Part 16. The Birth of Music — Pricing Sound, from Performance to Records

The Genealogy of Payment Habits — A Historical Hint Book for New-Content Business Models Volume 2 · Part 16

Sound Could Not Originally Be Owned

A painting can hang on a wall. A book can sit on a shelf. But sound? It disappears when the performance ends. Just as a game began only after a coin was inserted, music existed only while it was being performed.

Until 1877, there was only one way to pay for music: go to a performance hall. The listener had to be wherever the musician was. Music’s business model was fundamentally bound to time and place.

This constraint created the music industry’s first payment habit-space: going to a performance and buying an admission ticket. Across the three-hundred-year history of music payment habits, from eighteenth-century aristocratic patronage to the present, the greatest turning point came when the phonograph shattered this space.

Aristocratic Patronage — The First Music Business Model

In eighteenth-century Europe, musicians were usually attached to churches or aristocratic households. Johann Sebastian Bach (1685–1750) worked as Kapellmeister at the court of Köthen and spent twenty-seven years as cantor at St. Thomas Church in Leipzig. His salary came from an employer—a church or noble family. The person enjoying the music and the person paying for it were separate.

Bach’s annual salary in Leipzig was about 700 thalers, three to four times that of a skilled artisan. Obligations accompanied it: he had to deliver more than fifty pieces of music each year for church services and city events. In payment terms, it resembled a modern exclusive contract. The employer held exclusive rights to the work, while the creator received a stable salary.

Franz Joseph Haydn (1732–1809) is another model of this structure. He was employed for thirty years by the Hungarian Esterházy princely family. The terms were specific: conduct two orchestral performances each week and produce operas every year. Haydn left 104 symphonies, many written during this period of employment. Stable employment made large-scale creation possible.

This was the patron system. In exchange for supporting a musician, an aristocrat enjoyed that musician’s work exclusively in a private salon. As a payment structure, it resembled a subscription: the noble contracted the musician annually and received music services whenever needed.

Wolfgang Amadeus Mozart (1756–1791) was the first musician to rebel against this system. In 1781, he resigned from his post at the court of the Archbishop of Salzburg, moved to Vienna, and began living as an independent musician. For his first two years, Mozart gave piano lessons to aristocratic children. The monthly fee was six ducats per student. In years when income from aristocratic salon performances was included, his annual earnings reached roughly 3,000 gulden—more than four times Bach’s church salary.

Independence, however, meant unstable income. Mozart’s earnings became irregular after 1784, and his debts rose sharply. Without a patron there was no performance; without a performance there was no income. Mozart died from illness at thirty-five. His financial hardship in his final years arose not only from an extravagant lifestyle, but from a structure with no stable source of income.

Performance Tours and the Star System — The Prototype of Fandom Payment

The performance system began changing in the early nineteenth century. Public concert halls appeared outside aristocratic salons, and anyone could buy a ticket. Stars emerged with this change.

Niccolò Paganini (1782–1840) was a violinist who performed in public concert halls rather than aristocratic courts. His technique was legendary for the era, and he toured throughout Europe. Ticket prices were three to five times those of ordinary concerts. Even so, every seat sold out.

Records show the scale of Paganini’s earnings. During his 1831–1834 British tour, he earned more than £200 per performance. An ordinary worker’s annual income at the time was £20–30, so a single performance produced roughly ten years of a worker’s pay. Contemporary reports estimate that his total revenue from the three-year tour reached about £100,000.

What Paganini created was not merely a concert ticket. It was the habit of paying for a star: “I will pay more to see this person perform.” This habit became the prototype of the fandom economy that later extended through Elvis Presley, the Beatles, and BTS.

Franz Liszt (1811–1886) took the model one step further. From 1839 to 1847, he toured Europe and gave more than a thousand performances. During this period, Liszt established the solo recital: one performer filling the stage without other musicians. Until then, concerts usually featured several performers. Liszt believed he alone could sustain an entire program.

