Research
Research In Motion Ltd.s “BlackBerry Loves U2″ advertising campaign is part of a trend where brands are stepping into the breach as plummeting sales shrink music labels marketing budgets. Once reluctant to be seen as selling out to corporate sponsors, artists are keen to sign up.
“BlackBerry made the TV commercial with our music and then spent many millions of dollars on media and TV worldwide,” U2 manager Paul McGuinness said by phone from the Toronto leg of the groups multi-city tour. “They provided a budget that no record company could have possibly matched.”
Record labels have cut marketing budgets as they contend with dwindling revenue from CD sales and piracy rates as high as 95 percent for downloaded music. North America-based companies alone will spend a record $1.08 billion on music sponsorships this year, 8 percent more than in 2007, according to the IEG Sponsorship report. That makes such sponsorships the second- biggest revenue earner for artists after live shows.
“Record companies are more desperate for money because of whats going on and they are trying to do broader-ranging deals with brands,” said Ian Maude, an analyst at London-based media researcher Enders Analysis.
The practice is becoming widespread. Bayerische Motoren Werke AGs Mini brand, celebrating its 50th anniversary, hired Paul Weller to pen a song, while beverage company Bacardi Ltd. lined up Groove Armada concerts and released an exclusive EP. Next month, Michael Jacksons concert promoter AEG hosts a forum in London for brand managers on linking with musicians.
Pearl Jam
Corporate sponsorships are providing much-needed funds to record companies, with Sony Music Entertainment and Universal Music Group setting up units to link up musicians with the likes of BlackBerry and Marks & Spencer Group Plc. Research In Motion didnt respond to a query on details of its U2 sponsorship.
Still, mega-artists may start bypassing music companies altogether. Pearl Jam signed a contract in August with Target Corp. to release its newest album “Backspacer” on Sept. 20 in the U.S. and via Apple Inc.s iTunes Store. Target previously partnered with The Black Eyed Peas, Prince and Christina Aguilera on such releases. AC/DC, Kiss and The Eagles have done release deals with Wal-Mart Stores Inc.
“These types of deals will ultimately force reform at record labels and they have to make themselves more appealing to artists,” said Mark Mulligan, a music analyst at Forrester Research Inc. in London.
Retailers give musicians more money and greater flexibility on how to release and distribute albums.
Madonna, Paul McCartney
While contracts vary, a typical deal allows the musician to earn a royalty between 10 percent and 15 percent on each album sold once the costs of recording are covered.
Madonna, Paul McCartney, Radiohead, Nine Inch Nails and Prince have freed themselves from major labels in recent years.
“As the music industry has started to break down, the stranglehold labels had over artists and the marketing of artists is loosening,” said Natasha Kizzie, chief executive officer at KLP Entertainment, a unit of ad agency Euro RSCG. KLP created the Bacardi/Groove Armada campaign.
Fleeing artists have compounded lower sales of CDs. Sales fell 15 percent last year to $13.8 billion, according to the International Federation of the Phonographic Industry. They were $25.8 billion in 1999, according to Jupiter Research.
Skeptical View
Warner Music Group Corp., the only publicly traded music company, has fallen 82 percent from a July 2006 high in New York trading amid sliding sales. Universal Music, the largest record company, is owned by Paris-based Vivendi SA, EMI is closely held and Japans Sony Corp. owns Sony Music.
Granted, most brand money ends up in the hands of top acts such as U2, Beyonce and the Rolling Stones, said Steve Mayall, a director at Music Ally, which researches digital music.