The 45 and LP were developed, in part, as a competition between Columbia Records and RCA Victor to replace the 78 rpm format that had been the default since its development around 1900. Made of brittle and noisy shellac — a compound consisting of secretions from Southeast-Asian beetles and actually containing ground up bits of insects — the 78 rpm format was ripe for replacement by the late 1940s. The term "album" actually originates with the, literally, "albums" (like photo albums) manufactured for multi-record 78 rpm releases. Since 78 rpm discs could only capture 3-4 minutes per side, albums were required for reproducing classical, jazz and other genres that typically featured longer performances.
In 1948, Columbia unveiled the 33-1/3 rpm, 12-inch record made of a new "vinylite" (vinyl) plastic that was much quieter and less prone to breakage than shellac. The new format was perfect for reproducing long musical performances, and even though no "album" was required to contain them, single LPs (Columbia copyrighted the term "LP", by the way) became known as "albums."
Not content to begin using this format for its huge back catalog, RCA Victor quickly resuscitated an abandoned project and released its own 7-inch, 45 rpm format in 1949. Originally, RCA's strategy was to tout its new format's superiority over Columbia's LP, viewing it as a replacement for rather than a complement to the 33-1/3 rpm record. To that end, RCA manufactured inexpensive 45 RPM players featuring a spindle that could hold many 45s, dropping each to the turntable for play as soon as the previous 45 was finished. Part of RCA's thinking was that the 45's sound reproduction was superior to the LP, and part was its unwillingness to cede the long-playing music market to Columbia, even though Columbia was willing to license its manufacturing process to any record company. (Columbia did not make music playback equipment.)
In the beginning, confusion about the competing formats was rampant among consumers, record companies, dealers, radio stations, and hardware manufacturers. By the early 1950s, it was clear that both the 45 and LP were here to stay, and playback equipment for consumers quickly adopted modifications for playing all three formats. The 78 format persisted well into the 1960s, but its fate was sealed by the sheer superiority of the new 45 and 33-1/3 rpm records. For awhile, RCA tried to position the 45 as the 33-1/3 rpm LP's equal for long-playing classical and jazz music by releasing box sets of 45s intended for use on their "spindle" player system. But by the end of the decade, even RCA had adopted the LP for certain musical genres and helped bring it to the Pop audience as well by releasing LPs for Elvis Presley and other big-name artists.
Also clear by the mid-1950s was that the 45 rpm format was king for satisfying consumers' craving for new songs, fed by the Top 40 radio format becoming standard in that industry. 45s were the first choice of DJs as well as consumers, and it's not an exaggeration to say that the entire Rock'n'Soul revolution was built on the back of the new 7-inch vinyl format.
Part of this was demographic: In the Post-war world, teenagers suddenly had the disposable income to snap up their favorite hits, and they did so with gusto. LPs sold well, but couldn't compete for sales in the emerging teen-driven Pop market.
The 45 remained king of music formats through the early-to-mid 1960s, when a few recording artists from the "Rock'n'Soul" world emerged with more than hits on their mind. Bob Dylan was one of the pop artists who made every moment count on their long-playing records, rather than quickly recording filler songs to accompany the one or two hits LPs typically contained. The Beatles were avid 45 nuts, but even so, they were so talented, had so many great ideas, and were such perfectionists that their early albums contained little fluff.
Slowly but inexorably, both artists and fans came to expect LPs to contain great music not found on 45s, and the emphasis on "hits" diminished somewhat. Those of us baby boomers who grew up in the late 60s and early 1970s came to believe that 45s were for kids and that big boys (and girls) only took LPs seriously. It became fashionable to diss 45s and 45 collecting generally, since the format was viewed as just commercial pablum with no value beyond a song's hit potential. Artists who could not make LPs of the newly expected caliber were derogatorily dismissed as "singles bands" — that is, artists who had lots of hit singles but no LPs of equal quality. Artists who fell into this Rock Critic-created hole included The Doors, Creedence Clearwater Revival, The Turtles, Paul Revere & The Raiders, the Association, the Mamas & Papas, Tommy James & the Shondells, and many many more.
While it's true that the LP let recording artists grow beyond doing single songs into whole suites of material, and artists like Bob Dylan, the Beatles, the Stones, Simon & Garfunkel, Velvet Underground, Led Zeppelin and many many more were actually capable of making the most of the LP as art form, the fact is that the vast majority of singers and bands (not just in the 1960s, but in all eras) actually only had one or two — or perhaps a whole greatest-hits album full of — good songs in them, but not enough to fill LP after LP with good music. Buying the LPs of such artists could be a total waste of money, since the "hit" you liked was accompanied by some truly mediocre material. And yet, despite their higher cost (LPs in the late 1960s/early 1970s cost about $12, while 45s were about $1) and clear evidence that most albums did not match the consistency and quality of "Rubber Soul," "Highway 61 Revisited," or "Are You Experienced?", increasingly sophisticated and serious consumers of Rock music veered away from the 45 record, with its two typically excellent songs, and toward the musically spotty LP. Record companies' motivations were clear: LPs were much more profitable than 45s, and eventually the 45 merely became a way of promoting the LP. (This is true at least here in the U.S. As the accompanying list of non-album singles and tracks clearly indicates, U.K. consumers never adopted the somewhat snotty attitude U.S. young people had about the 45, and the "single" not only flourished there but even strengthened. U.K. artists routinely released 45s with no accompanying LP throughout the 1970s and into the 1980s, something U.S. artists rarely did.)
The trend toward the LP continued until it was replaced by the CD in the 1980s, at which point (according to my own empirical observations as well as testimony from those in the trade as depicted in the excellent movie about the rise and fall of Tower Records, "All Things Must Pass") companies doubled-down on their efforts to kill the "single." Eventually, fed up with high CD prices and their inability to buy the songs they liked individually rather than as part of an "album," consumers turned to their new personal computers and file-sharing services like Napster to feed their music-collecting appetite. It was at this point that the record industry imploded, and iconic record stores like Tower were forced out of business. At this juncture, Steve Jobs of Apple Inc. stepped in and developed what ended up replacing the record as a physical product: The iPod and its accompanying iTunes store. (Or their equivalents.)
In one sense, this was precisely what consumers were craving: Inexpensive songs, individually or as part of albums. Every song suddenly became a single, and you only had to spend 99 cents to get one. Unfortunately, this new paradigm also left consumers without high-fidelity music for the first time since the 78 rpm shellac disk hit the dust. The CD vs. vinyl debate pretty much died for a number of years, but that has now changed, and for the last 5 years or more, consumers' appetite for vinyl has steadily increased. Why? Just listen to the audible difference some time on decent speakers between an mp3 and a vinyl track, and you'll understand why vinyl is back in vogue. Now all that's left is for consumers to recognize that the very best sound is to be found on 45 rpm vinyl, and for record companies to respond by manufacturing the little 7-inch disks in quantity once again. Although 45s are still being pressed, try finding one here in the U.S. that contains a current hit in 2016.