DEATH IS NOT SO BAD!
On the future of the music and media industry
FUEGO
- ABOUT THIS BOOK -
When Tim Renner applied to the German record company Polydor in 1986, he intended to write an exposé about the music industry. However, things went differently and he turned this exposé into a career. For eighteen years his biography has been intermeshed with the development of the music industry, he led bands like Element of Crime, Rammstein, Tocotronic and Philip Boa to sucess. He raised up higher and higher on the ladder, finally reaching the top of Universal Music Germany. He witnessed how musical development has been hampered by the pressure of the markets, how pop and commerce diffused, and importantly, he witnessed the rapid dissolution of old comercial structures through the forces of digitalzation and globalization. But the ponderous giant labels kept their eyes shut in front of these developments and Renner finally quit. After his leave from Universal in 2004 he described his point of view on what he found were wrong tracks and challenges of contemporary pop music.
»Death is not bad!« is a profound analysis of culture and music in times of digitalization, based on the vison that creativity, consumption and capital could find a way of coexistence.
Ten years after the German edition of this book was published some passages read like a history book about a long forgotten time. Some passages pointing to developments which are fully manifested today and look to evolve further in the future. The book shows the changes of a whole industry and the first steps of a society on it's way into the digitalized future.
INTRODUCTION
This is the story of a failure. My failure. After all, I did not enter the music business 18 years ago in order to have a career. On the contrary, I wanted to unmask the industry. My job as a so-called junior A&R and product manager with music group PolyGram (in other words a scout who discovers artists, organizes and supervises their recordings, and dreams up marketing campaigns to coincide with the release of their records) was a disguise. As an undercover journalist I wanted to conduct clandestine research and turn my discoveries into the first German exposé of the music industry.
My plan failed completely. This book is not the belated fruit of my original ambition to become the Bob Woodward of the music world, for my aim here is not to expose the industry as such. At best I would be able to reveal that the industry is not malevolent – as I believed at the time – but stupid. But who could get excited about that? And would it really be appropriate to base a book on finding humor in an industry’s misfortune? A more interesting approach would be to see the industry as a seismograph.
The tremors of digitalization could have been felt in the music business well over a decade ago if only anyone had had the will to do so. The business has been battered for some considerable time by the crisis of content that can occur when capital is allowed to clash, unrestrained and improperly managed, with culture. The battle between the public, artists, and managers for identity, differentiation and, of course, power, has forever been part of the plot. The future of the media industry therefore has more than a little in common with the past of the music business.
My pupils, at my job interview in June 1986, were dilated. I allowed the two Polydor managers who sat facing me to ask precisely three questions. Then I talked almost uninterrupted for more than an hour. Shortly before the interview I had suffered a hay fever attack and Avil, a brand new medication prescribed by my doctor, had produced some strong side effects. It has now been taken off the market, but back then, right before my interview, it caused my girlfriend Petra to find me slumped over the kitchen table. There was no way she could let me go to my interview in that state. A half bottle of Sekt, German sparkling wine, would be just the thing to give me the kick-start I needed, she thought. This cocktail of Sekt and Avil turned out to be a perfect substitute for speed. Later we used it from time to time when we were out partying.
I sat there at my interview with jittery legs, staring at the Polydor catalog. Listed were the names of all the German artists under contract to the record company, (which was owned by the PolyGram group). A catalog of horrors, I thought then as a 21year-old, and told my astonished interviewers as much: this artist should have been dropped years ago, that artist should have been banned completely from playing or performing, and a third should consider retraining as a homeopath. In my opinion they were all too old, and I made it clear that I thought Polydor had been doing a lousy job for years. In almost any other industry that would have started the countdown to the end of my interview and seconds later the impertinent Tim Renner, who also gave every appearance of being a drugs-user, would have been ejected from the building by a well-aimed kick up the backside. Instead, the Polydor CEO and the head of national repertoire listened attentively. They had long been aware that the industry sold revolution via pressed vinyl, and this youngster had just hoisted a red flag in their office. My contract arrived in the mail the next day.
The story of pop music has always been one of rebellion. The horrors of war were resisted with swing, the middle-class cosiness of the 1950s – and the racism that was never far away – with “Negro music” (otherwise known as rock ’n’ roll), the parental generation burdened by war guilt (whose at best harmless hits were meant to help them forget the past) with earnest singersongwriters, the hippies, with their eternal striving for meaning and security with coarse punk, and the 68ers, schooled in critical theory, with minimalist, “cold” techno. Popular music is youth’s first form of self-expression and will always be so. From a technical point of view, music can be easier to produce than almost any other art form. To get started, all you need are three chords (this we discovered with punk if not before) or alternatively two record players, a mixer, and a bit of practice. The results make themselves felt very quickly: you can be admired on stage or else make an enemy of your parents at home with all the noise.