Accounts survive of female fans collecting gloves and cigar butts Liszt had used. The press called the phenomenon “Lisztomania.” The prototype of a fan culture that assigns high value to a star’s possessions emerged in this period.

P. T. Barnum (Phineas Taylor Barnum, 1810–1891) demonstrated another model of performance success. Barnum promoted the 1850–1852 American tour of Jenny Lind (1820–1887), a soprano known as the “Swedish Nightingale.” Barnum took in more than $500,000 from the tour. A structure in which the promoter received a larger share than the artist foreshadowed later revenue-sharing arrangements between labels and musicians.

Liszt earned money not only from concerts but also by publishing sheet music. Some people bought the score and played it themselves, while others went to the hall to watch Liszt perform. Two payment spaces coexisted.

This resembles K-pop’s dual album-and-concert structure. Buying music as a recorded object and going to a venue to see a star in person were separate payment habit-spaces.

Sheet-Music Publishing — The First Physical Commercialization of Music

Before recorded sound, there was already a way to sell music in physical form: sheet music.

Advances in printing during the seventeenth and eighteenth centuries made sheet-music publishing possible. Composers published and sold scores of their own works. Buyers could play that music at home. It was the first way to “own” music.

Liszt and Chopin earned substantial income from publishing. Frédéric Chopin’s (1810–1849) Piano Études, Op. 10, were published in 1833. Chopin arranged simultaneous publication in three countries: France through Schlesinger, Germany through Kistner, and Britain through Wessel. Because international copyright law was not unified, he could receive separate publishing fees from each country. One work generated revenue independently in three markets. This simultaneous-release strategy was a rare method of maximizing income at the time.

Chopin supported himself through performances and lessons for aristocrats in Parisian salons, but sheet-music sales were also important. Publishers distributed his études, nocturnes, and polonaises throughout Europe. Buyers could purchase the scores, play them directly, or learn them from a household music teacher.

As a payment structure, publishing was an interesting transfer: from “paying to attend a performance” to “paying to bring music home.” Sheet music was the first attempt to turn music into an object, but it had a limitation. Only people able to play an instrument could enjoy what they bought. A score meant nothing to someone who had never learned piano.

As pianos spread after the mid-nineteenth century, the sheet-music market expanded. Pianos entered middle-class homes, and teaching a daughter to play became a sign of cultivation. Sales connected to this piano-education market. Publishers released not only works by famous composers, but instructional collections and books of exercises.

Western-style sheet music first spread in Korea in the early 1900s during the period of the Japanese Residency-General. The Korean Music Association was established in the 1920s and 1930s, and collections of popular-song scores were sold in bookstores. The market formed about a century later than in the West.

Yet the sheet-music market was inherently limited to buyers who could perform. Something else was needed to make the entire public into customers. In 1877, Edison’s phonograph solved the problem.

The Phonograph — When Sound First Became an Object

In 1877, American inventor Thomas Edison (1847–1931) invented the phonograph, a machine that recorded sound on cylindrical records and played it back.

Consider what this changed. Before the phonograph, music was bound to time and place, and listeners had to be wherever the musician was. After the phonograph, music became an object that could be purchased, owned, and played at any time.

A payment habit transferred: from “buying a performance ticket” to “buying an object.” This was the music industry’s first great transformation.

Edison invented the phonograph but did not conceive of it as a music device. When the first commercial model launched in 1878, he tried to commercialize it through rentals at $20 a month. The primary customers were businesspeople. Its purpose was dictation—the role of a modern voice recorder. Selling recorded music came later.

The first commercial recording studio was built in New Jersey by Edison Records in 1894. An early recording session cost around $5 per hour. An ordinary worker earned about $1–1.50 a day, so recording itself demanded substantial investment. This cost structure was one reason the early recorded-music market centered on classical musicians and opera singers.

