unproven, it may be that the specific managerial and organisational conditions and conflicts within the chosen companies played a more significant a part in their problems than the business structure itself. These outcomes are typical of the type of corporate entrepreneurship described by Birkinshaw (2003, cited in Burns 2008, p.13) with its combination of risk taking, continual restructuring and a focus on turnover rather than profit. A cautionary note and some routes for further research By adhering to Friths aforementioned (2000) quest for accounts of the present, this research is, by necessity, a snapshot of the global music industries at a particular moment in time. However, it has attempted to progress previous work on the same subject in its scope as well as the range of data and theoretical perspectives employed. While this, and the scale and extent of the recent changes, means that it is likely to date quickly (like many of the previous accounts detailed in chapter 2), it nevertheless aims to offer some approaches which can be used for further, more specific research in and around the music industries and, as such, can best be seen rather as a starting point for further research. By taking the political economy approach of many of the previous accounts as a starting point, rather than as a singular approach, it has gone on to draw on selected aspects of organisational studies, entrepreneurship studies,

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business studies, cultural and mainstream economics to highlight and explain the operation of the new types of company (based around the 360 degree model) and industrial structures (with large conglomerates acquiring the large majority of available rights). It has also highlighted the weakening of some of the traditional discourses, notably those around independence and the importance of ownership, which have traditionally been used to frame the recording industry. The organisational changes across the industries mean that the type of independent entrepreneurs who previously played such a large part in the music industries have now largely been co-opted into larger conglomerates (where they may be given a degree of autonomy and entrepreneurial decision making power) or marginalised to the realm of hobbyists and non-profit making activity. Similarly, while these findings develop concepts which have been used to explain the music industries in the past (copyright) and introduce others which have either not been used or have been under-utilised in this context (rent-seeking and entrepreneurship), it is these along with the potentially rich fields previously mentioned which offer the most exciting and rewarding combinations for further research. These could range from further wide ranging structural surveys of the industries and firms within them to a more micro-level approach, which explores further the nature of entrepreneurial and rent-seeking behaviour by individuals in the industries. The final part of the thesis will suggest some avenues for further research. The major areas surrounding the contemporary music industries which are a source of new data and insights are studies of: (i) The recording industry: and the problems deriving from many of the responses which have emerged from the major companies within the recording industries in recent years. These include their legal action against consumers, investment in failed technological responses to copying and inability to negotiate favourable deals with websites and other

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new companies involved in music distribution due to the position of weakness which has come about because of their declining revenues. (ii) Live music and music publishing industries: In the light of their increasing importance in the music / cultural industries. Live music offers the possibility of studies which focus on social history, economics (and in particular the impact of large scale events on local economies) and the nature of risk-taking and the means of minimising this at both the top and bottom ends of the market. Similarly, in depth study of the music publishing industry (and, in particular, the operation of the rights collection agencies) is essential to fully extrapolate the importance of copyright for music businesses. Like other parts of the music industries, existing data is largely produced by the industries themselves to further their political ends, creating a need for reliable data from both qualitative and quantitative surveys. The need for independent quantitative data is crucial to a better understanding of the way all the music industries work. (iii)Firms: there is also considerable scope for detailed, top down case studies of the more established major firms with their origins in the recording industry. While Sanctuary and Live Nation offer a perspective on a new type of company, the changes and problems encountered by Universal, Sony, Warner Music and EMI during a similar period of study was make for a valuable comparison and yield the type of data which has been largely under-analysed since Negus work in the 1990s. (iv) Models: The models of the music industries presented here have tended to focus on the most visible and largest components: recording, live music and music publishing. However, in the attempt to move the focus away from the recording industry, there are a number of areas which are significant and largely understudied parts of the music industries which have been marginalised in this account. For example: artist managers, booking agents, merchandisers and the digital music distributors, the latter

