Four recording and distribution companies dominate the global music industry. Together, they distribute the artists of over two hundred record labels, supplying music wholesalers and retailers with about 80% of the U.S. market. They are: Universal Music and Video Group (UMVG), Warner Music Group (WMG), Sony/BMG Music Entertainment (Sony), and Electric and Musical Instruments (EMI).

On the other side of the fence are over 2,500 "indie" labels, distributed by around 100 independent record distributors and accounting for most of the remaining 20% of recorded music sales (over $2 billion per year). These figures, of course, do not include the thousands of new releases by artists not affiliated with any distributor but who just wanted to record and release their own music.

Despite the media assertion that the music business is experiencing a "depression," the reality is quite the reverse; the music business has experienced the most revenue growth in the past five years since its dawn in the 1950s. While critics focus on illegal internet services like Kazza hurting CD sales, they lose sight of the fact that music licensing, not CD sales, has been the heart and sole of music business profits since the 1980s. Ring-tones alone represented over 2.2 Billion dollars of new revenue in 2005 and movie/TV placement fees have reached record highs. (Example: in 1972 George Lucas licensed over 15 pop hits for the soundtrack to his film, American Graffiti for just under $10,000 In total. Today, the rights for just one pop song used for a few seconds would command a fee of about $50,000.)

It is salient to note that these days only a small part of music sales consists of CD's bought in stores. When you include everything from DVD players, iPods, cell-phones, clock-radios, and toys, in the US we own more music-playing devices than we do home appliances.

As such, the demand for use of music in advertisements, motion pictures, television, public spaces, greeting cards, novelties, toys and even new formats like magazine ads, websites, ring-tones, software and computer games creates an almost ubiquitous presents of music in our everyday environment.

For each of these uses (called a "performance" in music business parlance) fees are paid to owners of the both the recording and the underlying song. The two largest performing rights organizations, ASCAP and BMI, who collect the fees due songwriters and publishers for these uses have experienced consistent growth of about 8% per year and last year alone reflected record earnings of over 1.3 Billion dollars combined. The annual sale of music and delivery of music products exceeds the GNP of over 80 countries in the U.N.

As more and more avenues open up through new digital delivery services, like Satellite, and wireless "pod casting" of audio and video, the need for music product is also increasing exponentially. Music demand is greater now than it has ever been before, and this is great news for those investing in its development. Public demand is what creates the need for new talent. Labels need to sign and develop fresh, new acts to create the catalog for tomorrow's music licensing. New artists are therefore the lifeblood of the recording industry and essentially looked upon by labels as vital R&D.

Each year approximately 1000 new acts are singed to the four major record distributors or their affiliates, to deals of various sizes. In the indie strata the number is well above 5,000 signings a year.

Of these 1000 major labels half will be released to the public. Of the 500 released 50% will record a second album. Of that 250 about 125 will make a third album. Of the 125 that make a third album only about 10 will make a fourth album on the major label. The other 875 may go onto make very successful records in the independent world or continue to tour and have successful careers through merchandise or master licensing.

When major labels say that only 5% of the artists they sign "make money" this is the equation they are referring to. However, almost any artist who has made it to the point of even a second album has himself grossed in the hundreds of thousands through publishing, merchandise, touring, endorsements and satisfied their initial
 investors. In truth, the label itself has also seen millions in revenue even though they enjoy claiming otherwise.

So, in essence even if most major label signings don't result in creation of a super-star the dropped acts still generate ancillary interest enough to create mini-empires with myriad revenue streams. And these are considered the "failures." On the winning side of the formula you have groups like, U2, Rolling Stones, Madonna and other super-stars, who individually earn well into the 100s of millions year.

A music-industry consultant and advocate, Moses Avalon
mosesavalon.com is the author of numerous music industry
publications including "Confessions of a Record Producer" and
"Million Dollar Mistakes." As a producer and engineer, his work with
Grammy-winning recording artists has earned him five platinum records
and several Billboard and Ampex Golden Reel awards.