THE INTERNET’S IMPACT ON MUSIC INDUSTRY NETWORKS WITH A FOCUS ON MUSIC PRODUCTION, DISTRIBUTION, AND MARKETING A Research Paper submitted to the Department of Engineering and Society Presented to the Faculty of the School of Engineering and Applied Science University of Virginia • Charlottesville, Virginia In Partial Fulfillment of the Requirements for the Degree Bachelor of Science, School of Engineering Emily Mussey Fall, 2020 On my honor as a University Student, I have neither given nor received unauthorized aid on this assignment as defined by the Honor Guidelines for Thesis-Related Assignments Signature __________________________________________ Date __________11/30/20 Emily Mussey Approved Date 12/01/2020 Richard D. Jacques, Department of Engineering, and Society Introduction At the turn of the century, half of the American adult population used the Internet. By 2019, nine out of ten adult Americans used the Internet (Internet/Broadband Fact Sheet , 2019). The increased accessibility of the Internet has changed how we live and interact with the world around us. It allows people across the globe to connect in seconds, large amounts of data can be transmitted, and people have ages of research at their fingertips. We will evaluate the Internet’s impact on music industry networks with a focus on music production, distribution, and marketing. We will specifically look at three periods: from 1960 to the early-1990s, from the mid-1990s to early-2020, and the remainder of 2020 The Science, Technology, and Society actor-network theory, hereafter ANT, is how our timeline will be evaluated. ANT strives to look at the relationships between different actors and how changes in one relationship can impact the network as a whole. An actor does not need to be a single individual. It can be a company or a group of individuals. Actors can enter and leave the network based on their ever-evolving relationships (Law, 1992). In this study, we will look at multiple actors, including artists, music labels, virtual coordinators, and the government. More than one million individuals are included in this network (Siwek, 2018) along with immense data and physical resources. We are currently living in an unprecedented time with the COVID-19 pandemic, making it challenging to analyze future trends. Although some relationships evolve slowly over many years, the pandemic illustrates that a situation where immediate changes are required. Due to my increased research and experience within the music industry, the networks mentioned in this thesis will be different from those listed in my prospectus. Please we aware that the music industry has a small group of tight knit power players. Although peer-reviewed articles are available, some of the research has come from personal interviews with industry insiders and my first-hand experience. Definitions Throughout this thesis, you will notice consistent usage of specific terms and phrases. These terms will constitute the actors within our networks. Although the way they do their jobs have evolved, basic descriptions of their roles remain consistent. 1. Artist - Performs and record music or works of art 2. Record Label - Signs artists and produces recordings. Commonly referred to as labels 3. Manufacturer – Creates physical media, including CDs, tapes, and vinyl 4. Distributor – Provides an artist’s work to retailers and sometimes takes a promotional role 5. Retailer – Shop or website that sells an artist’s products 6. Marketing Agency - Promotes an artist’s work through various mediums 7. Consumer - Watch, buy, and listen to the artist’s work 8. Virtual Coordinator - Online resources to connect different actors Pre-Internet Actors & Network History and Changes from the 1960s to the early 1990s The path to the modern music industry began back in the 1960s. Smaller labels began to merge in an attempt to control the market. Not only did they want exclusive recording contracts with top artists, they also wanted to lower costs by moving music marketing, production, and distribution in-house. Labels that proved to be the best in those areas were acquired and these newly merged companies began using vertical integration. This is the beginning of the major music labels (Bielas, 2013). There are primarily two types of music labels: major and independent. As previously mentioned, major labels use vertical integration and are heavily funded. They have a large network of connections and are well-known in the industry. Independent labels generally have a smaller roster of artists, less funding, and outsource manufacturing, distribution, and marketing (Justin, 2020). Nearly all independent labels created before 1970 have either gone out of business or been acquired (Kennedy & McNutt, 1999). Those that survived tapped into the resources of big labels for manufacturing, distribution, and marketing (Knopper, 2006). Also, in the 1960s, the consumer tape recorder was released. Individuals could