Prediction Exercise – Music Industry

There’s a thought exercise that I like to do personally and now also when teaching entrepreneurship. I find it helpful to think through the past and to try to predict the future. Call it prediction practice.

Yes, I do think you can predict the future with general accuracy. Often (99%+ of the time) when I say that people express disbelief. But I’m not talking about predicting the future the way it’s normally described or done (think year-end predictions made by talking heads on TV and in magazines). I’m also not trying to predict who will be in next year’s World Series or the weather on this date two years from now. In this case I’m talking about looking at an industry and trying to see where it will be in the coming years or decades. In other words, to determine an industry you would choose to invest in (whether that means financial investments or investment of your time to build a career there).

Is it cheating to predict the future retroactively? Of course. The way to really do it is to invest accordingly and either reap the rewards or suffer the losses. But treat this prediction exercise as a way to learn how to apply broad second-order thinking elsewhere.

Let’s start with an easy one: the music industry.

Music has been around as long as there have been people. Longer if you count music made by animals. It’s safe to say that it’s never going away. So what happens when new technology encounters an eternal constant for humans?

Imagine That You Were Born in 1900

If you were born in 1900 you’d be a child when Enrico Caruso recorded these versions of “Vesti la Giubba” from the opera Pagliacci.

Enrico Caruso – Vesti la Giubbia, early 1900s

If you don’t know him, Caruso was one of the first international stars. His career coincided with the development of an early recording industry. His “Vesti la Giubba,” recordings from 1902, 1904, and 1909 combined are counted as the first million unit record sale in the US.

Around that time there were a few changes in the price of early music technology. The price of a phonograph (early record player) fell to $50 – $100 (over $1300 – $2600 in today’s 2018 dollars) and the price of a record fell to as low as $1 ($25 in 2018 dollars). These prices may seem high today with ad-supported streaming from multiple devices priced below that single purpose phonograph, but recorded music was not yet mass market. The thing to remember when looking back at that time is that it was the beginning of a dramatic change in how people consumed music.

Throughout all previous history there were more people than today (in terms of percentages) who performed music in public. Why? Before the recording industry developed, the way to hear music (that human eternal constant) was to make it yourself or listen to someone else live. (Yes, I’m not including the minimal influence from player pianos and music boxes.) When music had to be performed live, and also before travel (especially international travel) was easy and affordable, that meant that almost all of the performers were local. That means that a town could support more local musicians than today, when most music we listen to is prerecorded or broadly distributed via radio or streaming services. The live music vs recorded music mix started to change in the early 1900s.

First Recordings

When it came to opera, a genre developed centuries ago, what did performers do to be heard? Imagine performing in a large concert hall, which might have great acoustics, but which had no electronic amplification. Performers had to sing louder. That’s why the classic body type of an opera star, even today, is someone with good lung capacity. People can’t hear you in the back rows? Sing louder.

In the early years of the recording industry, even if you had a musical recording it could only be played on devices that were relatively rare and expensive. What’s more, the recording quality was terrible, as you probably heard in the Pagliacci recordings earlier. But it says something that when the choice was between poor recording and playback quality and not hearing any music (or hearing mediocre local musicians), people started to chose the professional music.

So at your early age, do you decide to focus you career in the music industry? Will recording technology improve? Will new methods of distribution arise? While you might not yet be able to tell the speed at which improvements will come

Caruso died in 1920. While he was one of the great opera tenors of all time, imagine if his singing career had peaked a generation earlier, before the development of the recording industry. We might have heard of him, but we would not know him as a star. Because of his popularity, which came from distribution of his recordings, he was also paid very well for live singing, earning $10,000 per night to sing for 12 nights in Havana in 1920 (that’s $124,000 a night in 2018 dollars). Doesn’t sound too off-base in light of what current stars are paid today. As much as his talent, it was technological development and the creation of the recording industry that made Caruso a star. A generation earlier, without the recording industry, his influence would have been more localized and of course, no one could have appreciated his voice today. He marks the start of the winner take all model that naturally emerged with the early recording industry.

Early Technology Is Improved

Maybe you need to hear more than just Caruso at age 20. You survive WWI, and depending on where you’re living either deal with prohibition or post-war reconstruction. Now it’s 1929 and you hear this recording.

Rudy Vallee – Makin’ Whoopee, 1929

Rudy Vallee was one of the early “crooners” — male singers who unlike Caruso, scandalously sung in a quieter, subtler, voice. Others you may know include Frank Sinatra, Mel Torme, Bing Crosby, Nat King Cole, and Bobby Darin. Crooning was the kind of voice that you’d sing with if you weren’t on stage performing, but were instead in the same room with the listener. This style naturally upset many older, conservative people in authority (a natural plus for the style’s popularization).

But if crooning is one of the ways people have always sung, why did it take time for this recorded singing style to emerge? Why even coin the crooner name for the singers? A big part of that change? The Ribbon microphone, invented in the 1920s.

The earlier popularized carbon button microphone, which was invented in 1878, didn’t enable this personal singing style. If you look at one you might mistake it for the receiver of an old telephone handset (which in essence it was).

However, the ribbon microphone design meant that subtler tonalities could be picked up. Loudness wasn’t needed as much. And when singers could vary their volume, they regained the flexibility of tone. Pair that with better records and record players and the style took off.

Another question for you. Now that you see the technological development of better microphones, recording, and music distribution, do you decide to invest in this industry? You might still not be able to predict how fast things will change, but do you think the music industry will be continue to grow beyond the rest of the economy?

Again, fast forward, you make it through the Great Depression and WWII. Recording quality continues to improve (just listen to some of the later crooners). How else can technology be applied to the music industry?

Technology Changes Musical Styles

Les Paul, who I luckily was able to hear play live at Iridium in New York, invented a ton of musical technology. His inventions included the neck-worn harmonica holder, over-dubbing, tape delay, echo, reverb, phase shifting, eight-track tapes, and the solid body electric guitar…

Now you find that rather than record with high accuracy that which you would have heard live, musicians and producers were able to change the music itself. New technology, such as the above, brought forth sounds that had never been heard before. This recording of “How High the Moon” took less Les Paul and Mary Ford an hour to produce, even though it required 24 takes. The sound was unlike anything people had heard before.

Les Paul and Mary Ford – How High the Moon, 1951

We’ll leave off all of the other musical style and distribution changes that Les Paul’s inventions enabled. Seeing all of this happen during the first half of your life, would you bet on continued growth in the music industry? Does growth seem inevitable?

Summary of Changes (1902 – 1951)

• Recording technology and distribution (records) shift music from produced live by local musicians to prerecorded by musicians elsewhere. Style had to fit within technological limitations.
• Improved microphones lead to prerecorded styles that reflected ways people have always made music. Radio added as a means of distribution.
• Sound engineering leads to entirely new musical styles.

I’m claiming that you can predict general growth. Not speed of growth (well, sometimes, but that will be a future post). Not precision in direction of development either. But I do claim that you can say whether a specific industry will be a good place to invest in the future (financially or in your career).

This piece is a work in progress that I will probably return to soon.