Initially, rock and pop music are all about two things: sexuality and differentiation. Later, as one gets older, a third can be added: the desire for eternal youth.
No computer game can replace the special bond between live performance and audience. At your computer or games console you play alone or at best networked. On the other hand, the concert or party at which a DJ performs is always a collective and intensely physical experience. Young people who are not yet sure how to approach members of the opposite sex, how to talk to them or win them over, have music and movement as a bridge. Enviable are those who find themselves on stage or standing behind the turntables. If you are not one of them you should at least know the guitarist or be able to give an informed appraisal of the songs and performances of the protagonists in order to make sure you don’t end up in the dark on your own afterward. Once this pattern has been learned and internalized, it continues to function for years after puberty and at the same time guarantees generation after generation of new pop fans.
For a long time now, most consumers of pop music have been over 30, but the renewal of the art form still comes from the young. In music they discover forms of expression that are not immediately comprehensible to parents and teachers; music helps them to discover their personalities. Only when we realize we are individuals in our own right can we become truly independent.
But this process of differentiation becomes more and more difficult from generation to generation. Recently, with techno music, it has been achieved in innovative fashion through the total elimination of any traditional song structure. However, it’s a godsend that pop music as a cultural form is so closely associated with puberty. It ensures that it is continually being called into question. This makes it the most innovative of art forms, and because there is such an urgent need for it, one of the most commercial.
Pop = art + capital • mass media. Being a means to an end is a fate with which art has long had to live and which it has repeatedly survived with a deep inner weariness. People have sung, com posed, written and painted for the sake of Christianity, for the glorification of wealthy, powerful patrons and, latterly, after the Industrial Revolution, to accompany the launch of soaps, technical equipment, fried chicken, and much more. Artists, quite justifiably, do not want to be poor. This is a form of romanticism they can do without. It is only required by a public that hopes, voyeur-like, to increase the authenticity of a work by increasing the genuine suffering of the artist. Ideally, this public would prefer to discover and promote artists only after their death. And in this it is strongly supported by the arts and review sections of newspapers, which are frequently suspicious of successful living artists.
Artists do not care about this. What they need is to find any kind of audience, any kind of canvas onto which to project themselves and their art. They express their condition, which they cannot communicate in everyday life, through music, the image, the written word, the performance. They yearn for fame and recognition (all the more, admittedly, the louder their stomachs rumble). Naturally they are prepared to place their craft at the disposal of some other cause as long as it doesn’t go against their artistic principles – not too obviously at any rate.
What fascinates me about pop is that pop culture has the most relaxed relationship with capital. True, the history of art has always been one of financial dependence, but pop doesn’t moan about it. The genius of pop culture lies not in coyly denying money, in trying to make people believe in the ideal of a work of art unsullied by finance, but rather in using it, playing with it, even (from time to time) mocking it. As money has no soul, it doesn’t give a damn. It took me a while to grasp this.
“You fucked up your life, why don’t you smile?” sang Element of Crime, the first band I signed as an employee of the mighty Polydor record company, at Hamburg’s Westwerk concert hall in 1986. I hugged my girlfriend (today the mother of our children) tight, for instead of a smile there were tears on my face. I felt I had been trapped, that I was going to become one of those people who waste their lives working for a corporation with no soul. In my attempt to follow in Bob Woodward’s footsteps, that might perhaps have been the only thing I would have succeeded in exposing. But now that I had urged these nice lads from Berlin Kreuzberg to sign with my company, I had become part of the system. However, the system let itself be used without complaining.
Using the system’s money, we persuaded living legend John Cale, the John Lennon of Velvet Underground, to produce the band. In every other respect the company saved every cent it could. The four members of the band lived together in a room in Swiss Cottage, an area of London as far removed from an Alpine dreamworld as it is possible to get. If you wanted heat, you had to put money into the meter every ten minutes. One thing we had in our favor, though, were pictures by Derek Ridgers, one of the most sought after of all pop photographers, who worked for music paper NME (New Musical Express). Pop needs capital, but even more than that it needs the mass media, which depend in turn on capital investment and operate according to the laws of capitalism. We got the media (the press at least) onto our side for Element of Crime because the names John Cale and Derek Ridgers were redolent of the big, wide world while the record Try To Be Mensch had such a sweet “boys next door” flavor.
For the media the way a pop product is presented is an integral part of that product. The mass media are responsible for conveying a piece of work into the heart of the viewer, reader or listener’s everyday life. Ideally, this happens without warning; it grabs your attention and it moves you – a song heard in a taxi, an article in the newspaper, a picture on TV. It is not unusual for the medium itself to become pop. Pop functions at its best when everyday life is influenced by … the everyday. Pop measures its success by the extent – how deeply and how broadly – to which it achieves this. A decisive factor here is how frequently and how intensely the work reaches the consumer. Pop’s offensive and honest relationship with the mass media and capital also make it incredibly vulnerable – when it results in the responsibility of the artist and of the management structures that surround the artist being overlooked.
