EPILOGUE

It took Kirchstein over twenty years to divest of his equipment, inventory, master tape material, and he still is in the process today of relinquishing control of Cuca. He began his retreat from the business by selling his studio equipment to Boynton Studios, Incorporated of Morris, New York in 1973. For 6,000 dollars, Kirchstein unloaded his microphones, console, equalizer, amplifiers, Presto lathe, tape decks, turntables, and speakers, the market values of which totaled over 7,0000 dollars.^[1*]

As indicated earlier, the return polices of the distributors had left Kirchstein with a warehouse stacked with over one million records. In order to rid himself of the records as well as to recoup at least a portion of lost profits on the unsold inventory, Kirchstein donated the entire collection to the federal penal system as a tax write-off. Another reason for the donation, rather than an attempt to sell some of the inventory through discount distributors or a sale through his mail-order list, was he did not want to dump over a million records onto the market. This would have hurt the reputation of the artists and the Cuca label. In the record market, a huge supply of discounted material indicated that the records were distressed merchandise; nobody wanted to purchase the music.^[2*]

Later, Kirchstein unloaded more records, masters, and even some reproduction rights. Kirchstein had purchased his master-making equipment from the defunct Phau label and with the equipment, he received the masters and the rights to all Phau material. Although he had once planned to reissue some of Phau's music recorded during the 1940's, in 1993 Kirchstein realized he would be unable to fulfill this task. He donated not only 402 Phau masters, but the reproduction rights to the University of Wisconsin-Madison.^[3*] He also gave 300 duplicate Cuca LP's from his personal collection and a series of recording session tapes, some of which contained music never released on vinyl, to the Mills Music Library archives at UW-Madison.^[4*]

Kirchstein did, however, retain the original master tapes from the recording sessions conducted at the Cuca studios. When he closed the studio, he removed thousands of tapes and transferred them to his home's basement, where they remain in storage. For the past several years, Kirchstein has been in the process of transferring the analog master tapes to digital audio tape or DAT, which is a superior technology. Unlike analog tape, information on DAT can be transferred and copied repeatedly without ever losing quality.^[5*] Kirchstein had the ability, therefore, to re-release Cuca material on compact disc (CD) or lease/sell the CD-quality master tapes to other firms.

Kirchstein's retention of the Cuca masters indicated his unwillingness to completely sever his ties with the record company he operated for over 10 years. Though he worked for the University of Wisconsin as an engineer and electronic design consultant, he still continued to maintain activities connected to Cuca. Several authorized reissues of Cuca rock material appeared on European labels in the 1990's, including the White Label Reissue Series out of Holland which released three volumes of "Cuca: Rock From the Midwest" and Classics Records of Sweden which issued the "Cuca Records Rock 'n Roll Story." Kirchstein himself considered reissuing some Cuca music on compact disc, especially that of the old-time artists. However, he confronted a marketing problem. The distribution networks controlled by the major companies have prevented Kirchstein from tackling a reissue project because, with its low demand, they are unwilling to carry the old-time music.^[6*] The costs of privately manufacturing CD's also make the prospect of releasing a limited amount of low demand product daunting; again, technological advances in the music industry after Cuca stepped away from the business hurt independents and gave even more control to the majors. Developments during the 1970's and 1980's suggested that Kirchstein's decision to close Cuca was a wise one.

Although the music market experienced minor fluctuations from the end of World War II through the mid-1970's, generally sales steadily climbed upward. That trend ended when, in 1979, the market experienced its first true crash since the Depression. Record sales fell 11 percent in 1979 alone.^[7*] This decline continued for the next several years, causing a decrease in the number of new recordings from 4 million in 1978 to 2 million in 1982.^[8*] The primary explanation offered for the slump, besides the cassette, was the style of music being pushed by the majors who now controlled the vast majority of the market.^[9*] The emphases on disco music as well as on superstars' releases at the expense of other genres and new artists took their toll on the music industry. Firms were unprepared for the public's reaction; customers quickly tired of the homogenized music selection and discontinued buying records and tapes in vast quantities.

