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June 11, 2008

Music Licensing Revenue Drops in 2007

I saw this story and wanted to highlight the relevant passage for my readers:

"Music fell by the largest margin (5.5%) to $125 million from $132 million in 2006..."

I've highlighted this before, but let me address this issue again.  This is no time for any artist, songwriter, label, or music publisher to be turning down revenue-enhancing opportunities.  This is no time to rest on one's laurels when a licensing request comes in and sit on it until the requestor is forced to go to another party to get what they need.  There is a glut of quality music supply, so the licensee, the buyer, holds the upper hand, not the licensor.

But licensees, as George Costanza might say - you've got hand.

June 08, 2008

Wal-Mart Strikes Again - AC/DC Exclusive

Retailers everywhere - those who merchandise music and those who don't - take note - if you want to include among the ranks of your customers fans of The Eagles, AC/DC, Journey, Genesis, and Bryan Adams - kiss that thought goodbye.  Because Wal-Mart, long rumored to be reducing their footprint in physical CD sales, has wrapped up all of these artists to sell their current or future CD releases exclusively at Wal-Mart.

First up, and the biggest coup for Wal-Mart was The Eagles, one of the best-selling groups of all-time, a group who had not released an album in close to 30 years.  Wal-Mart secured an exclusive on their new album and has sold (according to reports) over 3 million copies of Long Road Out of Eden.

Bryan Adams followed with a U.S. territory exclusive in May.

Journey just released their new album via Wal-Mart this week.

This week Wal-Mart partners with Genesis for an exclusive release of a 3-DVD set.  I love this quote from genesis keyboardist Tony Banks:

"Wal-Mart puts 100,000 of this DVD out there and feels like it can sell that many, which I think will be an awful lot better than the last few things we've done," Banks said. "You have to look at it that way."

And now, another superstar joins the Wal-Mart exclusive ranks, none other than hard rock powerhouse AC/DC (subscription required - link to Reuters/Yahoo here).

So, while record retail is tanking, and Wal-Mart itself, as well as retailing giants Best Buy and Target shrink music floor space... while Borders closes stores and puts itself up for sale... while Transworld continues to shrink shelf space devoted to music... while Handleman gets out of the music merchandising and fulfillment game altogether... Wal-Mart is still cleaning everyone's clock by locking up the TALENT people spend money on in the CD category.  I know Target has done a few exclusives too, but their profile is much smaller.  Best Buy - with their previous Rolling Stones and Elton John DVD exclusives - has also stepped up to the plate before.  Starbucks Coffee Company's Starbucks entertainment division signed record deals with Paul McCartney, Joni Mitchell, James Taylor, and others, but those releases were also released through normal record retail channels.  But Wal-Mart is very savvily locking up the acts that will make customers drool with anticipation over - will a Guns 'N' Roses deal for Chinese Democracy be next... if Axl ever delivers the record?

So my blunt question to all the retail chains out there, whether you be a mass merchant, supermarket chain, specialty retail chain, or regional or national department store is this: WHEN ARE YOU GOING TO STEP UP AND LEARN THE LESSON WAL-MART IS TEACHING?  That lesson is simply this: you need not reinvent the wheel by offering up an innovative product to help drive people into your stores.  You do not need to invest in the "next big thing" when there are major known quantities with brand equity and customer/fan loyalty you can tap into - who have specific relevance for your retail brand.  But you do have to be bold and act!  You have to get in the game.  You have to realize physical music product - CDs - can still boost traffic and get new customers into your stores.

How many Eagles and AC/DC fans do you think there are?  MILLIONS!  How many times have people walked into other stores merchandising music and asked for the Eagles CD, only to be told that it is available exclusively at Wal-Mart?  How many people who don't frequent Wal-Mart often - or EVER! - were compelled to purchase that Eagles CD at a Wal-Mart location or from Walmart.com?  How many Wal-Mart shoppers who frequent the store often feel that much more loyal to the Wal-Mart brand?

