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«Prepared for Caribbean Export Development Agency Barbados April 2001 CHAPTER ONE INTRODUCTION The rapid growth of an intellectual property and ...»

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The sector has generated much interest among governments because of its sustained growth rates in the recession-plagued world economy of the 1980s and 1990s. For example, in the United Kingdom, the music industry has proven to be dynamic and competitive relative to other sectors in the economy like the steel industry. In 1993, the music industry generated £1.2 billion in exports and net foreign exchange earnings of £571 million, 44% of which was earned from copyright royalties (Feist 1996).

The structure of the world trade in the music industry is such that the United States and Europe are the major exporters, as they accounted together for more than 80 per cent of the market in 1993. Europe, however, is the main importer, accounting for 61 per cent of international trade demand compared to the US share of approximately 6 per cent. The US has an impressive trade balance with the rest of the world (UNCTAD/ILO 1995: 48). The top ten sales territories, primarily North America, Europe and Japan account for 80.7% of the world market (IFPI 1999).

Another distinguishing feature of the current context is the rationalization of the industry in terms of corporate takeovers, leading to higher levels of concentration.

As table 1 below shows in the mid-1990s the six largest firms accounted for close to 80 percent of the world market. The leading firms were: WEA (Time Warner Inc.), BMG (Bertelsmann AG), EMI (Thorn EMI PLC), CBS (Sony Corporation), Universal (Seagrams formerly MCA) and Polygram (Phillips N.V.). The “Big Six” became “Five” after the latter two firms merged in May 1998 when the Canadian firm Seagrams acquired 100% of Polygram to form the Universal Music Group (UMG). In November 1999 Time Warner countered by merging (vertical integration) with AmericaOnLine (AOL) to form the largest entertainment company in the world. And if that was not enough, Time Warner then merged with EMI in January 2000 to form the world’s largest music company. In June 2000, in something of a counter strike, Seagrams, the parent company of Universal Studios and the Universal Music Group, merged with Vivendi SA, the French utilities and media conglomerate. Vivendi owns, among other things, Internet distribution systems and the pay-television channel Canal Plus. The merger establishes VivendiUniversal as the world’s second largest media company.

In the space of two years the music industry went from the ‘Big Six’ to the ‘Big Four’. Two of the Big Four have then merged with Internet service providers. These mergers are indicative of a strategic response by the large firms to the changing business model, which the growth of Internet-based music represents.

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The competitive advantage of the transnational firms is in the distribution stage:

the delivery of finished products to retail markets and the stimulation of consumer demand through advertising and promotion. The large firms have been able to maintain control of this most profitable stage through the "maintenance of their own wholesale distribution networks and strategic alliances with major retail chains," as well as through "tight formatting of radio playlists, exclusivity agreements with music video channels such as MTV, and market surveillance systems such as SoundScan" (Weber 1996: 5-6). The recent vertical integration between music companies and ISPs is a continuation of this pattern.

A vast number of small independent firms from all over the world share the remainder of the market but they are faced with the problem of limited international market access and media exposure. The independents tend to operate at the creative edge in that they act as the laboratories or the research and development centers for new music. The independents may have freedom with their repertoire, but given the high cost of entry into the mass market they are invariably dependent on the transnational firms (Wallis & Malm 1984: 85). As a result the independents are often forced to establish production and distribution contracts ("P&D deals") with the large firms. This industry practice allows the transnational firms to enjoy access to a virtually "risk-free source of new talent as well as surveillance of local music markets" (Weber 1996: 5).

Advances in microelectronics technologies since the 1980s have had a significant impact on the industry. The new technologies such as digitization have revolutionized the industry in terms of production processes. Low-cost recording technologies have facilitated the diffusion of sound production or the recording of master tapes by small entrepreneurs without any appreciable compromise in quality. Manufacturing or mass production technologies have also become accessible since the 1990s. There are now a large number of independent manufacturing firms that have replication facilities for records, tapes and compact discs (CDs). The proliferation of these facilities have made this stage of the commodity chain the most competitive and consequently prices have been driven down. For example, CDs can be now manufactured for as low as US$1.00 each for a minimum order of 500 units.