Failure Case: Edison vs. Berliner — The Loser of the Standards War

In 1887, German-born American inventor Emile Berliner (1851–1929) invented the flat disc. It was different from Edison’s cylinder: a flat plate rather than a tube. It became the prototype of today’s LP.

The two formats competed in the market: Edison’s cylinder versus Berliner’s flat disc.

Some judged the cylinder technically superior in sound quality. The flat disc, however, held a decisive advantage: mass production. Cylinders had to be recorded one by one, while one recorded disc could be used to create a mold and press tens of thousands of copies of the same performance.

That difference decided the contest. Victor Talking Machine, founded in 1901 and acquired by RCA in 1929 to become RCA Victor, adopted Berliner’s flat-disc method and made it the industry standard. Edison continued insisting on cylinders. In 1929, Edison’s record business closed.

Columbia Records followed a similar path. Columbia initially held on to cylinders and changed only after the market had moved toward flat discs. It survived, but lost market leadership during the time it lagged behind in the standards war.

The pattern is that technical superiority and the ability to establish a market standard are separate. Betamax losing to VHS and HD DVD losing to Blu-ray repeat the same pattern. Distribution and standardization—not technology alone—decided the winners.

LPs and Cassette Tapes — A Copyable Medium Shakes the Market

After Edison invented the phonograph, the music industry’s unit of payment changed rapidly. Early cylinders held one song or perhaps two or three. Payment was close to a per-song basis. As flat discs became common and technology advanced, the amount of music a record could hold increased.

In 1948, Columbia Records introduced the 33⅓ rpm long-playing record, capable of holding more than twenty-three minutes per side. The older 78 rpm record held only three to five minutes per side; the new format held more than twenty. It was called “long playing,” or LP. At launch, a ten-inch pop LP cost $2.85 and a twelve-inch classical LP $4.85. A 78 rpm single cost about 65 cents to one dollar, making an LP three to seven times more expensive.

The LP was more than a technical improvement. It created the concept of the album.

Sales shifted from fragmented individual songs to multiple pieces presented at once around a unified theme. The Beatles’ Rubber Soul in 1965, Revolver in 1966, and Sgt. Pepper’s Lonely Hearts Club Band in 1967 were designed as a single experience rather than a collection of unrelated tracks. Listeners purchased a musical journey intended to be heard in order from beginning to end.

In 1949, one year after the LP launched, RCA Victor countered Columbia with a small 45 rpm single. This “format war” continued for two years. The market eventually settled into coexistence: LPs for albums and 45 rpm records for singles. A dual structure solidified in which artists reached the public through singles, while fans paid more for albums.

As a unit of payment, the shift is significant: from “one song I like” to “the entire experience presented by the artist.” It resembles the game industry’s movement from brief arcade games to RPG packages lasting dozens of hours. Consumers paid more to buy a larger bundle.

LP ownership carried strong meaning. Buying a record meant possessing that music permanently. Like books on a shelf, a record collection displayed taste and cultivation. The albums a person owned expressed identity.

In Korea, Jigu Records, founded in 1948, and Oasis Records, founded in 1963, led the LP market. Lee Mi-ja’s “Camellia Lady” from 1964 is frequently mentioned in connection with the country’s all-time record-sales record. No official total survives, but contemporary reporting confirms that its sales were exceptional for the market of the time.

In 1963, the Dutch company Philips released the compact cassette, a smaller and more portable medium. Philips initially made its cassette patent available free of charge, choosing rapid standardization over patent revenue. The cassette quickly became an industry standard.

But the cassette differed from the LP in one decisive respect: it could be copied.

Recording an LP onto cassette was technically easy. Borrowing a friend’s album, taping it, and listening to the copy became common in the 1970s. In 1979, the British Phonographic Industry launched the “Home Taping Is Killing Music” campaign. Famous for its cassette icon shaped like a skull and crossbones, the campaign continued into the early 1980s.

