How the Music Industry Came to Be: 1970s to Present

The music of yesterday, today, and tomorrow.

Historically, the music industry has been shaped by its means of consumption. In the 1970s, when the vinyl record was predominantly used, the music publishing and recording businesses gained widespread attention for their profitability. Large companies began to buy into the industry and made large investments in this creative sector, considering it to be “an acceptable risk” (Baskerville, 9). Investments in music enterprises continued into the 1980s, as the invention of the compact disc or CD overtook vinyl and consumers quickly replaced their record collections with CD releases (Baskerville, 10). During this time, the recording music business saw its peak in terms of profits as a result of high margins in music purchasing. Consequently, there were heavy investments in all aspects relating to the musician, such as scouting, development, production, promotion, touring, and management; everyone wanted to become involved in the artist life cycle to take their piece of the profits. The musician exerted the majority of their energy into their craft, while various business-related roles were outsourced.

Summer Nights &amp; City LightsThe invention of the MP3 in the 1990s was the first format to begin to disrupt the traditional music order. What made the MP3 unique was the fact that it could be “compressed into files that could be distributed over the Internet freely (in every sense of the word), a new form of mass media became, in part, a medium controlled by the masses” (Baskerville, 10). Consumers could share and duplicate their music themselves using a computer without needing to even go to the store or shell out extra money. This illegal form of digital distribution was done by peer-to-peer networks, facilitated by companies such as Napster and Grokster (Baskerville, 13). With music being listened to, copied, and shared for free, “global recorded music sales dropped by nearly half in the following decade,” causing the music industry to cut costs and look for alternative methods of profitability (Baskerville, 13). Labels lost their ability to control this underground market and take their fair share of the profits.

The Internet soon became a thriving hub of fans who were distributing music and sharing their opinions about it. For, “[i]f the 20th century was about discovering new audiences, the 21st may prove to be about finding new, better, and… profitable ways to connect with them wherever they are and through whatever medium they desire” a new challenge for artist and record companies alike (Baskerville, 10). As communities and cultures quickly formed, artists were eager to become a part of connecting with these audiences in an intimate way like never before. Music streaming services such as Spotify, Deezer, Apple Music and YouTube, which require a paid subscription for use, were soon popularized and would regulate online music listening.

Not only did the Internet change the method of consumption for music, it changed so much more, as this digital revolution provided aspiring musicians with high-quality tools for producing music with inexpensive methods of personal promotion. The Internet also created access to self-education in areas such as marketing, production, and networking, where an aspiring musician can learn a host of information from online resources. Whereas there used to be many gatekeepers and an extremely high barrier to entry, those walls have been lowered and a music digital democracy was formed. Yet, this shift does not come without many challenges for the artist. Currently, anyone can put their music online, significantly increasing competition within the industry and making it difficult to become noticed amidst all of the noise. Musicians have also needed to take on business roles that they may not be accustomed to handling, such as their own marketing, promotion, and music distribution. This will take away from the musician focusing on their art itself, the core of their work. Now, it is not enough to be talented, one must know how to curate themselves as an artist in order to make a living as a musician and to become recognized by significant players within the industry.

The Watching shared by Lucian on We Heart It

Similar to how the digital revolution has changed the musician, it has also altered the music consumer. Consumers of this new generation expect instant access to music, which is often “perceived as being free of cost” (Baskerville, 20). Fans, who were never used to purchasing CD albums or songs in the iTunes store, view music listening as their right, without a willingness to pay for what they are receiving. Subscribers to Spotify, for example, can pay as low as $4.99 a month or listen for free with advertisement interruptions (Music). Consequently, labels have poured money into creating merchandise and massive world tours for artists, to re-engage the listener and have them invest in music experiences over virtually free, passive listening (Naveed).

21st Century Record Companies

Record companies play a new role within the 21st century music industry, given that the traditional use of the record company has been regarded as expensive and unnecessary. Whereas before labels focused their energy on scouting, developing, and creating a star, all costly tasks, musicians can now do this themselves. Consequently, record companies have shifted their strategy to “an increased concentration of the ownership and control of the market for recorded music. Another, and connected, strategy consists of shifting the costs of producing records to musicians and other actors involved in the creation of music” (Mazierska, 7). Now, the value that record labels can provide are their financial resources as large conglomerates and extensive networks, two key components in the musician’s venture. “The record companies have the resources to get your music heard above the noise of all the other artists out there,” including experienced marketers and relationships with streaming services and radio stations as well as massive amounts of data, which can help with artist’s strategy development (Passman, 77). Every platform requires a pitch and record labels have access to every platform. Record labels also have the funds to provide artists with exposure or help in funding large tours, yet are now more selective with whom they invest in because there are lower margins to be made in a given artist. Everyone is taking a risk. Consequently, record companies have shrunk their artist development efforts and A & R divisions. Considering that artists have the ability to grow a significant repertoire and following, to mitigate risk in artist investment, record labels invest in promising, emerging industry performers and a “common pattern is for an artist to get to a certain level, then move to a label because they feel they need the company’s resources to take their careers to the next level” (Passman, 77).


As a result of this “do it yourself” revolution, musicians can often undervalue the continued importance of the record company and their role in artist success. If the musician is undertaking so much on their own, why would a large corporation need to become involved? This may be true for smaller artists, where, “[i]f you’re a niche artist and you’re happy with selling your music to a small niche group of fans, you don’t need a record company and if you can make a living doing gigs promoting yourself directly to your fans and selling your music (genre limits your potential audience) you will make more money doing this on your own” (Passman, 76). Yet, for those who strive to have a broader group of people hear their music, record companies still have a crucial place in helping achieve this success.

We’ll see if this still holds true in the future. My bet is that the industry is on the precipice of a massive shift, just waiting for a disruptor. 

Stay tuned for next week’s article on “Who is the 21st Century Music Entrepreneur?”

Baskerville, David, and Tim Baskerville. Music Business Handbook and Career Guide. 11th ed., SAGE, 2017.
Mazierska, Ewa, et al. Popular Music in the Post-Digital Age : Politics, Economy, Culture and Technology, Chapter 12, et al., Bloomsbury Academic & Professional, 2018. ProQuest Ebook Central,  
“Music for Everyone.” Spotify,
Naveed, Kashif, et al. “Co-Evolution between Streaming and Live Music Leads a Way to the Sustainable Growth of Music Industry – Lessons from the US Experiences.” Technology in Society, vol. 50, 2017, pp. 1–19., doi:10.1016/j.techsoc.2017.03.005. 
Passman, Donald S. All You Need to Know about the Music Business: 10th Edition. Simon & Schuster, Incorporated, 2019.

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