Now ask this question: when is YOUR RETAIL BRAND going to use the power of music to elicit that kind of a reaction in consumers?  Being daring doesn't mean being stupid.  Even Wal-Mart didn't commit to more than 100,000 copies on the Genesis DVD.  Decisions about merchandising an exclusive album of new material from an artist require a solid grounding in the landscape of the music business, but, more importantly, a clear picture of one's own retail business, specifically:

  • Who is the brand's core consumer?  What can offering an album exclusive bring to these core consumers - and what NEW consumers will this exclusive seek bring into the chain's stores?
    What is a reasonable minimum "guarantee" of units your chain would commit to on a one-way, non-returnable basis to get an album exclusive?
  • What types of marketing efforts can your brand provide to support such an album exclusive effort?  Can you market the product via the following channels: brand web site, CRM efforts, print and/or broadcast advertising, mobile marketing, PR, in-store marketing and merchandising, store-level mangerial and associate support, operations and logistics, and direct marketing?
  • What can the artist's marketing offer your brand as you embark together on a mutually beneficial relationship?  Does the artist tour regularly?  What is their online/mobile marketing strategy?  How can the artist incorporate their partnership with your retail brand into their radio promotion efforts?  Are there other touchpoints where there are synergies (i.e. Does the artist shop for themselves or for their family at your chain?) that can be addressed?
  • Who is your brand talking to to initiate these deals with artists?  More than ever - veteran artists with strong followings are cutting their ties to major labels and launching their own, independent labels.  Younger artists trying to work outside the major label system are also hungry to be given a chance at these types of deals - and would probably accept much lower unit guarantees and retail brand financial commitment to do so.  Each retail brand needs to decide what their goals are in approaching an artist for a deal like this.  Is it to prove that the brand is a relevant lifestyle choice for a particular demographic?  Is it to purely drive in increased foot traffic?

But these questions, and their answers, are brand-specific.  Do your brand a favor and start asking some of them.  Or just sit back and watch Wal-Mart continue to eat your lunch.  There is no reason for a retail brand of 100+ stores to think "doing a music exclusive is out of our company's reach or scope."  Latch on to the incredible passion found in your consumers.  Discover what they are passionate about and deliver that.  It doesn't matter if you're a specialty fashion retailer or a quick serve restaurant - the right music can drive traffic and profits and get your brand closer to "top of mind" in the consumer's brain and emotions.

April 25, 2008

Starbucks Downsizes its Entertainment Ambitions (With Update)

It was just a few months earlier I was predicting how Starbucks Coffee Company's Starbucks Entertainment unit was overreaching.

In the midst of CEO Howard Schultz's revamping of the company Starbucks has decided to hand over the music operations for its Hear Music label venture to partner Concord Records.

But I think it should be emphasized that Starbucks's music initiative lost steam because they lost touch with what made their music effort cool to begin with.

  1. Starbucks concentrated on music that gave its stores a cool vibe: jazz, blues, classic R&B, classical, singer-songwriters.
  2. The Starbucks customer spends a lot of time in the store: ordering, waiting on line for their order, and, if they choose, drinking their order in the location (or just working on their laptops).
  3. Starbucks, while they have some teen customers, is clearly more focused on the adult market.  This is a demographic that is not as active a music consumer as teens and college-age students.  They want the commuter, the office worker, the business traveler.  Starbucks, when they practiced a more honed musical aesthetic, found an easy audience in these demographics.

When any brand seeks to make themselves an arbiter of cultural taste the focus needs to be tight.  It can't be all things into all people.  When Starbucks Entertainment was launched in the wake of the Genius Loves Company Grammy-winning triumph it undid much of the good work the Hear Music team had accomplished in building to that particular moment.  It chose more mainstream material and allowed themselves to get involved with labels trying to market new acts which did not fit within that previous core aesthetic.

It's a cautionary tale.  A strong focus on music to help drive profits and branding initiatives has to take into account the brand's customer base and how that customer interacts with the brand.

UPDATE:  Great minds think alike; Charlie Moran from AdAge.com's Songs For Soap Blog is also thinking the Hear Music division of Strabucks suffered more from lack of focus.

