A long legal fight about the rights on the patents started and blocked the development in the United States, until the rights became public property in 1914.[1]

Meanwhile, the market in Europe was opened by dependances of the American companies, like the Deutsche Grammophon AG in Berlin and the London Gramophone Company (later HMV) by the American Gramophone Company, Odeon by Victor, or the Columbia Graphophone Company (later Electrical and Musical Industries (EMI)) by Columbia. But also new European corporations entered the scene, like the Polyphon-Musikwerke AG in Leipzig (1895) and the Carl-Lindström-AG (1904).[2]

In this first stage the competition was mainly faught on the hardware sector, since the production of technology and the production of sound carriers were united in the same companies. The recorded material only contributed to the selling of technology and concentrated on the style that showed best the advantages of the system. Nevertheless the development opened up a perspective of what could happen in future, the first organizations of composers and publishers were formed. In 1909 the copyright in the US was amended by the mechanical reproduction and playing, which was copied in the following years by the European legislations.[3]

With the rise of broadcasting in the twenties, the music industry had to cope with a new situation: the better quality of radio-broadcasting and the fact that the consumer could listen for free let the sells of recorded music decrease. In 1922 the shares of the music industry went down to 92 million US$, from 106 million US$ in 1921.[4] The solution for this problem was providing the radio stations with recordings of the own repertoire, collecting the license fees and using the medium as a tool for advertising - orienting the publicising policy on the mass radio market and focussing on target group segments (rhythm&blues, country music, popular music, etc.).

In the decades between the two World-Wars many recording companies were confiscated as hostile possession. So in 1917 the British "Deutsche Grammophon AG" in Berlin was given to the Polyphon company. As a countermove Polyphon was not allowed to use its name in Great Britain, so a new subsidiary company was founded under the name "Polydor" for foreign distributing, which still existed after the Second World War and was contributed by the owning "Deutsche Grammophon Gesellschaft" to the PolyGram group 1972.[5]

The World Economy Crisis in 1931 cleared the market, only few competitors were left after a process of reduction and concentration. The years of the Second World War also saw a decline in the production of entertainment, so that only the strongest companies survived. "The music world was dominated by four firms. [...] The recording industry at this time reflected the characteristics of most American industry: substantial oligopoly [...], vertical integration, routine production, and little innovativeness except in marginal aspects such as packaging." [6]

Second, the electromagnetic recording on tape was invented in 1935 and introduced in the American music industry in the forties.[7] Beside bearing a better sound quality and easy handling, it also opened up the possibility to mix and produce more-track-recordings.

Third, the invention of the cheap transistor radio flooded the market with new listeners and a 27 percent increase in the number of AM radio stations from 1955 to 1960. [8]

Fourth, the introduction of television let the advertising income from radio stations drop alarmingly (a 38 percent decline from 1948 to 1952), "and the majors abondoned network programming on radio and transferred it to TV."[9] The newly more autonomous radio stations had to re-orientate to be competitive in terms of advertising to the television. The solution was a focus on target-group-oriented programs and music, a decentralization and fragmentation process in the radio ownership, since the stations could be purchased cheaply by local entrepreneurs.

Consequence of this was a boom in independent and local music labels, which worked flexibly and focussed on local and special interest scenes. The four major labels in the US lost from 1955 to 1959 34 percent of their market shares (78 percent to 44), and another 18,5 percent until 1963.[10] New companies entered the market, some of them developing the status of a major label, like the film corporation Warner Brothers (started 1958). The development in Europe was similar to the USA, due to the war with a delay in time.

The major labels managed to get back into their position, the four-firm concentration ratio went from 25 up to 51 percent between 1962 and 1973.[11] They did this by purchasing smaller labels, adopting their flexible working structures and opening up own sublabels for special target groups.

The tight coupling in the production of music in the major labels was loosened to a system of independent working parts, which still form the general structure of today's record companies: one, producing the master tape; two, the manufacturing of the records; and three, promoting and selling them;[12] a fragmentation in the following administrative sections took place: Sales, Technology&Distribution, Business Affairs, A&R (Artist and Repertoire), Marketing&Promotion, Finances, and Personnel Division.[13]

The eighties saw the birth of the CD after the digitalization of music production (Philips and Sony 1983), the boom of music videos and MTV (a joint venture of Warner Communication, American Express, Communication Satellite Corporation and RCA 1981), the success of the Walkman (Sony 1979) and through that of the tape technology.[14] In the middle of the nineties multimedia productions opened the computer- and new media market for the music industry, and the Internet became a more and more important factor in worldwide economic development.

In 1998, the global music market was worth US$38,7 billion (+3% in comparison to 1997), with total unit sales at 4.1 billion.[15] Approximately 95% of the music market is shared by the following so called "major" labels:[16]

Federation of the Phonographic Industry (IFPI) reports an increase of 6% (2,4 billion units) from 1997 to 1998, while the other sound carriers (MC, LP, Single) equally lost around 10%.[19] The CD now represents 65% of all albums sold, up from just over 60% in 1997.[20]

The basic structure of today's music industry sees two sides, on the one hand the so called "majors", globally acting corporations that are characterized by concentration- and centralization processes, productintegration and productdiversification; and on the other hand the so called "indies", independent labels, which are operating close to the basis, on a small scale and locally. The key term "independent", describing the economic status, had to be modified since the seventies; today most of the indies have contracts about distribution with the majors and act as talent scouts and -developers.[21]

The biggest music market on a global scale were 1998 the United States with 34,1% of the worldwide music market shares. Japan follows with 16,9%, then the United Kingdom with 7,4%, Germany with 7,3% and France with 5,5%.[22] The biggest five markets hold about 70% of the overall market share, the next biggest markets are Brazil, Canada (less than 3%), then Spain, Australia, Italy (less than 2%).[23]

Information about the real financial matters is not easily given away by the record companies, but a archetypical segmentation of the expenses of a bought CD is structured as follows[24]: There are basically three sides that take part in the sharing of expenses: the artist, the record company and the record sellers.

Demographic figures show that younger consumers tend to be the most active buyers of music productions. In 1998, 24,9% of all recorded music was purchased by buyers younger than 20 years old. Record buyers age 20-24 accounted for 12,2%, while three age groups – 25-29, 30-34 and 35-39 – each represented approximately 11% of the market. The 40-44 group accounted for 8,3% of purchase, while the share of consumers age 45 and older raised to 18,1%. In the last years a trend towards an older purchasing demographic started. The proportion of the younger ages, once the mainstay of the market, is now more and more balanced by the older age groups.[25]

[part 2.2: the internet]