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often detached from the music industries themselves 139, have rarely been located in holistic models, despite their increasing economic importance and influence on the workings of the industries. (v) Entrepreneurs: Each of the previous suggestions has concentrated on further top-down approaches, which concentrate on analysis of the firms and overall structure and organisation of the industries. These have tended to be the most popular approaches to the music industries, while ethnographic accounts of music have tended to be more specific and limited in their scope, discussing particular localities or cultures associated with the production and consumption of popular music. Chapter 3 established a methodological suspicion of ethnography as a research method for a study with such a wide scope, and, in any case, the extent and disparate nature of music industries workers would make it extremely difficult to produce for the music industries the type of account Nixon (2003) has for the advertising industry. Indeed, it would be difficult to draw wide ranging, generalisable conclusions from the study of individual workers across the music industries, and it is no coincidence that the best ethnographic work to emerge from Popular Music Studies has been limited by either geography (Cohen 1991) or extent (Thornton 1996). However, if there is to be a more detailed study of entrepreneurship in the music industries (both of individuals and within large companies), the narrower focus may favour the study of individuals and their decision-making processes, using the type of observational approach favoured by ethnographers.

139

Apples iTunes store was responsible for 26.7% of all US music sales in 2009, making it the largest music retailer (Christman 2010)

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Appendices

Title 1 2 3 4 5 6 Models of the creative/ cultural industries: classication systems Global Music Sales (Wholesale Trade Value) 1997-2009 Major components of Sanctuarys 360 degree model Growth of Live Nation 2005- 2010 Music Industries Organisations and Lobbying in the UK Major reports on the workings of the UK music industries

Page 246 248 249 251 252 253

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Appendix 1 : Models of the creative / cultural industries: classication systems

DCMS MODEL

SYMBOLIC TEXTS MODEL

CONCENTRIC CIRCLES MODEL

Core Creative Arts Literature Music Performing Arts Visual Arts Other Core Cultural Industries Films Museums and libraries Wider Cultural Industries Heritage Services Publishing Sound recording Television and radio Video and computer games Related Industries Advertising Architecture Design Fashion

Advertising Architecture Arts and Antiques market Crafts Design Fashion Film and Video Music Performing Arts Publishing Software Television and Radio Video and Computer Games

Core Cultural Industries Advertising Film Internet Music Publishing Television and Radio Video and Computer Games Peripheral Cultural Industries Creative Arts Borderline cultural industries Consumer electronics Fashion Software Sport

DCMS model: the cultural industries as defined by the UK governments Department of Culture, Media and Sport in their 2001 Mapping Exercise (DCMS 2001)

Symbolic Texts model: based on approaches to the cultural industries which derive from the critical-cultural studies tradition as it exists in Europe (Throsby 2008b, p.220), for example. Hesmondhalgh (2007, pp. 11-15)

Concentric Circles Model: as developed by Throsby (2001, 2008a)

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Appendix 1: Models of the creative / cultural industries: classication systems, contd. WIPO COPYRIGHT MODEL
Core Copyright Industries Advertising Collecting societies Film and video Music Performing arts Publishing Software Television and radio Visual and graphic art Interdependent copyright industries Blank recording material Consumer electronics Musical instruments Paper Photocopiers, photographic equipment Partial copyright industries Architecture Clothing, footwear Design Fashion Household goods Toys

UIS TRADERELATED MODEL

AMERICAN FOR THE ARTS MODEL

Core Cultural goods and services Audiovisual services Books Copyright royalties Heritage Newspapers, periodicals Recordings Video games Visual Arts Related cultural goods and services Advertising Architectural services Audiovisual equipment Information services Musical instruments

Advertising Architecture Arts schools and services Design Film Museums, zoos Music Performing Arts Publishing Television and radio Visual Arts

WIPO Copyright Model: as defined by the World Intellectual Property Organisation, with what Throsby calls a focus on intellectual property as the embodiment of the creativity that has gone into the making of the goods (2008b, p.220)