And, as large as their ambitions were, I'm also now thinking that Hear Music got mis-directed.  All of that early emphasis on jazz, classical, folk, blues, and singer-songwriters; think how much influence the company could have wielded (and may yet still wield) in introducing and/or touting artists of significance in those more eclectic genres.  Their customers are yearning for something great, something special, out of their music.  And even with the instant familiarity of the artists in recent projects you just can't create a cultural phenomenon out of a normal Paul McCartney album release, nor out of a live James Taylor greatest hits record.  And, sadly, lest we forget, a lot of the buzz behind Genius Loves Company started happening in the culture only once Ray Charles passed away.  That ain't gonna happen twice.

March 19, 2008

What is "Selling Out?"

NOTE: Sorry - I started this post last week and just had the time to get it out today.

A discussion I've heard far too often, both among music industry personnel and those in the media and in the corporate marketing world, is that of trying to define what "selling out" is in terms of a musical act's relationship with a corporate brand.  On the one hand, it is an accepted fact that many acts need some kind of corporate involvement at certain times during their careers to help them financially or with major exposure boosts.  On the other hand, the artists themselves are rightfully wary of aligning themselves with brands in ways which leave them open to criticism from fans and press alike.  An article by Charles Moran in this week's Advertising Age explores this topic again.  Charles also co-writes the great Songs for Soap blog for AdAge.com with Mike Tunnicliffe, which explores the many different brand/artist interactions taking place these days.

One thing rarely discussed is this: artists - ALL artists - need to "sell out" to corporate interests at some stage in their career, and often this involves the corporations they align with the closest and with the highest stakes for their longevity - namely their own record labels and the radio stations/video outlets (and the conglomerates which own them).  Even in this digital, DIY age the large majority of artists seek to be signed by a record label so the label can provide marketing, PR, radio promotion, and distribution of their recordings.  Once the act has music to be released, then they need to go out and promote their single across the radio stations and video channels/outlets which they depend upon to drive their music up the charts, thereby driving album sales and the revenue they might receive based on that airplay.  Yet the major labels (and those indies which are divisions of major corporations) and the big radio conglomerates use music to their own ends just as any corporate brand seeking to license the content from those acts. 

How many artists feel their careers were mismanaged by their labels, both when they were current artists, and with their catalogs after leaving a particular label?  Too many to count.  Those corporations keep cutting staff and roster acts as the industry's physical sales woes increase.  They also have lousy reputations for being dishonest in their accounting to the artists they rely on to develop the content the companies are based on.  But those labels are still the key engines for allowing artists to create and distribute their art as efficiently as possible across a wide range of media.  Even the band Birdmonster, once touted as a completely DIY outfit in Chris Anderson's classic business book "The Long Tail," has signed to a label.

How many artists decry how radio airplay decisions have been centralized by corporate behemoths, leaving virtually no local station autonomy and relying almost solely on audience research to make programming decisions?  How many fans hate when radio conglomerates change station formats in their local markets, thereby leaving music fans deprived of easy access to certain kinds of music?  Radio conglomerates especially just use music to sell advertising time and advertising programs to marketers.  So, in essence, while artists use radio to air their songs, the stations use the music to draw in audiences attractive to advertisers, and the artists have ZERO SAY in what advertising those stations play around their music.

Even the venue owners, ticket sellers, and concert promoters are large corporate entities which must be dealt with: Live Nation, AEG, Ticketmaster, etc...  and these companies all have divisions which deal with artist fan clubs, merchandising, and other key parts of the artist's live performance and ancillary revenue streams.

Many artists who would refuse any proactive alignment with a particular brand nevertheless do not complain when particular retailers, hotels, restaurants, banks, health clubs, etc... have in-store music systems which include playlists featuring their own music.

So, let me use a rather crude analogy.  Much as Mademoiselle Rimbaud, the busty French girl pleading to Mel Brooks's King Louis in "History of the World, Part I" pleads she simply does not "do it," I reply to those artists who think they aren't already neck deep in corporate involvement with the King's blunt response: "Come on.  You know you do it.  We all do it.  We love to do it."  There is always a price to pay for releasing one's art and striving to have it make an impact on as mass a scale as possible.  There is always a beast which needs to be fed.  And if you want to achieve mass success, then there is always a game to be played to fire up the engine of that success and keep it running smoothly... which doesn't mean there aren't conscious choices artists shouldn't exercise, just that any claims of artistic purity are proven false on prima facie evidence alone.