At its best, management means moderation; it means applying the brakes in the interests of both sides when content is threatened by capital and/or the medium. Not only does a dearth of content eventually destroy society, it also destroys business. How can consumers be expected to part with their money for something that no longer seems to have any substance? When the only value is the generation of profit, no one should wonder if the charts are reduced to a kind of karaoke bar. Good karaoke singers no doubt make perfectly nice neighbors or work colleagues, but they are not pop stars. Innovation has no place in television talent quests. But a culture that does not renew itself will, at some point, level out.
Pop provides an impressive example of how careers can be ruined when content is lacking over the long term. It is precisely this content that the consumers are searching for in order to be able to define themselves. We are no longer stuck on the fourth level of the famous “hierarchy of needs” pyramid devised more than 60 years ago by behavioral scientist Abraham Maslow. After the need for food, propagation and security comes a need for belonging. In highly developed countries, another need, the need for self-actualization, beckons us one stage higher, to level five.
No longer are we content to be simply a part of the teeming masses; we turn away from the traditional mainstream in an attempt to display originality. In most cases this succeeds only to a certain point. However, it brings about a situation in which it is no longer the “ideal” son-in-law or the dumb blonde sex bomb who make up the new mainstream, but highly individual types who represent the very best within their respective subcultures.
Consumers reveal their putative originality by assembling musical bouquets: Norah Jones, U2, Shania Twain, Eminem and Robbie Williams (naturally). In other words combinations of jazz, alternative rock, country, hip-hop and of course pop – artists from different genres whose styles conflict. Together they form a music collection that would have struck people as schizophrenic a few years ago, as I often discovered. All these performers have a strongly individual profile, are authentic exponents of their respective genres, and stand, each in their own way, for content. They are also, incidentally, the most successful pop artists in the world …
For a long time the music industry ignored the fact that in their thirst for individuality, consumers had actually created a new mainstream. I don’t mean the even-textured sauce that was traditionally considered to be the mainstream. The new mixture consists of the very best in their genres. Instead of building up new icons in these different areas, the music industry responded by creating its own idea of a mainstream: TV talent show acts and instant hits by faceless producers. If the music industry ignores this need for individuality and if, on top of everything else, the next wave of digitalization brings a change of format (such as the change from CD to Internet) that promotes the individuality of the consumer to an extreme degree, this will create a very real problem. One that threatens to suffocate the music industry and which, moreover, is heading inexorably in the direction of movies and television, and possibly other areas too.
The music industry is in the vanguard here because pop songs represent only small volumes of data. But the greater the progress made with data compression and download speeds, the more this problem will affect other media. These other media can learn from the music industry by making sure they don’t ignore the warning signals.
At PolyGram’s first international management conference, which I was permitted to attend as the brand new head of Motor Music in 1994, the guest speaker was Nicholas Negroponte, the founder and head of the legendary Media Laboratory at Massachusetts Institute of Technology (MIT). The visionary Negroponte, who was also co-founder of the magazine Wired, explained how data compression and peer-to-peer networking would work. He predicted that in ten years’ time half of all music titles would be obtained via the net. The managing director of A&M Records was asleep during his talk, other managers started to chat among themselves, and in the break Negroponte was left standing by himself. After he had gone, the chairman apologized to his colleagues. Obviously it was all rubbish; people were predisposed to touch and hold things, downloading something would never be seen as owning it. At the same time, thousands of kids were buying computer games at more than DM100 a throw, chucking away the packaging and calling a game icon on the screen their own.
Both Negroponte and the PolyGram chairman were wrong: just seven years later, more titles were being downloaded from the Internet than were being sold over the counter. The stupid part was that this was taking place almost exclusively via illegal sources. Consumers had the perfect excuse: the industry had abandoned them, all too often they had been forced to discover that the music companies’ content was no more than an illusion, the product was not being made available legally on the internet, and so they could become thieves in good conscience. As wannabe Robin Hoods they could roam the net taking from the supposed rich and stupid and giving to … well, themselves. And now imagine how the same consumers could soon be treating movies on the Internet, Internet and mobile radio, TV, recorded by digital video recorder and stripped of advertising for later consumption, and even, using a different type of screen, and books. If providers do not take a lead by creating credible content and legal structures, the consumer democracy will degenerate into consumer anarchy, into a short-term, self-destructive wallow in cultural excess. All this and much more can be learned from the experience of the music industry. Once the lesson has been learned and the new conditions adapted to, the death of the old structures and business models will not seem quite so bad.