Sony’s Walkman, launched in 1979, had a double effect on the cassette market. About 1.5 million units sold in its first year. Its spread increased total demand for tapes, which raised sales of legitimate cassette albums while also increasing personal copying. The spread of a free means of copying may, paradoxically, have enlarged the overall market.

Was home taping really killing music? The statistics are complicated. LP sales did decline, but cassette-album sales in the United States grew throughout the 1980s and surpassed LPs in the middle of the decade, according to the RIAA. Piracy did not fully replace purchases. Some listeners sampled an album on cassette, then bought the official LP if they liked it.

The phenomenon repeated in the MP3 and streaming eras: listening for free does not necessarily eliminate paid sales. Record companies failed to learn this pattern and repeated the same mistake during the digital transition of the 1990s.

Radio — The Paradox of Free Broadcast Increasing Record Sales

Radio emerged in the 1920s. KDKA, the first commercial radio station in the United States, opened in 1920. NBC followed in 1926 and CBS in 1927.

Record companies feared radio. The logic seemed simple: if people could hear music for free on radio, why would they buy records?

Their initial response was hardline. Major labels including Victor refused or restricted the supply of their records to radio stations during the 1920s. This position changed as evidence accumulated that sales actually rose after airplay. A cooperative structure between radio and records became established from the mid-1930s.

The outcome was the opposite of what labels feared. People heard songs on the radio, liked them, and went to buy the records. Radio became, in effect, a promotional channel for records. Labels began asking DJs to play their music and later even paid for airplay. This was the origin of payola: payment in exchange for broadcast exposure.

BBC Radio 1, launched in 1967, made the effect clear. After large-scale broadcasts of the Beatles and the Rolling Stones, the corresponding albums repeatedly showed visible sales jumps. Radio airplay became the strongest driver of record sales.

In Korea, Gyeongseong Broadcasting Station—the predecessor of today’s KBS Radio 1—opened in 1927. DJ programs became established in the 1960s, and radio drove record sales. Popular songs by Nam Jin and Na Hoon-a spreading nationwide through broadcasts are representative examples. Korea’s strong link between broadcast appearances and record sales formed during this period.

Radio posed the music industry’s first version of a lasting dilemma: does free distribution increase sales or reduce them? Radio increased them. The question returned in the streaming era, and record companies took another decade to rediscover the same answer.

The growth of the Radio Corporation of America (RCA) illustrates the paradox. RCA operated both radio broadcasting and records through RCA Victor. It played music on radio, airplay increased record sales, and the revenue returned to RCA Victor. This was the first model in which free distribution through radio and paid sales of records created synergy.

The Star System and Record Labels — The Artist’s Share

As the record industry grew, labels expanded their role. They discovered artists, produced albums, and managed distribution—and took most of the revenue in return.

Elvis Presley (1935–1977) clearly demonstrates this structure. Elvis first recorded in 1954 at Sun Records, founded in Memphis in 1952. Sun owner Sam Phillips transferred Elvis’s contract to RCA Victor in 1955 for $35,000. It was an unusually high sum at the time, but RCA Victor later earned more than $100 million through Elvis. A label secured contractual rights for far less than the artist’s value and monopolized long-term returns.

Artists typically received royalties of only 5–15 percent of record sales. The rest went to labels, distributors, and production-cost deductions. Even artists who sold many records found it difficult to become wealthy. Performance income paid the bills; records functioned more like marketing for concerts.

This structure later evolved into the “360 deal,” through which a label takes a share not only of record revenue but of all artist income, including performances, merchandise, and advertising contracts. Part 20 examines that change.

The contract between the Beatles and EMI subsidiary Parlophone Records is another model. When they signed in 1962, their royalty was about one penny: all four members together received one penny per record sold. A single cost six shillings, or seventy-two pence, so the Beatles’ share was about 1.4 percent. Renegotiation after reaching number one on the American Billboard chart in 1964 improved some terms, but throughout their career EMI’s share remained far greater than the band’s.

