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August 30, 2013

Music Makers and Market Breakers

In a new book, Damon Phillips dives deep into the history of jazz to share often surprising lessons about how new markets rise and fall.

Topics: Marketing

This article originally appeared in Columbia Ideas at Work.

Why did you write this book, Shaping Jazz?

The initial question that set off the project was to understand why the biggest record companies in the late 1910s and early 1920s, the market leaders, often avoided producing certain styles of jazz. Despite the success of jazz, musically and financially, these firms started to pull away from it and produce a less successful type of jazz that was more symphonic.

On the face of it, that fails Strategy 101. It doesn’t make sense. You are the pioneer. You introduce a new product. The product is successful. You are supposed to then take one of many actions designed to take advantage of that success. But with jazz it was different and I really didn’t know why. Now, in the 1920s firms were dealing with a cultural market where jazz, because of both the way the music was played and the race of many jazz musicians, had a stigma attached to it and it wasn’t highly thought of by the era’s cultural elite. The stigma was especially acute for the large firms, who were better known for producing classical music. But why would firms care about this if they were making so much money?

I dug through archives, worked with colleagues and jazz collectors, culled print media from the period, and compiled data from the discography of the time — not just the songs, but which musicians played which instruments, where a song was recorded — which gave me close to one million data points to use in my quantitative analysis.

And what did you learn?

It turns out that the people who were running these major labels were also friends or business partners with a lot of the same people who were against the original form of jazz, which today would be recognized as New Orleans and Dixieland styles. As a consequence, the major labels ended up producing a lot of jazz that had no longevity. A great deal of the songs those major labels released in the early 1920s have been forgotten about in the history of jazz.

And in most cases, record companies were trying to define the market in a way that was consistent with what they were already good at. The big companies shifted to a more symphonic style of jazz in part because they were already good at producing classical music. They knew highly trained and talented classical musicians. You could put a sheet of music in front of these people and they’d just play. The big companies’ whole infrastructure and distribution was set up to replicate something close to what they were already capable of doing versus a style that customers might like more, but that record companies would find more difficult to produce. At the same time, it turns out that the decisions that those record companies made early on made it possible for someone like a Duke Ellington to become popular.

We rarely talk about these kinds of firm behaviors in a typical strategy course. And these things are timeless. You see it a lot today in cultural markets and technology markets. We haven’t studied them a lot and we don’t have a lot of answers as to why this happens. There has been some of this with rap music. Time Warner in the 1990s was associated with some gangster rap artists, and got a lot of pushback. There were even protests at stockholder meetings.

Part of the purpose of the book is to begin this discussion, to point out that these are normal ways that markets operate, the types of pressures that affect decisions.

Many of your almost one million data points were geographical in nature. What did that data reveal?

Like a lot of people, at first I didn’t appreciate how broad jazz was geographically so early on. Jazz was not just coming out of New York, Paris, New Orleans, Chicago, and London. A lot of the more influential music was coming from outside these cities.

The way it often worked then and still works now is that a piece of music comes out that is interesting and unique, and when it also comes from a place that is special or exotic the music gets more attention. Jazz played with a pan flute is going to attract a lot of attention, especially if it’s from Peru, and you can say, “Well, this is Peruvian jazz. Isn’t this way of playing pan flute jazz interesting?” A New York jazz musician is better off skipping the pan flute and playing an instrument closer to an established tradition in New York. The exoticism of the pan flute is lost when the musician is from New York versus Peru.

The big cities were relevant because musical ideas from other places went to those cities to become legitimated. They might not originate in New York, but New York is where they were validated. Today firms are much more aware of this dynamic and make more rationalized business decisions based on that.

Another thing I wasn’t expecting to find is that about 10 percent of jazz songs from the 1920s and 30s have a geographical reference in the song’s title or band’s name. My analysis showed that over time these represent a more popular set of jazz tunes of the era, and spread more broadly around the world, and in many cases are still remembered and played today, like “St. Louis Blues”, “Sweet Georgia Brown”, or “Dear Old Stockholm”.

