Music industry: how it works

by Joost Nusselder | Updated on:  May 3, 2022

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The music industry consists of the companies and individuals that make money by creating and selling music.

Music industry

Among the many individuals and organizations that operate within the industry are:

  • the musicians who compose and perform the music;
  • the companies and professionals who create and sell recorded music (e.g., music publishers, producers, recording studios, engineers, record labels, retail and online music stores, performance rights organizations);
  • those that present live music performances (booking agents, promoters, music venues, road crew);
  • professionals who assist musicians with their music careers (talent managers, artists and repertoire managers, business managers, entertainment lawyers);
  • those who broadcast music (satellite, internet, and broadcast radio);
  • journalists;
  • educators;
  • musical instrument manufacturers;
  • as well as many others.

The current music industry emerged around the middle of the 20th century, when records had supplanted sheet music as the largest player in the music business: in the commercial world, people began speaking of “the recording industry” as a loose synonym of “the music industry”.

Along with their numerous subsidiaries, a large majority of this market for recorded music is controlled by three major corporate labels: the French-owned Universal Music Group, the Japanese-owned Sony Music Entertainment, and the US-owned Warner Music Group.

Labels outside of these three major labels are referred to as independent labels.

The largest portion of the live music market is controlled by Live Nation, the largest promoter and music venue owner.

Live Nation is a former subsidiary of Clear Channel Communications, which is the largest owner of radio stations in the United States.

Creative Artists Agency is a large talent management and booking company. The music industry has been undergoing drastic changes since the advent of widespread digital distribution of music.

A conspicuous indicator of this is total music sales: since 2000, sales of recorded music have dropped off substantially while live music has increased in importance.

The largest music retailer in the world is now digital: Apple Inc.’s iTunes Store. The two largest companies in the industry are Universal Music Group (recording) and Sony/ATV Music Publishing (publisher).

Universal Music Group, Sony BMG, EMI Group (now a part of Universal Music Group (recording), and Sony/ATV Music Publishing (publisher)), and Warner Music Group were collectively known as the “Big Four” majors.

Labels outside of the Big Four were referred to as independent labels.

I'm Joost Nusselder, the founder of Neaera and a content marketer, dad, and love trying out new equipment with guitar at the heart of my passion, and together with my team, I've been creating in-depth blog articles since 2020 to help loyal readers with recording and guitar tips.

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