UIS Model: UNESCO Institute for Statistics definition, used for their industrial classifications/ cultural statistics Americans for the Arts Model: as proposed by the arts advocacy organisation

Summary of classifications taken from Taken from Throsby (2008a)

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Appendix 2: Global Music Sales (Wholesale Trade Value) 1997 - 2009

YEAR

PHYSICAL SALES $bn 25.60 26.80 26.90 26.50 26.10 24.30 22.50 22.00 20.50 18.50 16.10 13.70 11.90

DIGITAL SALES $bn 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.40 1.20 2.20 3.00 3.90 4.30

PERFORMANCE RIGHTS $bn 0.00 0.00 0.00 0.00 0.00 0.40 0.40 0.50 0.50 0.60 0.60 0.70 0.80

CHANGE ON TOTAL PREVIOUS YEAR $bn (%) 25.60 26.80 26.90 26.50 26.10 24.70 22.90 22.90 22.20 21.30 19.70 18.30 17.00

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

4.69 0.37 -1.49 -1.51 -5.36 -7.29 0.00 -3.06 -4.05 -7.51 -7.11 -7.10

Source: IFPI, Recording Industry In Numbers (2010)

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Appendix 3: Major Components of Sanctuarys 360 degree model

Component Years Active Notes Smallwood and Taylor set up in 1976 and were initially involved in the live music industry primarily as concert promoters and suppliers of ancillary services. They took on the management of Iron Maiden in 1979. As well as achieving international success, they subsequently managed a range of other artists. During the growth of Sanctuary, management was central, with the acquisition of several major management companies representing artists like Beyonce and Elton John. One of the major assets purchased and developed by Centenary / Universal in 2007. Travel agent specialising in artist travel was key part of Sanctuary, but closed by Universal at the end of 2007. Integrated with management services, Sanctuary was involved in nancial advice to their clients. Potential conicts of interest ended this part of the company on sale. Short lived venture, Cloud 9 Productions, was active briey during the 1990s but ended when company began to focus on music rights. Originally set up to release records by artists managed by Sanctuary, the record label expanded during the subsequent period. Sanctuary also bought label catalogues, recording studios and stakes in other record labels. Universal closed the record label in 2007. In spite of the focus on rights, publishing was not central to Sanctuarys strategy. Nevertheless, a range of rights were acquired and added to Universals catalogue in 2007. Book publishing (generally of music related books) played a small part in the 360 degree model during the period of growth. Similar to book publishing, DVD rights were acquired for a number of artists in the early part of the decade but this was phased out as companys nancial situation deteriorated.

Concert Promotion

1976-1978

Artist Management

1979-2007

Travel Agency / Platinum Travel Financial Services

1984- 2007

1983-2007

TV Production

1991-1998

Record label, recording & associated rights Music publishing & acquisition of catalogues Book Publishing Video / DVD Production

1996-2007

1998-2007

2000-2005

2000-2005

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Merchandising / Bravado

1984- 2007

A mainstay of the company for most of its existence, the acquisition of merchandising rights was important in Universals purchase and they have developed and expanded this aspect of the business since the takeover. Bravado is now a market leader in artist merchandise. Helter Skelter was one of the most successful parts of Sanctuary and has, like Bravado, been part of the company developed by Universal in the period since 2007.

Live Concert Booking / Helter Skelter

1984-2007

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Appendix 4: Growth of Live Nation (2005-2010)

Year 2005

Key Events
* Live Nation spins off from Clear Channel - 78% of business is live music * combination of concert promotion and venue ownership * remainder of business - theatres and sports management

Phase

Revenue ($bn)
$2.93*

2006
* horizontal expansion - purchase of promoters/ venues: House of Blues, Angel Festivals, DF Concerts, Concert Productions International * sale of sports management business, sale of non-core activities * vertical expansion: purchase of 51% of Trunk Merchandising, MusicToday.com

