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Popular Music: Industry Portrait Where audiences meet musicians other pages in this Pop Music web welcome | industry portrait | competitors | indies suppliers | buyers | substitutes and new entrants royalties | music software | WNY music | Kazaa | The Bigger Picture links Lessig's Means of Control Economics / Markets || Technological / Architecture Political / Laws || Social Culture / Norms this page  What business are you in? | Definitions of these businesses Economic activity (census) NAICS 5122 Sound Recording Industries | NAICS 7111 Performing Arts Companies Analysis and decision making  learn more

For better or worse, the US government through the Commerce Department and its Census Bureau measures our economy. While there is certainly a vigorous exchange of goods and services that escapes its notice, the process of tax collection gives the government "official" statistics. Recognizing its limitations, we can still use these stats to compare industries and to observe trends over time.

The first question to ask: What industry are we talking about? How can we take something as amorphous and complex and dynamic as a trillion-dollar economy and make sense of it? How can we take something as ambiguous as pleasing sounds, treat them as property, and then control let alone measure it?

What business are you in?

North American Industry Classification System (NAICS)

NAICS is a taxonomy (systematic naming and classifying) that groups the US economy into 20 broad sectors.

All businesses, whether organizations or self-employed individuals, subject to Federal taxes must place themselves into NAICS categories. Their tax returns are then analyzed and aggregated to give this broad portrait. Line B of Schedule C refers you to the codes on page C-2, below left. Line C of Form 1065 references the same list.

NAICS Industry List - the 20 top-level sectors represented by two-digit numbers are further broken down to three-, four-, five-, and six-digit number codes. Each code number is linked to the definition of that industry title.

This system will soon be replaced by the similar North American Product Classification System (NAPCS) trying to coordinate information about the economies of Canada and Mexico along with the US.

The most recent census, done in 2003 of activity in 2002, will be available in late 2004. Meanwhile, the 1997 Economic Census is reported here.

Top-level NAICS categories

11 Agriculture, Forestry, Fishing and Hunting
21 Mining
22 Utilities
23 Construction
31 - 33 Manufacturing
42 Wholesale Trade
44 - 45 Retail Trade
48 - 49 Transportation and Warehousing
51 Information
32 Finance and Insurance
53 Real Estate and Rental and Leasing
54 Professional, Scientific, and Technical Services
55 Management of Companies and Enterprises
56 Administrative and Support and Waste Management and Remediation Services
61 Educational Services
62 Health Care and Social Assistance
71 Arts, Entertainment, and Recreation
72 Accommodation and Food Services
81 Other Services (except Public Administration)
92 Public Administration

Lower-level NAICS categories

The two in boldface above cover most of what we call the "music industry". Just to make sure, I searched for "music" and came up with four dozen six-digit categories. I put a diamondbehind all the two-digit top-level economic sectors above that have sectors involved in the music industry, listed below. All together, the economic impact is larger than it might appear from the more narrow core "music industry". Note that a couple of the six-digit numbers changed slightly from 1997 to 2002.

Definitions of these businesses

NAICS 512 Sound Recording

NAICS 51 - Information | Sector Description | Industries Covered | Product Lists

2002 NAICS Definitions: Sector 51 Information

The Information sector comprises establishments engaged in the following processes: (a) producing and distributing information and cultural products, (b) providing the means to transmit or distribute these products as well as data or communications, and (c) processing data.

512 Motion Picture and Sound Recording Industries

Industries in the Motion Picture and Sound Recording Industries subsector group establishments involved in the production and distribution of motion pictures and sound recordings. While producers and distributors of motion pictures and sound recordings issue works for sale as traditional publishers do, the processes are sufficiently different to warrant placing establishments engaged in these activities in a separate subsector. Production is typically a complex process that involves several distinct types of establishments that are engaged in activities, such as contracting with performers, creating the film or sound content, and providing technical postproduction services. Film distribution is often to exhibitors, such as theaters and broadcasters, rather than through the wholesale and retail distribution chain. When the product is in a mass-produced form, NAICS treats production and distribution as the major economic activity as it does in the Publishing Industries subsector, rather than as a subsidiary activity to the manufacture of such products.

5122 Sound Recording Industries

This industry group comprises establishments primarily engaged in producing and distributing musical recordings, in publishing music, or in providing sound recording and related services.

51221 Record Production

This industry comprises establishments primarily engaged in record production (e.g., tapes, CDs). These establishments contract with artists and arrange and finance the production of original master recordings. Establishments in this industry hold the copyright to the master recording and derive most of their revenues from the sales, leasing, and licensing of master recordings. Establishments in this industry do not have their own duplication or distribution capabilities.

51222 Integrated Record Production/Distribution

This industry comprises establishments primarily engaged in releasing, promoting, and distributing sound recordings. These establishments manufacture or arrange for the manufacture of recordings, such as audio tapes/cassettes and compact discs, and promote and distribute these products to wholesalers, retailers, or directly to the public. Establishments in this industry produce master recordings themselves, or obtain reproduction and distribution rights to master recordings produced by record production companies or other integrated record companies.

51223 Music Publishers

This industry comprises establishments primarily engaged in acquiring and registering copyrights for musical compositions in accordance with law and promoting and authorizing the use of these compositions in recordings, radio, television, motion pictures, live performances, print, or other media. Establishments in this industry represent the interests of the songwriter or other owners of musical compositions to produce revenues from the use of such works, generally through licensing agreements. These establishments may own the copyright or act as administrator of the music copyrights on behalf of copyright owners. Publishers of music books and sheet music are included in this industry.

51224 Sound Recording Studios

This industry comprises establishments primarily engaged in providing the facilities and technical expertise for sound recording in a studio. This industry includes establishments that provide audio production and postproduction services to produce master recordings. These establishments may provide audio services for film, television, and video productions.

What about the mass duplication and distribution of recorded products? This function, usually outsourced by the companies in Integrated Record Production/Distribution, is classified in the Manufacturing and Wholesale Trade industries. Note that these classifications cover atoms: CDs, cassettes, etc. They don't take into account bits: Napster, KaZaA, and individual file sharing.

What we know as the Big 5 record labels (and the indies) are classified in 51222 Integrated Record Production/Distribution.

Economic Activity

Now that we know whom we're talking about and what they do, we can look at what happened in one year. Because the US economy is complex and dynamic, the Census Bureau takes a snapshot once every five years. This information takes a couple of years to compile and distribute. Thus, the most recent complete snapshot comes from 1997. Over 2004, we saw the results of the 2002 Economic Census.

Census Form Resources (blank forms)

plus Bureau of Labor Statistics

NAICS 5122 Sound Recording Industries

sources, and symbols, and definitions

1997 Economic Census: Information Industries

2002 Economic Census: Information Industries

Now let's focus on the 285 and 446 establishments in 51222. They are commonly referred to as the "music labels" or "record labels".

How many establishments do these firms (companies) have?

Single Unit and Multiunit Firms: 1997

How much money do they bring in?

Receipts Size of Establishments of Firms: 1997

Receipts Size of Firms: 1997

How many employees do they have?

Employment Size of Establishments of Firms: 1997

Employment Size of Firms: 1997

How dominant are the market leaders?

Concentration by Largest Firms: 1997

Concentration by Largest Firms: 2002

Where does their income come from?

Major Sources of Receipts for the United States