Finally, I was really surprised to find that during the first 15 or 20 years of jazz recordings, more recordings came from Berlin than either Paris or London. At the time, the symphonic style of jazz that Germans most often recorded sold more than any other kind of jazz, and they produced a ton of it. In fact, the first school for jazz performance in the world was founded in Germany in 1927. Yet history does not have much to say about jazz in Berlin. Why? It turns out they produced too much of it and too narrow stylistically, because when that type of jazz went out of favor, Germany was no longer a relevant source. The cities and record companies that prospered more often produced a variety of jazz styles.

So Berlin’s jazz portfolio was not diversified enough?

That’s right. Now, the political upheaval in Germany that was developing did have something to do with Berlin’s fall from jazz favor, but I found that it doesn’t easily explain jazz’s current lack of association with Germany because it turns out that architecture, film and a lot of other cultural outputs from that period in Germany, the Weimar era, still flourished after the rise of Nazis.

If you mention this early German jazz there are people who will tell you, “Oh, but that’s not really jazz.” Well, maybe not as we define it today, but no one back then would have a problem calling it jazz. Also, everyone who played that symphonic style of jazz is now forgotten whether they were in Berlin or in New York. That’s why I see it as a diversification problem and not those other explanations.

The book’s cover illustration tells an interesting and significant story about how firms marketed jazz early on. Would you explain?

The top illustration on the cover is a promotional image for the first group recorded as a jazz group in April of 1917, the Original Dixieland Jass Band. (View cover illustration; GIF 132KB.) It is a caricature of a group of African American musicians. By today’s standards it’s a stereotypically offensive image, but it was not unusual for the time. The bottom image is a photograph of the actual Original Dixieland Jass Band. They are white.

I’m not pointing this out to say that those record companies were nefarious. This was, for better or worse, a record company’s attempt at explaining jazz to people who had never heard it. If you’re a first mover in a new market, to establish the market, you struggle with trying to define the market. In the case of jazz, this attempt at defining the market backfired because the association with African Americans got of a lot of conservative Anglo white people riled. That ended up influencing managerial decisions later on.

I also found it interesting because people who study rock-and-roll point out that you often saw the opposite happen as record companies tried to define that new genre. A group that was in fact African American would be depicted as white.

What other — and perhaps more successful — strategies did the recording companies use to actively influence the market for jazz?

Recording companies had control over various aspects of production. They would select musicians, for example: larger companies tended to start with musicians who had more technical training and could read music quite well. Smaller companies tended to get great improvisers.

When it came to marketing and advertising, it was not uncommon for groups to be given labels that would associate them with a place, even if the relationship was fabricated. The California Six could easily all hail from Brooklyn and have never even been to California. Record companies might set up a deal with a record company in a different city or a different country, and get access to their musicians, who might sell very well in the new company’s local market. Vice versa, the foreign musicians might do well in their local market because they are new and interesting, and that might balance out the different recordings a record company would offer. For example, a group whose sound the company knew was very different would not call that group “the Harlem Standard Bearers.” That would be a bad name for a group that had a really unique sound. Companies sometimes would even re-release music under a different group name. The record companies were trying to figure out how consumers would respond.

Jazz was a major musical innovation. What lessons does this story of jazz offer innovators?

The key lesson is how important it is to define the market early, as a company and, especially in the early years, keep at it. Everyone involved, from people running the business to investors are also trying to affect the understanding of what the market is, because the first successful case of the market defines the market.

When NetScape succeeded so hugely, it changed the way we understood what internet dot-com companies were to be. What is going to, in the long run, define green technology will be the first huge IPO in that market. That’s why there’s a lot of attention around it. There has to be something for people to grab onto, to understand, so they can then compare one type of company to another company, or one type of product to another type of product. If you don’t understand it, then the market won’t arise.

Damon J. Phillips is the James P. Gorman Professor of Business Strategy in the Management Division at Columbia Business School.

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