record songs they heard on the radio, but degradation was high, so they still purchased the media (Balaban, 2001). Although this innovation did not have a large-scale impact on artist’s and label’s income, it provided one of the early methods for obtaining music without compensating the artists or others within the networks. This was one of the first entries in the story of how modern copyright law was created. Throughout the 1970s, rack jobbers controlled 80% of record sales (Lopes, 1992). A rack jobber’s role was to select, price, and display physical media in non-specialty stores, such as department stores and gas stations (Klein, 1912). They did not take risks and stocked shelves with artists that would give them guaranteed sales. This left little room for newer acts to gain publicity. In the late 1970s and early 1980s, major record labels began to work directly with retail stores and consumers. Due to their strong financial backing, major labels could take more risks on newer artists and add more diversity to the network. Independent labels did not have this cash flow and the power imbalance between the independent and major labels became more obvious (Lopes, 1992). Unfortunately, in 1979, one man nearly caused the demolition of the music industry: Steve Dahl. In the late 1970s, major labels decided to put a majority of funding toward disco, and as it boomed, the search for new talent slowed. Steve Dahl was a prominent rock disk jockey and refused to give into the rise of disco, causing him to lose his job. He made it his mission to stop disco. By the end of 1979, he was successful. Since labels were starting to financially back distribution of records to retailers, the labels lost millions when disco stopped selling and thousands of records were returned. With the industry’s reliance on record labels, this almost signaled the collapse of the music industry (Knopper, 2006). In 1981, MTV arrived and the industry was saved. Up until that point, radio had controlled what music and artists topped the charts. They stuck to conservative styles of music and refused radio play to songs discussing sex, drugs, and other taboo topics. The creation of MTV brought rise to New Wave music targeted at the youth. Unfortunately, although New Wave music was drastically different from traditional songs on the radio, it did not provide adequate representation to the black community, females, and genres like rap. MTV provided new opportunities for major labels to continue gaining industry control. At the time, video and audio recordings were both analog. High quality analog recordings proved difficult to produce, but major labels could provide their artists with funding. This gave major labels control of what MTV played (Lopes, 1992). After the fall of disco, labels were also struggling to understand their consumers’ tastes. MTV allowed them to test an artist before putting big money behind them. The success rate of new artists was under 10%, so they spread their risks and released a large volume of media. (Huygens, 2001). Later in the 1980s, more TV and radio stations came on air, allowing the populous access to a wider range of music. Still, these were controlled by major labels and independent artists felt increasing pressure to join them (Lopes, 1992). In 1982, the first commercially available CD player was released. By 1988, CD sales overtook vinyl and in 1991, CD’s eclipsed cassettes (Waniata, 2018). Labels used the rise of CDs to renegotiate contracts with their artists. The new contracts reduced the royalty fees artists received. Before CDs, artists were making a little more than 75 cents for each $8.98 LP that was sold. Now, artists were making about 81 cents for each sale of CDs, which were priced at $16.95 (Knopper, 2006). Then, labels discovered consumers were willing to repurchase old albums on new media formats. Major labels realized that they could use this to their advantage and began purchasing smaller labels around the world to obtain their back catalogs. By releasing the music on CD’s, they could generate profit with little work or investment. This was also a big step in the internationalization of the music industry as labels began releasing back catalogues of foreign acts (Huygens, 2001). Major labels were spending millions from their CD profits to build new artists and independent labels could not keep up. Luckily, the sudden market interest in old recordings allowed many independents to be bought instead of falling into bankruptcy (Knopper, 2006). Backing up a few years, in the mid 1980s, the Digital Audio Tape (DAT) was released. Consumers could create and distribute perfect copies of recordings without compensating artists. This led Congress to pass the Audio Home Recording Act of 1992. It provided protection against copyright infringement by requiring DAT devices to include a copy control mechanism. DAT’s could create a copy of media once, but they could not create a copy of a copy.