In the case of products, the compact discs (CDs) have replaced cassettes and vinyl records as the most common consumer format. In 1998 the retail value of the world music market was US$38.7 billion. Over the period of the 1990s music sales have grown at an annual average rate of four percent, most of which relates to an expansive growth in CD sales. Cassettes sales have remained fairly stagnant and vinyl records sales have plummeted. The phasing out of vinyl records proved to be very profitable for the record companies because CDs offer significantly higher profits than vinyl at a similar manufacturing cost per unit and allow record companies to recycle their old catalogues in new marketing contexts.





In contrast, the arrival of Internet-based music is proving to be a threat to the major record companies. The convergence of the telecommunications and the media industries as a result of satellite and digital technologies have made it "irrelevant to distinguish between transmission of images from voice, data or text" (UNCTAD/ILO 1995). The rapid expansion of the World Wide Web and Internet services illustrates the point. It is suggested, by some industry analysts, that the Internet will revolutionize product sales and marketing, change the nature of piracy and royalties collections as well as upset the balance between the major recording companies and the independents thus giving the consumer greater choice. These gains are, however, dependent on wider access to Internet services internationally, improvements in the download capabilities of personal computers and the introduction of world-wide legislation to implement the International Standard Recording Code (a built-in electronic code that identifies all recordings) (Hayes 1996: 14-15).

Table 2: Forecast Music Sales via the Internet, 1997 – 2004, (US$m)

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Internet music sales are relatively small at present (about 1 – 2%of world music sales), but are on the rise and are forecast to grow exponentially in the next five years to approximately $4.0 billion or eight percent of the world market (see table 2 above). Projections are that Internet music sales could rise to as much as 20% of the market by the year 2010 (Cole 1999).

In the last few years Internet based music services have grown at a rapid rate through firms like Cdnow, RealAudio and Liquid Audio. In addition, the downloading of music has been made more accessible with file formats like MP3, a2b and Audio 4.0 and the issue of music identification has been addressed through watermarking and other security devices. It is argued that the emerging techno-economic paradigm is likely to result in a radical realignment of the

industrial structure of the global music industry. As one analyst put it:

All previous distributed music carriers – from the wax cylinder to new optical discs systems like Super audio CD and DVD-Audio – have been physical objects requiring manufacturing resources and conventional retailing. But electronic distribution can bypass all this, with music sent direct from record company to consumer. An even more radical possibility is for artists to bypass record companies altogether and sell their music direct (Cole 1999: 110) The threat that the Internet poses has prompted a response from the transnational firms. In December 1998 the Big Five formed a strategic alliance with several technology companies, namely, Sony, JVC, Pioneer, Matsushita, Dolby and Microsoft, to establish the Secure Digital Music Initiative (SDMI), which aims to set a standard system for distributing music over the Internet. The SDMI has yielded little so far. However, industry shifts have been moving at a blinding pace as firms juggle their options. The last year or so the majors have been jockeying for positions in the Internet race. In addition to the vertical mergers AOL-TimeWarner and Vivendi-Universal, the major firms have been forging alliances of all sorts. For example, UMG and BMG have established a joint venture GetMusic.com; IBM and RealNetworks have come together to form a digital downloading system; Microsoft has introduced an alternative downloading solution MS Audio 4.0, AT&T’s a2b; and Liquid Audio has been negotiating with major recording artists like Alanis Morissette and Garbage, and Sony has designed its own digital distribution solution called Magic-Gate (Haring 1999).