Noted music supervisor Josh Rabinowitz of The Grey Group writes a bi-weekly column for Billboard magazine entitled "With the Brand."  In last week's column (no link available through all my search efforts) he espoused the virtues of artists "selling in" to the world of music licensing and doing music promotions with brands.  Why?  The answers are obvious.  In an interconnected world where one is more likely to hear about a video via YouTube than MTV, or hear a new band or song on MySpace or "Grey's Anatomy" than on commercial radio, then the choice to be anything but completely channel agnostic is short-sighted thinking.  Yael Naim and her song "New Soul" are part of the cultural zeitgeist due to an Apple TV ad.  And both the artist and the brand can measure their success together.  Since her song was featured in the ad her download sales have been significant, and Apple can actually, in some fashion, track how much consumers are paying attention to its advertising by watching that immediate reaction.  Similarly, the company can also check out how many YouTube views of its commercial have been seen by consumers, and, as Yael Naim's record is released, how many albums she sells and her success in the digital and mobile arenas - in great part to her association with the brand.

Haven't those been the great questions marketers consistently seek to answer: "How can I quantify the effectiveness of the advertising my company and/or marketing agencies is producing?  How can I tell, in this TIVO/DVR world, if people are just skipping through my company's ads and ignoring them?"  The measurements above are imperfect to be sure, but they are still measurements one can gauge effectiveness by.  Was there any shot "New Soul" would have received any consumer attention in today's oversaturated media marketplace without a major ad or television licensing opportunity such as the Apple ad?  Did she stand any chance at garnering radio airplay of any significance?  No way.

The quotient may be different for some older tracks or artists whose music is used in such a way, but not by much.  90s dance star Haddaway had his once-ubiquitous hit "What is Love?" licensed for a diet Pepsi Max ad aired on this year's Super Bowl.  He had a tremendous increase in download sales after the ad was aired.  Was it an increase the Diet Pepsi Max brand manager thought was significant given his multi-million dollar media buy for the Super Bowl?  Who knows?  But it at least gave him some quantifiable evidence to suggest the ad was the sole reason for that sales increase.

Production music companies are more than happy to be to taking corporations' easy money and leaving the moralizing to the artists with egos who find these opportunities to be analogous to selling one's soul.  There is a market to be served and they are glad to serve it as efficiently and cheaply as possible.

So every artist needs to take a step back and truly ask themselves this: if they are willing to give up their masters to one company - the record label, or if they are willing to go and provide programming to radio conglomerates who don't have any vested interest in music per se, then why are other types of brand partnerships taboo?  They shouldn't be, and if you don't think fans realize this, then you're selling yourself... short.

January 24, 2008

E-commerce Sales of Physical Product - Revisited

As I mentioned in my last post - sales of physical CDs were up 2.4% at E-commerce sites last year.  E-commerce sites can offer up wider selection of product, allow customers to listen to audio clips of tracks, and peruse editorial and customer reviews of the album.  What the E-commerce experience lacks in immediate customer gratification it gains in terms of ease of shopping experience.

Yet sales of albums at E-commerce sites represent just 6% of overall album sales.  For labels with huge catalogs facing further consolidation of record retail floor space E-commerce sites represent the last best hope for the compact disc.  So where is the great marketing effort on the part of the major labels, the RIAA, and independent labels to drive customers online to purchase physical product.  This does not mean shunning label retail partners.  So many major music retailers have online sites which sell music as well.

But it also broadens the number of accounts the distribution companies ought to be targeting to sell physical product (and digital music as well).  So many "non-traditional" retailers operate E-commerce operations.  Why not get these accounts to test the viability of music sales via their web site?  How can the labels get these retailers to give them visbility on their site?

The point is this: in this area where the labels have a growth story to sell we hear little from the industry touting this success.  Now is not the time to play possum.  Now is the time to flaunt your plumage like a peacock and go out and convert the non-believers.  CDs, especially catalog and deep catalog in this current market, need to be championed.  Get out there and grind it out!