PART ONE:
THE OLD TESTAMENT
PARADISE
PARADISE – SAVED BY HERBERT VON KARAJAN AND JAN TIMMER
1 August 1986, my first day at Polydor as a junior artist and repertoire manager, began with an announcement from my boss that it was his last day. What a volatile industry, I thought to myself as I wished him the best for the future. I assumed, not without justification, that this would enable me to conduct my research a bit less closely observed. I was still, at this point, planning to reveal the dirty secrets of the music business by operating as an undercover investigator. Had I been sufficiently observant, I would soon have realized that the material had fallen into my lap for a far bigger story: the story of the beginning of the end of the music industry as we know it – I was there!
A corpulent, semi-bald man, who reminded me strongly of South African President Piet Botha, stood on the stage of the Golf & Sport Hotel in the Baltic coastal resort of Timmendorf. I and almost everyone else present felt awful. The day was still young and the previous evening had been given over to an incredible drinking contest (schnapps and beer) between the product managers (of whom I was one) and the sales reps, who had won decisively on points. I swore to myself that I would turn up at future sales conferences better prepared for this kind of thing. Now all I could see were circles. They all had a hole in the middle of them and were being projected onto the screen in front of us. The large gentlemen who had introduced himself as Jan Timmer, world boss of PolyGram, was busy giving these things names. One was a data CD and could make jolly pictures appear on computer screens – the future CD-ROM. Another was a CD that could record data, which later became known as the CD-R.
It wasn’t just my hangover that made the talk seem absurdly abstract. In the whole of Polydor there was just one computer, and before being allowed to use it you had to prove you were qualified. My vacation job as a data inputter with Albingia Insurance was not good enough. Recordable – no, that didn’t sound too good when I thought about our rights situation. But cassettes were also recordable and they hadn’t destroyed the industry. I smiled at the memory of the “Home taping is killing music” campaign run by the music industry. Ever since ailing vinyl had started being replaced by the CD, no one ever mentioned it any more. The CD had been pushed through by Timmer in the face of opposition from the rest of the music industry. Why couldn’t he be happy with that?
We were all suffering with headaches and another change of format was the last thing we wanted. Things were finally going well again for the industry, although it still hadn’t fully recovered from the scare of 1979, when the market collapsed dramatically for the first time. Only the previous year, the corks had been popping in spectacular fashion at PolyGram. Saturday Night Fever and other records from the end of the disco era had delivered fantastic profits in 1978. This had had to be celebrated. Former American Secretary of State Henry Kissinger was invited to the annual conference in Florida as guest speaker, flamingos that had been flown in by company jet teetered through an artificial lake created specially for the occasion, and the company gorged on caviar. A year later the hits that could have made up for the weakness of vinyl sales failed to materialize and bankruptcy loomed. Unfortunately I was not there, but I know about the party from the vivid picture painted of it by the grim-faced head of Human Resources at a staff seminar in Noordweik, The Netherlands.
Back then, in 1990, we simply reflected on the case study and shook our heads. What idiots, we thought and said. Anyone who has attended a basic marketing seminar could tell you that products have a life cycle. First comes the introductory phase, followed by the growth phase, the maturity phase, the saturation phase, and finally the decline phase. This can even be represented by means of mathematical formulae; it is predictable. The end of vinyl came as no surprise, therefore. The naiveté of our predecessors, on the other hand, did. I didn’t understand Jan Timmer and his lecture. What else but this had his message been? And yet the same thing happened to the next generation of sound carriers, the noble CD, which at the time was bringing us undreamed-of returns of over 20 percent. He was not yet able to show us a prototype of the CD-R, but he did explain what the logical and technical next steps would be on which the patent holder, Philips, our Dutch parent company, would soon embark. The day was coming and with it the beginning of the end for the CD and the music business as we knew it.
In 1990, Jan Timmer began a six-year stint as head of the entire Philips group. And although he introduced a drastic restructuring program (named “Centurio”) at the badly hit electronics giant, cutting more than 50,000 jobs in the hardware division (and earning himself the nickname “Butcher of Eindhoven” in the process), the company held on to its software interests for as long as he was in charge. His aim was to reinvent Philips as a media group with significant vertical integration. Above a certain size of company, territory and number of products to be marketed, it makes less and less sense to attempt to maximize profit by cutting costs. This occurs more through the absorption of costs within the group. If a company controls numerous different phases of the value chain, many costs get reabsorbed into different areas as revenue. At the heart of Timmer’s strategy was the music division PolyGram. He knew the business well and saw content such as music as being where the biggest opportunities for development lay. His goal was to link content with hardware interests and to let one drive the other. The introduction of the CD was a perfect example of this strategy.