$3.69

e x p a n s i o n o f a s s e t s & r i g h t s

2007
* acquisition of remaining 49% of Trunk and MusicToday.com * further acquisitions: House of Blues (Canada), Jackie Lombard, Academy Music Group (international promoters and venues) * joint venture with Korn and EMI * further sale of non-core assets in theatre and sport

c o r p o r a t e e n t r e p r e n e u r s h i p

$4.18

2008

* superstar / multiple rights deals: Madonna, Nickelback, Shakira, JayZ, U2 * start of ticketing business / end of Ticketmaster contract * major sponsorship deal with CitiBank * strategy changes to increase revenue per fan at events, rather than drive more ticket sales.

$4.16

r
e n t s e e k i n g $4.18

2009

* proposed merger with Ticketmaster to form Live Nation Entertainment * strategy changes to increase revenue per fan at events, rather than drive more ticket sales. * sponsorship deal with Coca-Cola

2010

* approval of merger with Ticketmaster to form Live Nation Entertainment

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Appendix 6: Major Reports on the workings of the UK music industries The thesis has made mention of a number of works which have been commissioned by government departments and agencies with a view to map, quantify or value the music or cultural industries in the UK. This interest from government is a relatively recent development, dating back to the late 1980s and early 1990s and the emergence of cultural policy, with music playing an important within these wider studies as well as being examined in its own right. Below are the most important surveys of the UK music industries, with some information on their purpose, authors and funders. In addition, there have been a number of similar reports conducted on a national (Scottish, Welsh, Northern Irish) and regional level funded by local enterprise companies and local authorities. Summaries of these can be found (for Scotland) in Williamson, Cloonan and Frith (2003) and more generally in Cloonan (2007).
Year 1988 Report / Authors / Funders Myerscough / Economic Benefits of the Arts Purpose Arguably the first report to make the connection between arts events and economic growth. Myerscough was subsequently engaged by a number of local authorities to produce reports which justified their investment in culture / arts events, notably Glasgows year as European City of Culture in 1990. Produced in association with a range of the music industry bodies of the time, including the BPI, the Musicians Union and the CPA, the aim of this report was to emphasise the value of the music industry in terms of international trade, with a view to attracting government support. Commissioned by the National Music Council - an organisation whose executive contains members of the major industries organisations - the report valued the UK music industry at 2.5 billion, representing 0.3% of the countrys GDP

1995

British Invisibles / The Overseas Earnings of the Music Industry

1996

Dane et al / The Value of Music

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Year 1998

Report / Authors / Funders DCMS / Creative Industries Mapping Document

Purpose With the advent of a new government department, this was the first UK government attempt to assess the scale and extent of the various creative industries. Music data drew heavily on the work of Dane et al. Again funded by the National Music Council, this report was an updated version of The Value of Music breaking the music industry down into a number of sectors and establishing the amount of jobs created, spending and value added of each. An update on the 1998 report. Drawing on previous NMC funded work, this report established small business as central to the UK music business and focused on the reluctance of banks and investment companies to take risks on music related ventures. Another attempt to draw government support for the music industries, this report argued the need for a UK Music Office (subsidised by the government) to help improve the success ratio of British artists in the USA. Despite some positive responses from the UK government, such an office was never established. A further update on The Value of Music and A Sound Performance aiming to highlight the contribution of the UK music industries to the economy. Published by the National Music Council. Interestingly, the NMC stopped publishing such reports at a point where the performance of the UK industries (particularly recording) began to decline - nevertheless, they played an important part in establishing the links between both the music industries and the UK government (see Appendix 5) and highlighted the importance of data production as part of the lobbying process.

1999

Dane et al / A Sound Performance

2001 2001

DCMS / Creative Industries Mapping Document Wilson et al / Banking on a Hit

2002

British Council / Make or Break: Supporting UK Music in the USA

2002

Dane and Manton / Counting the Notes

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