December 21, 2007

Starbucks Entertainment Officially Jumps the Shark

Kenny G.  No artist's name makes the hair on my neck stand up straighter.  As someone who got involved with the music business in the 90s from a love of jazz and during the "jazz renaissance" of that decade Kenny was, in my opinion, the epitome of everything wrong with music.  The saccharine sounds.  The Michael Bolton connection.  The complete lack of soul.  Sure, the guy had chops up the ying-yang, but to what end?  The coup de grace was when he paired himself with the disembodied voice of the deceased scion of jazz music: Louis Armstrong, for a "duet" on "What a Wonderful World."

I'm a pretty inclusive music consumer and listener.  I listen to all kinds of music, even the occassional smooth jazz record.  But I draw the line with Kenny G.  Today, Starbucks Entertainment announced an exclusive release with the above-mentioned Mr. G.

When I worked at Universal Music Special Markets I really wanted to work on the Starbucks account.  They had always approached music with a very sure-handed and opinionated curatorial sensibility.  Certain music worked for their brand.  Certain music didn't.  I distnctly remember one of the first meetings I attended with someone from Starbucks in 1999.  We had someone from Verve Music Group in on the meeting.  That person tried to pitch Starbucks on doing a smooth jazz CD as part of the company's branded CD compilations for the coming year.  They Starbucks employee looked at our Verve guy like he had two heads. 

Smooth jazz was not what Starbucks was about.  They emphasized artistic quality and warmth, intimacy and collaboration.  They did instrumental jazz compilations, singer-songwriter collections, blues, Brazilian music, world music, even some classical and opera.  The music for the brand had a point of view.

Starbucks never did too much advertising.  Their advertising was their product and their stores, and the environment created in those stores.  The couches and the ability to sit and enjoy your latte were part of that environment, but the music playing in the in-store bed was what you felt, what made you feel like sitting and staying at Starbucks, that being there was worth the price of that latte.  And the music on the Starbucks CDs and the music being piped in were synched up.  When you bought one of those CDs you could take a little piece of the Starbucks brand experience home with you.

Even as Starbucks purchased Hear Music and became more ambitious, the artistic specificity remained in their brand point of view.  They launched the "Artist's Choice" series of CDs, where musicians would create compilations based on their artistic taste.  And they chose artists that furthered the Starbucks brand's image as tastemaker: Lucinda Williams, Willie Nelson, Yo-Yo Ma, Elvis Costello, Diana Krall, Norah Jones, and many others (not all the titles are in print anymore).  Even on their "Opus collection" single-artist greatest hits packages they were able to delve into some very significant artist catalogs that were normally difficult to license: John Lennon, Bob Marley & the Wailers, Jimi Hendrix, Frank Sinatra, and The Doors, to name a few.  For this they should be recognized and applauded.

Starbucks also became a more significant account for selling frontline records, records which not many other accounts were carrying.  They championed artists who were releasing good records rather than just carrying the latest record the labels wanted them to flog.

After the groundbreaking partnership with Concord Records which was responsible for the Ray Charles mega-hit Genius Loves Company the company was sitting even prettier.  But, after the massive, Grammy-winning triumph of Ray Charles that curator's sense of knowing what was right for the brand diminished.

Starbucks is a huge brand, with a massive retail footprint.  At some point earlier this decade the company decided that the exclusiveness of the type of music Hear Music was producing and buying needed to diversify to account for a wider, more diverse customer base that crossed many different age cohorts.

So there is no longer a "Starbucks sound" per se.  Starbucks can't do deals with Kenny G AND Joni Mitchell and expect there to be continued trust in the brand's musical taste or sensibility among its customers.  Similarly, on the frontline side the Starbucks Entertainment team is now stocking more big hits and well-known artists: Led Zeppelin, Alicia Keys, Wyclef Jean are current highlighted titles.  And the titles released by Starbucks by Paul McCartney, Joni Mitchell, and James Taylor haven't excited customers as much as they've generated PR buzz.

