AUDIO TECHNOLOGY INDUSTRY

AUDIO TECHNOLOGY INDUSTRY. In 1877, Thomas Alva Edison completed his experiments with recorded sound technology, or what would become popularly known as the phonograph. The inventor discovered that the sound vibrations of his voice were powerful enough to allow a stylus to cut a signal into a revolving sheet of tinfoil. Building upon Alexander Graham Bell's work with the telephone, Edison speculated that his "talking machine" would allow businessmen to record and preserve their conversations. Edison also believed that phonographs had significant commercial potential for entertainment, bringing great music within reach of every American. Edison's vision, which built upon the work of other inventors such as Leon Scott in Paris, paved the way for a recording industry that would earn lavish profits and alter music, popular culture, and leisure time in the twentieth century.

Edison, however, was not without competitors. Bell and Charles Tainter worked at the Volta laboratory to develop the gramophone, substituting wax for the tinfoil and using a needle to indent the sound waves. The Volta associates offered to join with Edison to exploit the phonograph commercially, but Edison refused, choosing to perfect his phonograph by having the revolving cylinder powered by an electric motor rather than the gramophone's hand crank. Nevertheless, Edison faced stiff competition, because his English patents on the phonograph lapsed in 1885.

Jesse Lippincott created the North American Phonograph Company in 1888 in order to sell Edison's phonograph and Bell's gramophone. Yet the anticipated business market failed to materialize due to the commercial dictating machines' poor sound reproduction quality. By 1891, only nineteen of Lippincott's original thirty-three franchises were still in operation, and matters worsened with the financial panic of 1893. But the entertainment potential of the talking machine was becoming increasingly evident.

The Popular Market

Popular audiences were fascinated by early sound reproduction, depositing nickels into coin-slot phonographs, which were often installed alongside kinescopes (peephole viewers) in public amusement arcades. Seeking to exploit this market, Edison contemplated a duplicating system in which a master music recording could be used to create multiple copies. Following the demise of the North American Phonograph Company, and spurred by the competition among the entrepreneur inventors Edison, Emile Berliner, and Elridge Johnson, record sales in the United States climbed from 500,000 in 1897 to almost 3 million two years later.

The record and phonograph industry was dominated by the so-called big three: Edison's National Phonograph Company; the Victor Talking Machine Company, formed by Berliner and Johnson; and Columbia, under the direction of Edward Easton, a former congressional stenographer. The big three owed their dominant market shares to patent position and large-scale manufacturing. Each of the big three made extensive use of mass advertising; maintained a line of models ranging from small $10 record players to elaborate cabinet models that sold for as much as $500; developed a chain of exclusive dealers who were expected to follow company price and maintenance standards; signed artists such as the Italian tenor Enrico Caruso to promote record sales; and sought to develop international markets, especially in Europe. According to U.S. census figures, in 1914 the recorded sound industry produced sales in excess of $27 million.

The Rise of Jazz and Radio

While World War I led to temporary market dislocations, the postwar economy witnessed a surge in consumer spending, with Edison selling phonographic merchandise worth more than $22 million in 1920. However, the vast potential profits and expiration of patents lured many new enterprises to the industry. While there were 18 recorded sound companies in 1914, this number had climbed to 166 by 1918, with sales during this period rising from $27 million to $158 million. While profit margins declined, the industry continued to be dominated by the big three, which had signed most well-known classical musicians to exclusive contracts. This monopoly of talent forced new companies to seek untapped audiences. Accordingly, the recorded sound industry introduced the general public to African American blues and jazz, although white executives rather than black musicians such as Louis Armstrong enjoyed most of these growing profits. While Edison continued to enhance the quality of recorded sound with Diamond brand disks, his company's sales sagged as the inventor stubbornly clung to classical records and failed to capitalize on the popular taste for jazz.

During the 1920s, the recorded music industry faced a new challenge: radio. The talking machine businesses initially perceived radio as a competing technology that might replace the phonograph in the American home. This potential conflict was resolved by the Western Electric scientists Joseph Maxfield and H. Harrison's development of electrical recording, making it possible for the phonograph companies to produce high quality radio sets. Rather than destructive competition, radio and the talking machine established a symbiotic relationship. Following a sales slump in 1924–1925, the recorded sound industry rebounded, taking advantage of new markets in talking films, which electrical sound reproduction had made possible.