Music recordings are very prone to international piracy and other forms of copyright infringement. Piracy is quite common in countries where IPRs legislation is scant and weakly enforced. It is estimated that the global market for pirated CDs and audio cassettes was worth US$4.5 billion in 1998 and amounted to 11.6% of the global turnover of soundcarrier sales $38.7 billion (IFPI 1999b). Pirate activity has grown rapidly in the late 1990s as a result of the over-capacity in world-wide CD manufacturing and the advent of new forms of piracy such as CD-Rs and the Internet. The International Federation of Phonograghic Industries (IFPI 1999a) estimates that CD-R piracy may account for as much as an additional 15% to the 400 million pirate audio CDs and is becoming so widespread “ranging from fullscale cottage pirate industry to school children selling compilation CD-Rs in the playground.” It is also estimated that there are in excess of 500,000 infringing files (e.g. illegally posted songs in MP3 format) on the World Wide Web. The problem of infringement has been further exacerbated by two recent developments: the establishment of MyMP3.com by MP3.com, which allows users to upload music to a server and access it anywhere; and, the increased popularity of Napster, a search engine for MP3 files. The Recording Industry Association of America has filed suits against both parties in its attempt to curb music piracy on the World Wide Web.

Copyright protection and collections are administered through copyright societies.

The largest societies are the American Society of Composers, Authors and Publishers (ASCAP), the Broadcast Music Inc. (BMI), and the Society of European Stage Authors and Composers (SESAC) of the USA, and the Performing Rights Society (PRS) in the UK. The various national societies are members of CISAC (Confederation Internationale des Societes d’Auteurs et Compositeurs). The operations of these organizations provides a legal and business framework for the protection of authorship, uniqueness and reproducibility against copying and piracy as well as for the commercial exploitation of copyright through licensing fees and royalties. Collections by the main copyright societies have grown appreciably in the last few years (Krasilovsky & Shemel 1995:xxii; Feist 1996: 15). For example, the three largest collection societies have expanded gross collections over the period 1991 to 1997: ASCAP collections rose from US$375million to $482 million, BMI from $276 to $421, and PRS from £137 million to £201 million (PRS 1999).

Total income from international royalty collections stood at US$ 6 billion in 1995, approximately 15 percent of soundcarrier sales (MBI 1997). North America and Europe are the dominant players. The US and the UK are the only two surplus countries in that they collect more royalty income than they pay out. These earnings are likely to grow in coming years as a new infrastructure is being established by CISAC (the Common Information System) to increase the efficiency of usage monitoring, data processing, information exchange, and income reporting and distribution between societies and their members.

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INTRODUCTION: THE SOUNDS OF JAMAICA

Jamaican music has had a significant impact on the global music scene, in terms of commercialization as well as mass market appeal. The commercial achievements of Jamaican music surpass that of any Caribbean sound or that of any other non-Western or World Music genre. For instance it is argued that “Jamaican popular music has gained the stature of a global musical currency, alongside jazz, blues, funk, and rock” (Manuel 1995: 143). What is also noteworthy about the globalization of reggae is the way in which the music tapped into the revolutionary fervor of the 1970s -- for example, through its association with Rastafarianism -- and became established as “consciousness

music”:

In complex and varying ways, reggae has been adopted by a wide range of local communities around the world – Hopi and Havasupai Indians in Arizona, Palenquero Maroons in Colombia, urban youths in Nigeria and South Africa, working-class skinheads in Britain, Maoris in New Zealand, and aboriginal Australians, to name a few – as an expression of class consciousness, and yet others by its message of universal liberation (Manuel 1995: 144).

Jamaican popular music has its roots in the folk music of its African population.

The folk music drew on several strands: the music of the Pocomania church, the fife and drum music of the Jonkanoo masquerades, the adaptation of the European quadrille and the plantation work songs. From the late 19th century until the 1930s the dominant music was mento, which was particularly popular in the rural areas. During this period the main foreign influence on the Jamaican sound was calypso from Trinidad and rhumba, bolero and mambo from Cuba.



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