Lots of food for thought to catch up on.
The New York Times‘ “All Shook Up, Right Down to the Musical Core” reminds me of what Netflix and Blockbuster are now engaging in, exclusives, whereby one or the other has the exclusive right to a DVD release.
The upshot is that Universal will provide music to iTunes on an “at will” basis. Thus, if someone offers Universal a boatload of cash for the right to sell the latest Bon Jovi or Rihanna singles exclusively on a rival download service, Universal is saying that it is open for business.
Billboard’s “MAMA to Buy Even More Mean Fiddler Venues” is yet another reminder that in sense of the dollars and cents of our new world order it comes down to selling shows (and merchandise).
The numbers seem to be working out in all partners’ favour so far. Davis says roughly $10 million of the EMI money was structured in the form of a traditional album advance, leaving EMI’s 30% buy-in valued at about $15 million. So for EMI to recoup their investment on the deal, Billboard estimates that KoRn needs to generate in excess of $50 million in profits during the five-year life span of the pact.
To date, Billboard projects it has generated around $15 million on the sales of “See You on the Other Side” (based on worldwide sales of about 2 million units and estimating a net of about $7.75 per album after manufacturing and distribution costs, based on an $11.45 wholesale price).
The band has also pulled an estimated $4 million after fees from additional sales of digital downloads, ringtones and the “Unplugged” album. On top of that it has netted a projected $7 million-plus after expenses in touring-related revenue from the 2006 Family Values Tour and a 20-date US theatre tour and selected European dates that grossed more than $11 million in box-office receipts.
Tour sponsorships and merch pulled in another estimated $2.2 million. That leaves the band still needing to earn another $20 million-$30 million in profits by 2010.
The Guardian’s “The Vinyl Frontier” brings us back to what I mentioned last week in discussing Paul Bonanos’ “The National, Recording, Arts, and Sciences” and Tony Sachs’ “Burnout”. It also raises the question of something Alex Wipperfurth discussed in Brand Hijack with the case of the Blair Witch phenomenon: by limiting the initial number of theaters the week of release, Artisan was able to generate even more excitement (like with Pearl Jam having fans wait outside Tower Records), and begs the question of whether someone who’d just waited in line for something would knock that which they just experienced (and admit it was a waste of their time) or create positive initial word-of-mouth buzz:
A key issue for mainstream retailers, says Eamonn Forde, editor of Five Eight magazine, is simply injecting a sense of excitement back into music, beyond slashing prices. “People will queue up for games consoles or the iPhone, but not for music,” says Forde. “Ten years ago you had Oasis’ Be Here Now on the news and there was this huge demand and feverish build up, but, with the exception of the Arctic Monkeys, there really hasn’t been anything since.” The notion of the pleasure to be gained from simply spending hours riffling through the racks of a record shop just to see what’s there seems to have disappeared from the chains.
The Economist’s “A Chane of Tune” is an excellent in depth analysis of artists/labels addressing in slumping sales and the need to generate new, and mutually beneficial, revenue.
Record labels have come up with a remedy: the “360° contract”. Instead of settling for a cut of CD sales, they increasingly offer artists broader contracts that encompass live music, merchandise and endorsement deals. Such deals, also known as multiple-rights or all-rights contracts, are particularly important in regions with rampant CD piracy, such as Africa, Asia and Latin America. “The market has made it necessary—we’ve got to look for something else,” says Manuel Cuevas, an industry executive in Mexico City. His company, the Mexican subsidiary of a major label, decided earlier this year to adopt the 360° model. “It’s a discussion you have with every new artist now,” says EMI’s Ms Meyer.
Although record labels like the idea, artists are unsurprisingly less keen. Few established artists have accepted 360° deals, though the labels trumpet the exceptions, including Robbie Williams, the Pussycat Dolls and Korn. It is more profitable, the artists say, to stick with artist-management agencies, which have traditionally handled the job of cultivating careers beyond the realm of recordings.
Management agencies are also considered to have more respect for their artists’ interests. Record labels, for example, have been criticised for obtaining rights to the names of artists and bands for use in internet addresses. Some clauses stipulate that name ownership applies even after contracts expire or artists die. This can prevent musicians from launching websites to promote tours, sell merchandise, and communicate with fans as they see fit. “Record companies don’t exactly give many artists the warm, fuzzy feeling,” says Gary Bongiovanni, the editor of Pollstar.
Musicians with small fan bases and little business experience are much more receptive to the idea of 360° deals. There is no shortage of aspiring artists, and some will become big names. Juha Ruusunen, the founder of TWU, a small management agency for heavy-metal bands based in Jyväskylä, Finland, says European labels have begun to sign up new talent with 360° contracts. As record labels move more aggressively into the artist-management field, Mr Ruusunen worries that his agency might struggle to compete.
Building a roster of 360° talent, one deal at a time, is slow going. It is quicker for labels to buy artist-management agencies. Last month Universal Music made a £104m ($205m) offer for Sanctuary, a struggling British label with a management arm that represents musicians including Elton John and Robert Plant. Sanctuary also owns two other artist-management companies and runs Bravado, a merchandising operation. Sanctuary’s shareholders will decide whether to accept Universal’s offer, which is considered generous, this month.
The “full marketing campaign” will likely traverse different forms of media, though the sources would not delve into specific outlets or media spend allocations.