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Through dominance of the distribution link, the recording industry is thus becoming more and more influenced by a few large firms. To illustrate, the 1978 weekly album-rating charts of Record World indicated that the majors owned or distributed 74 percent of the year's largest-selling albums. Taking account of the recent contracts by majors for the distribution rights of labels like A&M, 20th Century Fox, United Artists, and others, one finds that the majors distribute over 85 percent of these albums. Clearly, this phenomenon could have important ramifications for the industry. A number of potentially interesting issues arise in the context of concentration in the distribution of recordings. Most significantly, what are the likely impacts on concentration in the sales in recording product markets? Although current government data are not yet available, evidence indicates that the major record companies are beginning to earn an increasing share of the retail market. Without efficient access to retail outlets, it is clear that vertically independent recording lables are likely to slip in stature. Control in distribution is likely to be a formidable barrier to competition. Finally, the contracts between major companies and independent labels should be more carefully evaluated. The incentives for large scale distribution are clear. However, one must question the desirability of having large firms distributing their own records as well as those of competitors. To the extent that majors will be motivated to more efficiently distribute their own output to the detriment of independent labels, increased market concentration and a significant stifling of competition might be the result.

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The Impact of Performance Rights Legislation on the
Recording Industry

It is quite possible that the establishment of performance rights in sound recording could have indirect impacts on the structure of the recording industry as a result of the aforementioned changes expected in the behavior of broadcasters. Lack of data prevents an estimation of the magnitude of the quantitative changes but the qualitative nature of probable changes can be predicted.

If, as suggested, broadcasters reduce their use of recorded material in an attempt to reduce their recording license fees a probable result will be a reduction in the number of large-scale recording successes because radio exposure is generally essential to the making of a hit album. Recall that the recording industry's big sellers bankroll the system, enabling companies to absorb the losses associated with the vast majority of recordings. With reduced radio play lists and hits less frequent, it is likely that the already serious cash flow problems of independent labels will be exacerbated thereby increasing their competitive disadvantage with respect to the majors. Thus, it is possible that the current trend of independent labels being absorbed by the majors could be intensified.

For these reasons, it is also likely that concentration in the distribution segment of the industry will also increase. The diminished sales in general, as well as the increased risk factor will probably support fewer distribution networks. One strongly suspects that

the major recording companies are better equipped to survive.

FOOTNOTES

Section II

1.

Shemel, S. and Krasilovsky, M. W., This Business of
Music. N.Y.: Billboard Publishing Inc., 1977.

2.

"The Gorillas are Coming." Forbes, July 10, 1978.

3.

"Narm Adult Market Study," Music Retailer, November, 1976
cited in Mary E. Stibal, "Disco: Birth of a New Marketing

System," Journal of Marketing, October, 1977.

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FOOTNOTES

Section IV

57

1.

"Survey of Employment, Underemployment and Unemployment in

the Performing Arts," prepared for the Human Resources

Development Institute, Inc., AFL-CIO in cooperation with

the Department for Professional Employers, AFL-CIO by

Ruttenberg, Friedman, Kilgallon, Gutchess and Associates, Inc.,

6.

= 6.6

15% of all households have incomes of $25,00 or greater.
Of households whose head has four or more years of college 40%
are in this income class. 16.5% of the civilian labor force
has four or more years of college. Therefore 16.5 x .4
is the percentage of families headed by a college graduate and
earning $25,000 or more a year. Thus, 15 - 6.6 = 8.4 is the
percentage of families earning $25,000 or more and whose head
is not a college graduate. Of those families whose head is
not a college graduate, let P be the fraction earning
$25,000 or more. .835 x P = .084. Thus, P = .1 or

10 percent.

27% of all families have an annual income of less than
$7,000 while only 4% of families headed by a college
graduate fall in this income category. Let Q be the
percentage of all families that have an annual income of
less than $7,000 and whose head has less than 4 years of
college. Then

.04 x 16.5+ Q x 83.5 = .27 and Q.32.

40.4% of AFM members surveyed had four or more years of college. For AFTRA members the percentage was 49.4. Then if the rewards to education are the same for AFM and AFTRA members as for the rest of the labor force we would expect that for the AFM the percentage earning $25,000 or more annually would be

40.4 x 0.4 + 59.6 x 0.1 = 22.12%.

The expected percentage earning less than $7,000 annually is

40.4 x 0.04 + 59.6 x 0.32 = 20.69%.

For AFTRA members the expected percentage with incomes of $25,000 or greater is

49.4 x 0.4 + 50.6 x 0.1 = 24.82%.

and the expected percentage with incomes below $7,000 is

49.4 x 0.04 + 50.6 x 0.32 = 18.17%.

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