The majors' reaction to this crisis was one of further conglomeration and yet another restructuring cycle. Companies attempted maintain profits by slashing costs through employee lay-offs. For example, between 1980 and 1986, CBS cut 7,000 employees from its payroll.^[10*] Other companies cut their artist rosters and contracts, releasing 50 percent fewer artists than before the industry slump and cutting new releases industry-wide from 4,170 in 1978 to 2,170 in 1984.^[11*] Many of the international conglomerates also shut down extraneous branch offices. Some of the stronger independents which had survived the oil and distribution crises of the early 1970's began to fail; both Capricorn Records of Georgia and RSO Records, which had released the best-selling soundtracks to "Saturday Night Fever" and "Grease" during the late 1970's, went out of business.^[12*] RCA took over A&M Records and Artista, CBS swallowed Chrysalis, and Casablanca Records went to Polygram.^[13*]

Distribution systems were further altered and fell even more under control of the major firms. Distribution companies owned by the majors had previously guaranteed 100 percent returns in order to attract retail customers. Because of the slump, these firms felt they could no longer afford such guarantees. Majors now controlled the distribution systems so they began charging percentages against returned merchandise from stores.^[14*] This meant that stores ordering merchandise from the distribution companies, most owned by major record labels, were increasingly wary about ordering records issued by an independent label which distributed through the majors' distribution networks. The unknown artists' releases on these labels did not guarantee sales and therefore record stores stood a chance at losing profit by stocking independent merchandise.

The new return policy also hurt the artists on the independent labels. The policy reduced artist income and complicated the royalty payment procedure, making indies even less attractive to aspiring musicians.^[15*] The records returned to the majors were often scrapped and recycled or sold as cutouts which gave the artists small to no royalty payments.^[16*]

By 1982, six companies controlled 90 percent of the record distribution system in the United States.^[17*] Not only did they control the distribution of major and independent releases, but their staffs also decided what types of music should be recorded and promoted, putting musical innovation by upcoming artists at jeopardy. History has demonstrated that major labels with institutionalized bureaucracies having a close eye on their bottom lines have little incentive to experiment with new musical genres. Instead, the industry shored up its control over the recording process by propagating new technology and promotional devices which further undermined independent competition.

Beginning in the early 1980's, the industry began a sales upswing, a result of revolutions in both new technology and marketing. The introduction and phenomenal success of the CD created by Sony and Phillips caused majors to raise revenues. Record companies charged more for the new music format which helped increase industry earnings steadily from 1983 onward. The CD also made the sale of vinyl LP's almost, but not completely, obsolete. The quick acceptance by the public for this new technology was obvious; as early as 1986 CD's almost matched the revenue earned by LP's, 930 million dollars to 983 million dollars respectively.^[18*] In 1987 the sales for LP's and CD's were equal and by 1989 CD's sold 207.2 million to LP's 34.6 million.^[19*]

Even more important to explaining the industry rebound and the continuing major control during the 1980's to the present was the introduction and popularity of television satellite communication technology. Warner Communications and the American Express Company took advantage of the new entertainment medium and launched Music Television (MTV) in August of 1981.^[20*] It was MTV which helped pull the depressed industry out of its slump. In two short years, MTV expanded from 2.5 million cable customers to 17 million. By 1983, MTV was "unquestionably the most effective way for a record to get national exposure."^[21*]

Independent labels did not, however, welcome the new promotional format because the costs of producing a music video were prohibitive. In 1983, the average cost of making a video was between 35 and 45 thousand dollars (although some videos, like Michael Jackson's "Beat It," cost up to 150,000 dollars to produce^[22*] ), the entire annual promotion budget for some small labels. Also, independents lacked the corporate media connections the majors had at their disposal. Majors like Warner Brothers not only owned recording facilities, record/CD manufacturers, distribution systems, and retail outlets, but also ran film studios which had the equipment and staff necessary to film complex music videos. Majors also were able to use their connections to Hollywood to push their artists and albums by exposing the music not only on video, but in major motion picture releases. Videos on MTV exposed both music and films to the public, promoting two products at once for the media conglomerates.^[23*]