The story of the CD began in 1969, when Dutch physicist Klaas Compaan came up with the idea of a disc that could be read by laser. A year later he was working on the prototype with his colleague Piet Kramer. Not long after that, capital started to take an interest. Philips’ technical director at the time, Lou Ottens, took the view that compact dimensions were vital for the successful marketing of the new development and was therefore responsible for naming the invention. In 1979, Philips unveiled a prototype of the compact disc player and formed a strategic partnership with Sony. The collaboration would prove a brilliant success on two fronts: first, from a technological point of view, as Sony’s expertise with digital conversion technology complemented Philips’ development of the CD perfectly; and second, Sony already had a stake in CBS, parent of Columbia Records (now Sony Music).
While all the record companies originally rejected the new format, Sony was at least able to help overcome the objections of one of the major players. By this time Philips had poured $60 million into the development of the CD and reminded its subsidiary PolyGram of this in no uncertain terms (in other words: “Now hand over the back catalog”). On 17 August 1982 Philips and PolyGram presented the public with the first CD player and CD, a recording of Chopin waltzes by pianist Claudio Arrau. This was closely followed by the first pop album: The Visitors by ABBA. The development of the CD and accom panying CD player is a good example of how important comfort and emotionality are for the consumer and therefore the success of a market launch. The introduction of the CD succeeded with such speed and success precisely because the underlying technical complexity of the system was belied by its outward user-friendliness. In the first year, PolyGram produced 376,000 CDs – and then demand exploded. To date, 950 million CD players and billions of pre-recorded CDs have been sold.
It was through the CD that the phenomenon of digitalization first reached the mass market – not as a terrifying data monster, but as an audible, perceptible leap in quality for the user. The CD was less sensitive than vinyl; the tracks could simply be keyed in
– there was nothing users could actually do wrong. The CD may have been a technical innovation, a “cold” development, the simple conversion of music into countless zeros and ones, but it was sold emotionally, “warmly.” Here the nature of its content – music – played a decisive role. So too did the artists. Herbert von Karajan set the standard in two different ways. The conductor of the Berlin Philharmonic Orchestra was given a CD demonstration as early as spring 1981. He adored the format and was prepared to talk about his new love to anyone who would listen. “A technological achievement comparable with the transition from gas lamp to electric light,” enthused von Karajan. At the same time, Philips and Sony were in discussion over the size of the CD. Originally, Philips had set the diameter of the disc at 115 millimeters, which yielded a playing time of 66 minutes. But at Sony’s instigation this was increased to 120 millimeters and a maximum playing time of 78 minutes. The reason was that Sony president, Norio Ahga, a former opera singer and fan of classical music, wanted von Karajan’s recording of Beethoven’s Ninth, his favorite symphony, to fit onto a single CD, and the recording lasted 72 minutes.
There were dramatic repercussions. At presentations, Sony staff used to casually pull their demo CDs out of their shirt pockets as a way of highlighting the practical dimensions of the new discs. This larger CD would no longer fit into normal-sized pockets. Sony staff were therefore supplied with shirts with larger breast pockets. And this size was eventually adopted as the new standard for men’s shirts in Japan. The only problem was that the record companies were refusing to accept the CD as a new music medium and grasp it as a new opportunity – despite the fact that the water was already up to their necks as vinyl sales collapsed.
PolyGram boss Jan Timmer responded by taking charge of the issue and announcing a 500-day program during which he built CD factories in all the company’s sales territories, thereby driving the market forward. At the same time, Philips boss Cor van der Klugt and Sony president Akio Morita developed a crafty negotiation technique. A meeting had been organized in America in order to agree a way forward with the heads of the big record firms, who considered the 3 cents per CD license fee too high and were planning a boycott. Once all the managers had sat down, Klugt explained: “PolyGram has brought two lawyers with it. All those who wish to go ahead with a CD boycott will receive a legal summons and will be arrested as soon as they leave the room as it is illegal to declare a collective boycott in America.” The gambit worked: the music bosses were caught off guard and the boycott never happened.
Soon after, Philips stopped charging the record firms the CD patent license fee and started collecting the 3 cents per disc from the pressing plants instead. Most of the pressing plants were owned by the record companies and the fee was simply absorbed as part of their production costs. The price of a CD, meanwhile, was approximately double that of an LP. At this point the music managers’ skepticism began to give way. As the CD rapidly went from being a toy for classical music snobs to being a toy for rock snobs, becoming part of the everyday lives of millions of music lovers, the music industry began to become enthusiastic about the idea of distributing its previously closely guarded masters to the public in digital form.
PARADISE – CREATED BY EMILE BERLINER AND FRED GAISBERG
I arrived at PolyGram just in time for the 100th anniversary of the record player: Emile Berliner and his invention were celebrated in 1987. We were given a first-day cover bearing a set of Deutsche Bundespost anniversary stamps and a commemorative book. From the latter we learned that Emil had left school at the age of 14 and fled to America five years later in order to avoid Prussian military service. A physics and meteorological textbook by Freiburg professor Johannes Müller had inspired Emile (he added an “e” to his name in order to appear more American) to take an active interest in acoustic phenomena. And his enthusiasm was fired further by his neighbors’ daughter, Cora Adler. The acoustic experiments conducted by Berliner, who actually earned his living as a bookkeeper, involved drawing wires through Cora’s family’s rooms. The patient Adlers did not try to stop him and even in the end allowed him to marry their daughter.