Starbucks has always aimed to be the "third place" in people's lives, other than home and work.  But, more so than they realize, Starbucks' music initiative, from its beginnings, has helped give the brand the respect it needs to keep people trusting in their brand experience.    I mean, even the baristas can't be excited at the prospect of having to have Kenny G music piped into the stores.

Starbucks needs to reclaim their musical mojo - not just take on projects because they can.  If the gentleman from Starbucks I know who delivered that "no smooth jazz" edict to Verve back in 1999 is still working at the company I can hardly imagine how disappointed he is in this choice by the company he's worked at for so long and done so much for in developing their music business.

November 25, 2007

The Bottom of the Pile

HITS magazine has been posting the manifestos of Terra Firma head Guy Hands re: the company's recent purchase and now management of recorded music giant EMI.  I liked this one in particular (free registration required).

Among the ways Terra Firma states it will add value to EMI is listed this:

Exploiting assets Moving the prioritization of the exploitation of the catalog from the bottom of the pile to the top

I find that statement both laugh-out-loud funny and cry-out-loud tragic.  Funny, because that's what record companies and music publishing companies ought to be doing every day in the first place.  Tragic, because these labels can't maximize catalog exploitation until they are able to license each and every artist's catalog they own at will, and that is unlikely to ever happen.  Every artist contract is different, and those artists who retain artist consent clauses will be loathe to give up their rights just for the sake of the record company's financial health... but unless the record companies make the attempt to make licensing and exploitation a more seamless process, then the catalogs of the major cash cow artists those labels control will never be able to be maximized financially.

I applaud EMI for stating that a change needs to happen going forth in order for the company to maintain financial health... but why did it take until 2007 for one of the major labels to realize this new reality?

November 13, 2007

Moderating Panel Tomorrow Night in NYC

I'll be moderating a great panel tomorrow night in New York being presented by the Film Music Network on the use of music in corporate imaging and branding.

Check out the event and please pass the word on to any marketing people of musicians/composers you think might be interested in attending.

Thanks.  I'll let you all know how the event went later this week.

October 17, 2007

Will the Spice Girls Spice Up Victoria's Secret?

The biggest deal I was ever a part of was for Victoria's Secret.  Back in 2001, in coordination with Universal Music Group's Classics Group, we forged a deal to sell in two million custom Andrea Bocelli CDs in conjunction with his appearance on the brand's network TV fashion show.  I also worked with the brand on a much smaller deal in 2005 while at Sony BMG, developing a Chris Botti single-artist compilation which was sold during the Valentine's Day selling season of 2006.

I hadn't heard of the brand doing a deal to bring in any music CDs into the chain since.

In 2003, Victoria's Secret did a custom, single-artist Sting CD with Universal.  Sting also appeared on the brand's network TV fashion show special.  In 2004, I believe, Victoria's Secret launched a TV campaign featuring not only the music of, but the presence of, musical icon Bob Dylan.  At first, some questioned Dylan's choice for appearing in the campaign, but more so, there were voices critical of Victoria's Secret for using Dylan at all.  As Seth Stevenson from Slate noted at the time:

So, it makes some sense for Bob. But what about Vicky? Why would a brand that's about sexiness, youth, and glamour want any connection at all with a decrepit, sixtysomething folksinger? The answer, my friend, is totally unclear. The answer is totally unclear.

Even if Victoria's Secret hopes to bring in more boomer women, do those women want their underwear to exude the spirit and essence of Bob Dylan? Or, conversely, is Bob Dylan the sort of man they're hoping to attract? Even if you're of the belief that men frequently shop at VS for their ladies, I still don't see the appeal of this ad. I, for instance, am a man, and I can assure you that Bob Dylan is not what I'm looking for in a woman's undergarment. (And if I found him there—man, would that be disturbing.)

Victoria's Secret wouldn't return my calls, but media reports say the idea of putting Dylan's face in the ad (they'd been using his song—"Love Sick"—in ads for the past year or so) came straight from corporate chief Les Wexner. To the company's surprise, Dylan accepted their offer. It's at this point that someone at Victoria's Secret should have stopped the madness. Just because you can hire Bob Dylan as the figurehead for your lingerie line, doesn't mean you should. Perhaps no one was willing to say no to the big boss, or perhaps they fully expected Dylan to say no. Joke's on them.

