Market failure: Punk economics, early and late

College Literature, Spring 2001 by Thompson, Stacy

The most thorough account of the early economic situation that birthed punk is Simon Frith's Sound Effects: Youth, Leisure, and the Politics of Rock `n' Roll (1981). The baby-boomer generation's capacity to consume begins to flower in the 70s, Frith writes, and large amounts of capital circulate through the rock industry, which produces the boomers' music of choice. This increase in capital results in a division of labor in the rock music industry and a consequent surge of not only professional musicians but specialized promoters, managers, publicists, distributors, producers, technicians, advertisers, etc. (1981, 137).As the expense of producing a rock album grows, the major record labels begin to dominate the industry by creating or purchasing the full range of the necessary means of rock production: they obtain their own manufacturing facilities; they establish their own distributors, which distribute primarily their products; they become major music publishers, purchasing the back catalogs of earlier music producers; and they invest in and give widespread distribution to the newly available technological processes for producing home sound systems as well as electrical instruments (141). By becoming vertically integrated and thereby expanding their control over the full range of the various branches of production, the major record labels can, through competition, drive smaller producers out of business or envelope them, which is exactly what they do. Frith found that "by the end of the 1970s . . . the majors in the USA (CBS, RCA, WEA, MCA, Polygram, Capitol) accounted for more than 90 percent of the record market in terms of both volume and sales; the 'independents' had a smaller share than at any time since the beginning of the 1950s" (138).

However, the majors' domination of the music market came at a price. According to Frith's argument, the Big Six never successfully manipulated, that is, rendered entirely predictable, rock consumers' tastes, and, consequently, they gradually developed an extremely expensive system of overproduction and promotion, whereby only about ten percent of all the records that they released earned any profit. That ten percent, however, in addition to the money made from investments in other areas of the music industry, could sustain the labels between hit records, because the massive promotion and distribution budgets paid off in the form of immense sales when albums succeeded. However, the high costs of overproduction and promotion ensured that only the majors controlled enough capital to be able to afford to lose money on ninety percent of the records that they released (1981, 148). Specifically, Frith notes that by "the end of the 70s the average `rock `n' roll album' cost between $70,000 and $100,000 in studio time, and any rock `sweetening' (adding strings [stringed instruments], for example) could add another $50,000 to the bill; promotion budgets began at around $150,000 and rose rapidly" (147).

Frith argues that, in reaction to the prohibitive costs of producing commercial music, frustrated musicians who felt shut out of record-producing rebelled and were responsible for an "explosion of independent rock musicmaking production" in the mid-70s (1981, 155). The result was punk rock, which became possible as the means of producing music became cheaper and access to them became more widely available. While the majors' costs of recording and promoting technologically sophisticated albums were rising, punks reverted to "front-room studios" and recorded their music relatively cheaply, using four-track tape recorders (156). Independent record labels emerged in England to release punk rock, and soon "independents sold enough to establish a viable 'alternative' record business, with its own network of studios, shops, clubs, [and] charts" (156). An "independent" label, for Frith, is one that does not have a distribution deal with the majors (156). In the US., however, the majors effectively absorbed punk, rendering it ineffective as an economic force, and hard on the heels of the majors' envelopment of American punk came their takeover of English punk as well. Ultimately, for Frith, punk must be understood as an "unsuccessful musicians' revolt" (84), because the "new sounds, disco and then punk, came from independents, and were, in their turn, standardized and co-opted into new record company divisions" (155).