And another, “oh so Edison” thing, perhaps the most crucial of all, is that while Victor
learned early from their music publishing colleagues that popular performers make for
good marketing instruments, and consequently hired stars like Enrico Caruso to record his
records and to use his name in the marketing campaigns, Edison scoffed at the practice.
By the way Caruso made over 5 million dollars from Victor recordings in his career, charging
as much as 4,000 dollars for a single song recording, plus 40 cents per record sold,
at the time when records were sold for 1 to 1 and a half dollars each. To put it in today’s
terms, that would be 58 million dollars in career earnings from recordings, getting about
100,000 dollars for a single song recording, plus 25-40 percent in sales royalties. You
think Victor would allow for such a deal if Caruso wasn’t making them some serious profits?
Edison, on the other hand, refused for a long time to as much as print the names of the
performers he recorded, even on the records themselves, insisting that it is the quality
of the sound and the composition that matters, not the performer. In one of his business
memos from 1912, Edison says something along the lines of: “ We do not care for the reputation
of the artists. It is not our intention to feature artists and sell the records by using
their names. Those that do, engage in promotional fakery. We intend to rely entirely upon the
tone and high quality of the voice.”
Wow. Told you. Such an Edison thing. “So how did that strategy work out for you Mr.
Edison?” “Well, not so good.” “You, don’t say.” By the late 1920s Edison controlled
only 2% of the industry he invented, and is the only one of the Big Three that had to
close its operations in 1929, and the Edison disc business was no more. But what a ride
the recording industry in general had until that point. In 1900, 4 million records were
sold. In 1909, 30 million. In 1920, 100 million. And then, the downturn. Not just for Edison,
but for others as well. Edison simply made the situation worst for himself with his attitude
and bad business decisions.
So to be fair, it wasn’t only Edison’s policies that spelled the end for the Edison
records and players. Though the Big Three - Edison, Columbia, and Victor - led the market
for a long time, by the early 1920s over 150 companies were making records and record players,
and were undercutting each other’s prices and affecting the market. Why so many record
companies? Because it was a pretty good business. Records cost about 20 cents to make, including
the newly legislated mechanical royalty payment to the publishers of the recorded songs, and
including the musicians on the recording. Unless you had a star performer, in which
case the math was different, as we saw with Caruso. But the sales were different too in
that case. The retailer took about 15 cents from the standard record price of a dollar
to dollar fifty. The rest was profits. Nice and clean and usually profitable, unless you
have a total flop of a song on your hands. So the competition grew, and grew, and grew,
and by the 1920s they started lowering the prices, down to 50 cents per record, competing
with each other for customers, and the profit margins shrunk, and the incrementally smaller
and smaller piece of the pie was available to each, and so the crisis begins to occur.
More importantly, though, radio entered the picture in the 1920s as well, and seriously
shook things up. Radio networks soon crisscrossed the nation, and advertising potential and
income became glaringly apparent. These new funds allowed the networks’ programming
to grow quickly, in diversity and quality, which in turn increased the numbers of listeners
greatly, taking them away from their record players and the records market.
It should be said at this point that at this time radio stations generally did not rely
on records for their programming. The shows were mostly live, with live performers providing
entertainment. Even when the records were used, they were not commercial records, but
the recordings of the programs made for radio, produced and used internally by the industry.
So radio and commercial records were, for the time, in direct competition with each
other for the audience, and radio was winning.
The recording industry countered with higher quality records and players, using electrical
recordings, which utilized microphones and newly developed tube technology amplifiers.
Being that radio sound quality was pretty low at the time, this strategy helped a bit
for a while, but when the Great Depression hit, most of the record companies were not
strong enough to weather the storm on their own, as records went from leisure to luxury
in just a few years. Most, simply folded, like Edison, but Victor and Columbia survived.
Not on their own, but survived nevertheless.
The Radio Corporation of America (or RCA) acquired Victor, and the Columbia Broadcasting
Company (or CBS) acquired Columbia. How predictable, isn’t it? That the medium, which expanded
the most and became the most powerful at the time, acquires the medium that was, because
of it, brought down to its knees. So radio both killed and saved the recording industry.
Poetic.