Victoria's Secret also ordered up a few hundred thousand custom Bob Dylan CDs from Sony Music... CDs which did not sell well at all for the brand.

It was after that campaign that the brand shied away from making large commitments on selling CDs in its stores, despite the ad campaign receiving serious buzz when it launched.

Notice one other thing here: Andrea Bocelli, Sting, Bob Dylan, Chris Botti - they are all male artists that the brand surmised would appeal to its core female shopper.  They weren't appealing to the male aficionados of the Victoria's Secret catalog.  In that sense, most of these seem smart tie-in partner artists for this brand to align with.

So, imagine my surprise checking out the Wall Street Journal today and reading how Victoria's Secret is going to be the exclusive retailer for a new Spice Girls greatest hits CD through January of 2008 (paid subscription required).  Capitol Records is selling over 500,000 units of this release - on a one-way basis - to the chain.  The group will also appear on the upcoming Victoria's Secret fashion show broadcast.

I'm all for making deals, but I think the question now, as back in 2004, is what does Victoria's Secret get out of this deal?  In this case, more specifically, the question to be raised is: "Why is Victoria's Secret partnering with a group out of the limelight since earlier this decade, a group which has no current relevance to the U.S. marketplace, a group whose hits (even "Wannabe") faded into the ether of pop ephemera?  And even if they are able to answer that question in a reasoned manner, then why in God's name did they purchase so many of these CDs... on a one-way basis?!?!"  Is Mrs. Beckham's allure really that compelling to the Victoria's Secret audience?  More than Rihanna?  More than Fergie?  More than Beyonce or Jennifer Lopez (both of whom own their own fashion lines, so their fit with the brand may well have diminished)?  But at least those acts are more fresh and current-sounding than the Spice Girls.  I've sold frontline CDs into "non-traditional accounts" on a one-way basis, and record companies should continue to sell CDs into these accounts using that method.  I'm sure the label is taking a certain amount of margin hit in order to make that scenario more palatable for Victoria's Secret.  BUT, there was seemingly little incentive for the chain to commit so much money - and I'm assuming it's at least $3 million - to purchase this amount of CDs.  Yes, they are going to be selling the CDs for a profit, but just as with other merchandise sold in their stores, Victoria's Secret will be stuck with a lot of cold merchandise if the Spice Girls CDs don't sell well.

Yes, CDs are more of an impulse buy item than in years past.  Yes, it is smart for a record company to sell in releases to chains like Victoria's Secret.  But shouldn't the merchandise fit into the lifestyle of the chain's customers?  For all the research done on fabrics and designs by the Victoria's Secret team - my preliminary instinct is that they went with the Spice Girls based on instinct alone.  If an American can name as many, or more than, three Spice Girls hits they are a rare exception, and this is a U.S.-only deal.

So the big bet Victoria's Secret is making is that the Spice Girls' presence will help cause a run on their stores for the CD, but, more importantly, lead to an uptick in sales overall at their stores during this promotion.  I applaud the brand for finally going outside of the "male artist" box and noticing their predominantly female customer base enjoys music from and admires female artists as well.  It remains to be seen if the Spice Girls, and this particular greatest hits project of theirs, will serve to move the needle in a positive direction.

September 26, 2007

Hotel, Motel, Holiday Inn - The Major Labels Find Hospitality Partners

Two very similar marketing deals between major label groups and hotel operators popped up this week.

The more significant deal was between Sony BMG and hotel conglomerate Starwood.  Meanwhile, EMI has partnered up with hotel chain Fairmont Hotels & Resorts in a similar deal.

Kudos to both label groups for securing these partnerships with their respective partners.  However, I am curious as to why a hotel chain would want to establish such an exclusive arrangement with one label group, even major label groups such as this.  In the Sony BMG deal, it says that:

"Another goal is to create compilation CDs that will be sold at each hotel. At a price of $20, a compilation for W Hotels -- including such acts as Goldfrapp,