How Greedy Major Distributors And Their MAPS Agreement Killed The Music Industry

On January 15, 2009 Tommy Silverman said at a seminar, " in 2008 out of the 1,500 obscurity-breaking releases, 227 artists broke the “obscurity line” for the first time ever. Out of the 227 first-timers, 14 artists did it own their own; approximately 106 were signed to a major; the rest were signed to indies. Those left were not even breaking even on their music releases".

Over 15 years ago, all 6 majors at the time, CEMA, SONY, WEA, MCA, PGD, and BMG got together and agreed on MINIMUM ADVERTISED PRICE PROVISIONS (MAPS) on new release, front line and back catalog product, as a means to curtail piracy. The FTC took them to court (http://elr.lls.edu/issues/v21-issue3/elahi.pdf) because it was believed that this move was a direct violation of the Sherman Antitrust Act.

Distributors settled with the FTC by agreeing to postpone MAPs for seven years, but the FTC's findings had discovered long held suspicions of price gouging of consumers by the major conglomerates, only to pad profit margins. This caused a change in the infrastructure of the business model at that time. Companies became afraid that with such a move this would monopolize the infrastructure of the business, so larger wholesale distributors began to gobble up their smaller competition. Record labels began to merge. Radio broadcasting stations concerned of loss of ad revenue started to buy up radio stations by the hundreds. The only result of this MAPS agreement was that it didn't curtail piracy but actually encouraged it, and delayed the digital evolution in the industry.

Numerous "physical" distributors, jack robbers, one stops, and small specialty labels became afraid that this would cause them to lose business or go out of business altogether, so they began to merge in order to survive. In turn, independent radio stations also afraid of advertising revenue loss began to change formats and eventually joined large broadcasting networks like Beasley, ABC, Cox, Fox, Clear Channel, etc.., which changed their business model, because now the broadcasting companies would have the ability to dictate and control radio playlists nationally in a block group of stations owned by them. No longer would indie artists and companies be bale to just walk into a radio station and expect to have a sit down with a radio program director, now those decisions would be left up to independent "radio consultants'.

As the majors remained defiant to change their business model, more and more online digital companies began to spring up, Napster, LimeWire, Download.com, Bearshare, MP3.com, CDBaby, Itunes, Garage Band, Reverbnation, Amazon, and more recently Tunecore. This cut deeply into the revenue of the majors, and actually forced the former 6 majors to merge with one another because of profit losses.

They could have jumped on at the beginning of the digital revolution and struck deals with all these fledgling companies that have now reaped millions of dollars off the backs of artists, and now the majors have been forced to shut them down in court, but still work out agreements to allow them to operate as "pay" services.

It became apparently easier for independent record labels like Bell Mark, Tommy Boy, KOCH, TVT, and numerous others to operate freely of the broken major distribution system, by signing artists and small record labels to deals that were marginal at best, and then undercut the majors by lowering their prices on product, because they were not held to the MAPS provisions. It worked for a while until the age of digital ingenuity provided a means for artists and companies to produce, distribute, market and promote on the internet with very little cost, and slowly eroded the need to have a major distribute your product, although it is still a viable resource if you take care of your business first, and come to them with leverage on your side to negotiate the best possible deal.

Although cd's entered the pre-recorded market in the 80's, and became the primary medium for the delivery of pre-recorded music by the early 90's, cd prices have steadily increased. This paradoxical "trend" occurred despite increasing retail competition, and despite other factors that suggest decreasing prices, as in the digital revolution online.

So again trends can either be beneficial or hurt the business. If the major distributors had embraced the digital evolution instead of running from it, afraid that it would cut into their almighty profits", then the business would not be in a death roll like it is today. This is the direct result of them now willing to make deals with Limewire, Napster, and numerous other file sharing portals by shutting them down and allowing them to relaunch as "pay for" music services, and sign any garbage out here and be damned if they develop the artist, or even pay them. They are trying to play "catch up", and it's way too late in the game for that!!

By DJ Giovanni Nsane
Copyrights reserved 2010