This hormone-driven research resulted in the invention of the telephone microphone. Emile sold the patent to Alexander Graham Bell, allowing him to mass-produce the telephone. He built a factory for his brothers Joseph and Jacob back home in Hanover in Germany. Through telecommunications the Berliners built up DM20,000 of start-up capital with which to found the Gramophone Company in 1892. Meanwhile, Thomas Alva Edison had invented the phonograph as a means of recording the human voice. A few hundred machines toured America’s fairgrounds from 1877 onwards, causing amazement wherever they went. Edison himself had lost interest long before and had turned his attention to the invention of the light bulb. Emile Berliner, on the other hand, focused not on the world of the office and the recording of sound for dictation purposes, but on home use. Instead of cylinders, his gramophone, which he patented in 1887, used easily interchangeable discs and was much cheaper to produce.
The first hit was the Lord’s Prayer recited by street trader John O’Terrel. This success may have been carefully calculated, but the technology was not quite fully developed. Berliner’s calculation that listeners would recite the prayer aloud while listening to the recording, thereby covering up some of the blemishes, was thus extremely shrewd because they did. The “software” was simply a way of helping to sell the gramophones. The quality of the first records was thus rather poor and the image of the “hardware” suffered as a result.
In Germany, the gramophone soon acquired the nickname Spießers Wunderhorn (the enchanted horn of the bourgeoisie). It took Fred Gaisberg, the Gramophone Company’s first artistic director and the forerunner of subsequent artist and repertoire managers, to turn things around. Gaisberg came to the company as a 21-year-old from Columbia Phonograph. Columbia had been founded by a former court and Congress stenographer. This said a great deal about which aspects of the new recording technology it was interested in. Gaisberg tried his hand as a pianist on some initial, rather joyless music recordings, but these met with little enthusiasm at Columbia Phonograph. Fascinated by the new possibilities of the gramophone, he decided to learn about sound technology from Emile Berliner.
The young musician soon won Berliner’s trust, and in 1898 was sent to London to set up the Gramophone Company Ltd and build the first sound studio. There was a good reason for the spatial separation. Berliner knew that he would not succeed in Europe in the long term with exclusively American repertoire. Gaisberg even convinced him that they needed recordings of authentic artists from all the different countries in which they wanted to market the invention. Music produced by a simple shellac disc was an abstract enough phenomenon; the performers and their songs needed at least to be familiar to consumers.
From London, Gaisberg traveled across Europe and through Russia to India, and all the way to the Far East. He recorded Heurigenlieder in Vienna, fandangos in Madrid, chansons in Paris, tablas in Hyderabad, pipa music in Shanghai and opera arias in Berlin and Leipzig. Forever on the lookout for talent and repertoire, he also, inevitably, turned up at the legendary La Scala in Milan. In 1902 a young, little-known tenor by the name of Caruso was performing there in a production of the opera Germania. Fred Gaisberg was enchanted. Even he had never come across such a voice before. After the performance he went behind stage and enthusiastically offered the young man the opportunity to make several records. But Enrico Caruso was a self-assured artist, and although only at the start of his career he had a very good sense of his own worth. He demanded £100 for ten short arias. This was an exorbitant sum for the time and for a format that was still in the process of being launched. Gaisberg tried to get approval from the parent company, but was rebuffed in no uncertain terms. How many more machines would be sold if this Caruso and not some Italian cowherd or fisherman could be got to sing into the recording horn …
Fred Gaisberg was too proud and too sure of his cause to enter into such a discussion. He immediately decided to pay Caruso out of his own pocket. The tenor recorded everything for him in just two hours. The biggest sensation, and not only in Italy, was caused by the aria E lucevan le stelle from Puccini’s Tosca. The director of the Metropolitan Opera in New York heard a recording and engaged Caruso forthwith. Thus began the first world career in music while the gramophone record underwent a quantum leap. It was suddenly discovered and respected by the newspapers and by cultivated circles as a cultural tool and therefore began to lead a separate life from the machine on which it was played. This was the result of the unwavering belief of a single individual and his faith in quality and a regional approach. Joseph and Jacob Berliner, who pressed the discs for their brother in a cowshed next to their telephone factory, did not know what had hit them. After Caruso the market boomed. A new pressing plant had to be built to meet the demand for the recordings supplied from Britain by Fred Gaisberg. By 1907, 36,000 discs a day were being pressed. And the American market also eventually got going – all the more vigorously for the delay.