As a pioneer in developing the talking picture, Warner Brothers acquired musical rights and record companies, such as Brunswick Records in 1930, increasing its capitalization from $10 million in 1927 to $230 million in 1930. Radio Corporation of America (RCA), led by David Sarnoff, moved into film production, forming Radio-Keith-Orpheum (RKO) in 1928. This followed its 1919 takeover of the Victor Company, the leading member of the big three. The new company was referred to as RCA Victor, a manufacturer of radio sets, radio-phonograph combination sets, and records. Columbia responded to this merger by purchasing a small radio network in 1927, obtaining air time to promote its records. This new company was called the Columbia Phonograph Broadcasting System (later CBS).

The Industry during the Depression

While the film industry was doing well in the 1925–1929 period, the recorded sound industry remained sluggish, with yearly sales of talking machines staying in the $70 million range. The electronic phonograph players were also expensive, selling for nearly $400 a set, the equivalent of a Ford Model T. And the depression had a devastating impact on the industry. On 2 November 1929, Thomas A. Edison, Incorporated, ceased manufacturing recorded sound products. In 1930, industry recording and recording machine sales fell to $46 million. The following year, sales figures slumped to $17 million, while factories and recording studios often stood vacant.

The depressed industry attracted foreign investors looking for bargains, such as England's Ted Lewis, who established an American subsidiary of Decca records in 1934. Decca produced cheaper popular records destined for the nation's jukeboxes, which contributed more than half the nation's record sales by the end of the 1930s. The radio industry weathered the depression by providing a psychological sense of comfort for troubled Americans, with a unit in more than 60 percent of homes. RCA, with the financial support of General Electric and Westinghouse, formed the National Broadcasting Company (NBC). To provide radio programming, these media conglomerates increasingly turned to prerecorded sound. Thus, the record industry rose out of the depression on the coattails of radio, which promoted its recordings. By 1938, record sales had climbed to 33 million, dominated by RCA Victor, Decca, and Columbia/ARC (American Recording Corporation). The process of consolidation in the entertainment industry was accelerated by the depression. The interlocking system of record production, filmmaking, and radio broadcasting helped foster a popular musical form, swing, in the 1930s, which provided commercial product for the media empires.

An Era of Changing Technology

World War II contributed to the pace of technological change in American life, including the recording industry, which introduced magnetic tape recording, the vinyl microgroove record, and the stereophonic reproduction of sound, in addition to the extended play or LP (for long-playing) during the 1930s. The new technology appealed to audiophiles, reflecting postwar society's fascination with technological innovation. In addition, the development of solid-state electronics and transistors brought smaller and cheaper record players within range of the growing teen market.

Technology and the youth culture combined to produce a revolutionary new music form: rock and roll. Inexpensive magnet recording made it possible for independent record labels to market the new rock music as well as specialty fields—Folkways and Vanguard Records for folk music, and Atlantic Records for rhythm and blues. Independent record labels captured American musical roots in folk, blues, and country music, while innovations in the sound studio allowed for greater collaboration between artists and engineers with the synthesizer and electronic keyboard. By 1958, the big four companies—Columbia, RCA Victor, Decca, and Capitol accounted for only 36 percent of hits on the Billboard chart of best-selling records.

Initially reluctant to embrace rock music, the major labels eventually recognized the market potential of the youth culture. The record industry in America during the 1960s was, indeed, a lucrative business, as sales reached more than $1 billion by decade's end. This market was once again dominated by major companies—by 1967, Columbia (renamed CBS Records), RCA, and Capitol accounted for market shares of 12 to 13 percent each. During the 1960s and 1970s, media conglomerates such as CBS, Warner Brothers, RCA, Capitol-EAAI, Poly Gram, and MCA (Music Corporation of America) controlled the recorded sound industry. By 1979, the annual sales of audio products in the United States totaled slightly more than $4 billion.

While the conglomerates were in an excellent position to promote their music through such important venues as Music Television (MTV), the introduction of digital sound recording technology in the 1980s made Japanese and European companies predominant in the industry. While Philips negotiated an agreement with MCA to jointly introduce its laser vision system of video-discs, in 1988 the Sony Corporation purchased CBS Records for $2 billion. In 1990, Matsushita paid $6.59 billion for MCA. In regard to market share, Sony, Matsushita, and Philips were the modern-day equivalent of the big three. Digital technology increased corporate sales, but tensions developed between record companies and artists not to mention consumers seeking to download free music from such Web sites as Napster. Digital technology, the compact disc, the computer, and the CD-ROM replaced Edison's phonograph. Nevertheless, much of Edison's dream regarding commercial profits for the recording industry, as well as changes in the leisure habits of Americans, had been realized.