Music: Phonograph Boom

Seven years ago the U. S. phonograph and record industry was so sick its own backers almost gave it up for dead. Today, it is not only up and around again; it has fattened into one of the fastest growing businesses in the U. S., with an annual gross of some $36,000,000. Every disc-buying jitterbug knows that records have been booming, but why, and just how much, has been anybody’s guess. Last week in a figure-packed survey, FORTUNE put an end to guessing.

During the first quarter of the century records had their first boom. Disc-fans of that period paid the late Enrico Caruso alone some $3,000,000 in record royalties. What they paid for was a croaking shadow of Caruso’s ringing voice. But in the days of hand-cranked Victrolas, even shadows were marvels of scientific progress. When the radio arrived in the early 20s, Victor Talking Machine Co., with Caruso as its biggest name, was doing more than half the industry’s business to the tune of more than $50,000,000 annually. But by 1925 that figure had dwindled nearly 50%, and the heaps of records in Victor’s stockrooms had begun to gather dust. By 1932 Victor had passed from the hands of the bankers to RCA, where it became a horse’s thumb among RCA’s booming radio projects. Victor’s competitors did no better. The 1932 gross for the entire industry reached a scant $2,500,000.

But while the record manufacturers gloomed over their dwindling sales accounts, the engineers of Western Electric and the Bell Telephone Laboratories had been monkeying with electrical transcription and reproduction. By means of their new recording and amplifying gadgets the phonographic disc could, for the first time, catch a close approximation of actual sound, from the topmost squeaks of the piccolo to the profoundest groans of the bass tuba. Morose manufacturers adopted the new gadgets in the middle 20s. Electrical recording failed to set the industry on the road to recovery. But it did lay a firmer foundation for the Industry’s future growth. It remade a mechanical stunt into a musical instrument.

The real upswing came in 1934 when two things happened: 1) RCA began to remember and worry about its long dormant record business; 2) a brand new concern, Decca, entered the field with a sheaf of fresh ideas. Dapper, bespectacled Jack Kapp and his codirector, Edward R. Lewis, had long contended that what the country needed was a good 35¢ record (standard prices had previously ranged from 75¢ to $2). Signing up big names in the popular field (biggest: Crooner Bing Crosby—see p. 50), Decca put this contention to the test, and sales began to skyrocket. Today, the five-year-old Decca concern, with Crosby as its Caruso, stands second only to RCA Victor, with an estimated annual gross of $4,000,000.

Ninety-five per cent of its output consists of the 35¢ popular discs advocated by President Kapp, and Crooner Crosby sells about 2,000,000 of these a year, a post-Caruso record record.

Once the upswing had its initial bounce, other factors kept it moving. Most important of these was the popularity of the slot machine or “juke box” which retailed melody in small barrooms, lunch-counters and dance joints at 5¢ a shot. With an estimated consumption rate of more than 30,000,000 discs annually, the 300,000 juke boxes in the U. S. are today the record industry’s largest customer. Another boost, accounting for perhaps

25% of record sales in today’s popular field, came from the argumentative aficionados of swing, whose number mushroomed with the nation-wide vogue for hot jazz in 1935.

Today the juke boxes, the individual buyers of popular discs, and the swing fans together account for 88%-to-90% of all record sales. But, dollar for dollar, they contribute only 70% of the money spent on records in the U. S. The remaining 30% is spent by the collectors of classical records. The classic-collectors have grown slowly and steadily ever since high-fidelity recording began to catch the finer points of symphonic scoring. The industry today regards them as its most stable market. Most important distributor to this market is Manhattan’s 11-year-old Gramophone Shop, which deals almost exclusively in classical discs, has 50,000 active buyers, and claims to be the largest record retailer in the U. S.

Three companies manufacture the bulk of today’s records. Of these, Victor still holds first place with an annual output of 13,000,000 discs. The youthful Decca company, which expects to jump its annual production this year from 12,000,000 to

19,000,000 discs, stands second. Third, but just beginning to nudge Decca for second place, is the newly reorganized Columbia (now a subsidiary of Columbia Broadcasting System) which hopes to jump its output from last year’s 7,000,000 discs to 13,000,000.

Meanwhile the technique of recording continues to improve. Fussy cantata-collectors are demanding still less surface noise, solutions to their record & needle problems, still higher fidelity of reproduction. The phonograph, originally “perfected” in 1882 by Alexander Graham Bell, is still an imperfect instrument.