By the early 1920s the new record industry had become the biggest sector of the American entertainment business. In 1921, disc sales totaled some $106 million. (By comparison, the motion picture industry, seemingly so powerful, turned over just $93 million during the same year.) However, the euphoria was shortlived. In its frenzy of expansion, the industry had failed to notice the development in America of a new technology that allowed consumers to listen to music for free. This confounded invention was called radio. Like the Internet after it, it had originally been invented for military use but in 1922 could suddenly be received in every home, broadcast by two large networks: Radio Corporation of America (RCA), and the Columbia Broadcasting System (CBS).
CBS was founded by artist’s manager and concert promoter Arthur Judson, a failed violinist who feared that the live music business would be adversely affected by radio concerts. It was not, but the record industry, which failed to take the kind of de cisive action that Judson took, was. The Depression piled on further pressure and by the early 1930s the industry was on its knees. In 1933 sales of gramophone records reached just $6 million – a mere 5.7 percent of the glorious total achieved 12 years earlier. In 1934 the radio companies RCA and their arch rivals CBS began swallowing up the sorry remnants of the industry. This was partly for strategic reasons and partly because the record companies could be had irresistibly cheaply. Also, of course, the recordings to be broadcast had to come from somewhere.
The radio oligopoly was not alone for long. In Britain, Decca was founded, following the logic of anti-cyclical behavior, while the crisis was in full swing. For its American subsidiary the new company secured the services of A&R man Jack Kapp, who did not like being treated as a recipient of CBS handouts. Not only did he gradually bring over artists such as Guy Lombardo, Louis Armstrong and Bing Crosby from his former label Brunswick, he also, in conjunction with his British boss Sir Ted Lewis, developed an idea that would put an end to the industry’s woes. To the great surprise of RCA and CBS, this small, new competitor decided to sell its records for 35 cents instead of the usual 75. This radical policy of cutting the price by more than half was so successful for Decca that the two giants had no option but to follow suit. Consumers rewarded the music companies by buying the records they could now afford again in large quantities.
Shortly before World War II, sales in the American market had increased more than sevenfold to $44 million, and by 1947 turnover in America had grown to $224 million. The market diversified – Capitol (which specialized in country, and rhythm & blues), MGM (a subsidiary of motion picture studio MetroGoldwyn-Mayer) and Mercury (the subsidiary of a plastics manufacturer who wanted to use his pressing plant to capacity) sprang up alongside RCA, CBS and Decca – as did a whole host of small specialist labels. The music market stood its ground against the movies, radio and the new medium of television.
While the entertainment industry was still on hold in post-war Europe, the next technical revolution was already underway at CBS. At that time records had a standard diameter of 30 centimeters but a maximum playing time of only five minutes per side. Another disadvantage was that shellac, the material out of which they were made, was heavy and fragile. A certain Dr Peter Goldmark was particularly annoyed by this. The Austrian, who had emigrated to America, was an ardent lover of classical music and did not understand why he had to get up an average of 32 times to change sides or switch discs whenever he wanted to listen to a complete symphony. He wanted to discover a material that would allow narrower grooves to be cut in it and found this in 1948 in the form of the plastic known as vinylite.
Dr Goldmark, who was head of the CBS laboratory, developed a special motor suitable for lower playing speeds, designed a new pick-up arm, optimized the pick-up device (the stylus) and also, while he was about it, invented the condenser microphone in order to fully exploit the improved sound quality of his new vinyl disc. Dr Goldmark invented high fidelity almost single-handedly. A playing time of 45 minutes per record and a frequency range of 30 to 15,000Hz provided the consumer with a completely new sound experience and gifted the record industry its second boom. The long-playing record was born and with it the wonderful principle whereby providers of music recordings were able to sell customers ten or 12 songs by a performer even though they had originally only been after three or four specific numbers. The new technology also made the music business attractive once more for electronics firms. During the war, Siemens had already bought the Hanover-based company Deutsche Grammophon; in 1950 Philips entered the market with Phonogram and bought up American labels such as Mercury to go with it. In 1972 it merged all this with Siemens subsidiary Deutsche Grammophon and its pop label Polydor to form PolyGram, the world’s largest record company.
Previously this position had, for a long time, been held by Electric and Musical Industries Ltd – EMI for short – which had been formed out of the merger of the British arm of the Gramophone Company, controlled by Fred Gaisberg, and Columbia Phonograph, his former employer. As its name implies, EMI originally saw itself as a mixed enterprise. However, in 1954 it consolidated, selling its gramophone and radio manufacturing business to the consumer goods and weapons manufacturer Thorn, which acquired the rest of the company 25 years later. Decca, the wunderkind of the Depression, found a new home with Telefunken under the com posite name Teldec.