Another promotional activity continued to challenge the efforts of small firms. Payola, the practice of promoting record releases to radio programmers, remained a problem for the industry, especially for the independents still attempting to compete during the 1970's and 1980's. An informal group of independent promoters called "The Network" formed in 1978 and became the powerful new form of institutionalized payola throughout the 1980's.^[24*] The Network used similar tactics as in the past, like bribing radio program directors with cash, drugs, and expensive gifts. Majors paid about 30 percent of their profit to the independent promoters to cover payola costs, as well as other legitimate promotional activities. However, the Network's true power lay in their ability to prevent a song's exposure over the airwaves and to curtail independent labels' access to the potential of a hit record.^[25*] This successful control of the airwaves also drove independents out of business, solidifying the cycle of an increasing market share by the majors.

From the late 1970's through to the present, majors also continued to co-opt new musical trends initially developed on independent labels. Just as majors during the 1950's took black rhythm and blues songs recorded on independent labels and developed their own white artist versions, majors took new genres like punk rock and "grunge," signing groups previously contracted with independents and the artists' commercially palatable imitators. For example, SubPop Records of Seattle, Washington was the first label to gain commercial success with grunge rockers like Nirvana. Soon, majors saw the commercial viability and popularity of the new, noisy rock style and signed a host of Nirvana imitators to their corporate labels. Even SubPop, with its enormous commercial success, fell into a non-independent status with its distribution merger with Geffen Records in 1991. (Geffen was absorbed by MCA in 1990,^[26*] which itself became part of another international conglomerate the same year when Matsushita purchased both MCA and Motown for 6.6 billion dollars.^[27*] )

The result of the new promotion techniques, technology, and co-opting of musical innovation was, by 1991, six majors controlled an unbelievable 93 percent of all record sales. At the same time, the market shares of the independents dropped and even more of the remaining indies were taken over.^[28*] The difference between the new conglomeration in the 1990's from that of previous years was now only one major remained a U.S.-owned firm: WEA, a division of Time-Warner which included the Warner Brothers, Elektra, and Atlantic labels. EMI of Britain owned Capitol, Chrysalis, IRS, and Rhino; Sony of Japan bought CBS and renamed it Sony; Phillips Corporation from the Netherlands owned Polygram, which included the Polydor, Mercury, Decca, A&M, and Island labels (the two former labels having recently been independents); and Germany's Bertelsmann publishing corporation (BMG) bought RCA Records and its subsidiaries.^[29*]

Although the major conglomerates now control almost the entire market, independents do still continue to exist and release new forms of non-commercially successful music and their role in the industry continues to be a vital one. Indies provide studio and label services to musicians who do not have economic or geographical access to major studios and labels. They also give these musicians an opportunity to expand their audiences with sales of singles or albums, often privately pressed with the bands' own funds, at concerts and local record stores not part of national chains.

The outlook for new independents in the 1990's is, however, grim. It is estimated that the average life-span for an independent label is two years.^[30*] Independents also continue to experience similar problems as they have throughout history, some sounding eerily reminiscent of Cuca's dilemmas. Posh Boy Records of California, a single-owner label which specialized in west coast punk rock music during the 1980's, experienced a similar distribution problem, exacerbated by pressing plant credit woes, to that of Cuca. Its prime distributor, Sounds Good, declared bankruptcy, leaving Posh Boy without a way to sell records effectively. By the time Sounds Good liquidated its assets in 1987, all other local distributors had been bought out by Sony and Virgin Records. As a result, its owner was forced to turn to expensive and time-consuming custom orders and private distribution, limiting the proliferation of his product.^[31*]

It can be surmised that a host of other hopeful new firms will open each year, only to face the same obstacles as Cuca and a legion of other labels have encountered throughout recording history. The structure of the music industry is such that failure is almost inevitable. However, the continuing efforts by music enthusiasts who offer record label services to artists makes the existence of indies, and their histories, valuable to audiences seeking to expand their consumption of new music and culture.