In Korea, Jigu Records monopolized exclusive contracts with major artists such as Lee Mi-ja and Nam Jin in the 1970s. Artist royalty rates are believed to have been about 2–5 percent, low even by global standards.

The label’s power lay in distribution infrastructure. Only major labels could supply records to stores nationwide, promote them to radio stations, and enter overseas markets. Artists therefore had little choice but to accept unfavorable terms. The label was “the manager of friction” and took most of the revenue in exchange.

The Early Formation of Korea’s Music Industry — Jigu Records and Oasis Records

Korea’s record industry formed in the 1950s and 1960s. After the war, Western music arrived with American military culture, and the Korean popular-music industry began to germinate.

Jigu Records, founded in 1948, and Oasis Records, founded in 1963, were the core distributors in Korea during the 1960s and 1970s. They played the roles in Korea that RCA and Columbia played globally: licensing foreign pop for domestic distribution and signing Korean artists to produce records.

Lee Mi-ja’s 1964 “Camellia Lady” was a representative hit of the Korean market. It was sold on vinyl and later released on cassette. Nam Jin’s “With My Beloved” was another major product of the Korean record market in the 1960s and 1970s.

Korea’s early market resembled the global structure but was far smaller. Artist-label relationships, links with radio, and distribution all followed the global model with a delay of fifteen to twenty years. Korea differed, however, in one respect.

That difference was its broadcasting environment. KBS and MBC dominated terrestrial broadcasting, creating an especially strong link between record sales and broadcast exposure. Broadcast appearances were the key to promoting an album, but opportunities were limited. This environment later laid the foundation for an agency-centered K-pop system. Only large agencies with access to broadcasters could turn new performers into stars, and this concentration solidified into the big-three system of SM Entertainment, JYP Entertainment, and YG Entertainment.

Concentration among Major Labels — Distribution Is Power

The record industry concentrated rapidly in the mid-twentieth century. Dozens of small and midsize labels still competed in the 1960s. By the 1990s, they had narrowed to the “Big Six,” and in the 2000s to the “Big Three.”

Universal Music originated in the American label MCA. After acquisition by the Canadian company Seagram, it bought the Dutch company PolyGram in 1998 and became the world’s largest record company. Sony Music entered the global market in earnest by acquiring CBS Records for $2 billion in 1988. Warner Music combined Atlantic, Elektra, and Warner Bros. Records.

The reason for this concentration was simple: distribution infrastructure. Supplying records to hundreds of thousands of stores around the world required enormous capital. Small labels had to depend on majors for distribution, and the moment they did, they had to surrender most of their revenue.

The principle that “the one who manages friction takes the revenue” operated here as well. Companies that solved distribution friction—the work of shipping physical records nationwide—dominated the industry.

Then, in the late 1990s, the internet removed that friction. The age in which physical distribution infrastructure formed the foundation of the business model ended. That shock is the subject of Part 16.

This Part’s Hints — Checkpoints for New-Content Planners

Checkpoint 1: Can your content be owned, or not?

Sound could not originally be owned. The phonograph made ownership possible, and that transfer changed the entire music business model. If your content is digital, can it be owned, or does it exist only as an experience? Making it ownable is the first choice in building a business model.

Checkpoint 2: Does free distribution increase sales or reduce them?

Radio first proved that free distribution could increase record sales. But the relationship does not always hold. Determining the conditions under which free distribution produces paid conversion remains one of the most important business-model design questions today. Which side does your content fall on?

Checkpoint 3: Who manages distribution?

Edison lost despite his technology. Major labels imposed unfavorable terms on artists, always justified by the same claim: “Without us, there is no way to sell.” What fee does the platform distributing your content demand now? Which friction does it solve to justify that fee?

The next part examines the moment this solid record industry encountered the shock of digital technology: the golden age created by CDs, followed by the cracks opened by MP3 and Napster. What music experienced first, games experienced ten years later.

Kim Dongeun WhtDrgon@MEJE.kr 2026