At CBS, the thinking was more vertical. Alongside television, radio and gramophone records there was also a musical instruments division (whose products included the legendary Fender guitars and Steinway grand pianos), a hi-fi division and a retail chain. In the mid-1960s it was almost impossible to spend more than a few dollars on music without contributing to CBS’s profits. At that time records still only accounted for 15 percent of group turnover; by 1972 it was half. This proportion was reduced again when CBS was swallowed up by Sony for $2 billion. Sony had previously failed in the video sector with its Beta system and in the audio sector with DAT (digital audio tape) due to its lack of influence over content – despite superior technology. Its purchase of CBS was designed to prevent this frustrating situation from happening again.
In actual fact, vertical integration only ever seemed to occur in the music industry when a technical innovation needed to be pushed through. Even in times of good sales and high profits, as in the 1920s, 60s, 70s and 90s, the industry never made a serious attempt to turn things around and actively bind the equipment sector and music distribution to it in order to control developments itself. It seemed that the music companies’ capacity for innovation was exhausted by their focus on content. Their artists and content acted as motors but the companies continued to be driven by technical innovations. Even where integrated thinking came easier (because content was also an important consideration), it was mostly third parties who took the initiative. As a motion picture company, Warner initially (from 1958) used its music arm to look after its subsidiary rights before developing it through the purchase of Atlantic and Elektra into the worldwide WEA group. And thanks to the introduction of vinyl (which meant that records could finally be sent safely through the mail), the German media group Bertelsmann embarked in 1956 on significant expansion by adding records to its book club business. It founded Ariola in 1958 and later, with a view to international expansion, bought Arista (1979), and finally the mighty RCA (1985).
PARADISE – DEFENDED BY AHMET AND NESUHI ERTEGUN
In 1986, when I joined Philips subsidiary PolyGram, none of the large record companies was truly its own master any more. But neither were they in the direct field of fire of their investors or owners. Their products supported overall corporate strategies and in that sense made a contribution beyond mere profit. Increasing consolidation, on the other hand, was a worry. Years of merger and acquisition activity had resulted in the creation of five international entities with the power to move the markets. With subsidiaries in all the important territories, thousands of employees, umpteen sub-labels and countless artists’ contracts, Bertelsmann Music Group, EMI, Sony, PolyGram (later Universal) and Warner created structures that, due to their sheer size, threatened to stifle creativity rather than foster it. Only strong personalities that were able to endow these systems with an identity and provide a sense of security could cushion the impact and structure things in such a way that neither artist nor employee suffered. These personalities included classic record company bosses such as Ahmet Ertegun, the founder of Atlantic, Clive Davis, who as CBS president and later head of Arista became the prototype of the talent scout and promoter, and Siggi Loch, who built up Warner Germany.
When Ahmet Ertegun set out from the New York Ritz in 1947 to discover the world of black or so-called “race music,” he was embarking on an undertaking of enormous consequence. His artists would have had to have given him their seat on the bus or else face arrest – as happened to Rosa Parks in Montgomery eight years later. Racial segregation had been enshrined in American law ever since the Supreme Court had established the “separate but equal” doctrine in 1894. Martin Luther King was still a simple minister at this time and the idea of peaceful protest against the American version of apartheid was only just starting to develop in the minds of a small number of individuals.
The young, spoiled son of the Turkish ambassador left the best hotel in the city and crossed 125th street into what was uncharted territory for white America. Harlem, however, was where the most exciting jazz clubs were, where rhythm & blues (R&B) was celebrated. Here Ahmet Ertegun heard more hot music than ever before. He came back time and time again, and decided to take the rest of America to Harlem with him. His plan was to record what he heard, press it and sell it to the white middle classes. Harlem would enter everyone’s living room. Ertegun had been brought up speaking four languages. He had received a polished private schooling in Switzerland, Paris, London and Washington, read Kierkegaard and drunk the finest wines. And ever since his brother Nesuhi had taken him to a concert by Duke Ellington and Cab Calloway in the London Palladium in 1932, he had also been a jazz fan. Together they were the proud owners of an impressive collection of 15,000 shellac 78s.
Ahmet Ertegun hadn’t a clue about how to realize his dream of setting up a record company until he ran into an old friend in New York. Having trained as a dentist, Herb Abramson promoted jazz concerts and also produced records for National Records. He transformed Ertegun from consumer to producer and infected him with the idea of launching their own label. The firm they founded was called Atlantic Records. Its strength lay in innovative production work coupled with fair treatment of artists. Most importantly for the day, this meant that Atlantic paid royalties – on time and in line with contract. This was by no means normal practice, even for large record companies such as Columbia or RCA, and it brought Ertegun a stream of artists who were happy to sign long-term contracts with him and who trusted him totally. “They love Ahmet,” explained producer Phil Spector later in Rolling Stonereal 1