Digital Media and the changing market

Why bands need brands
16-Apr-08

With the music industry locked in flux as its business model erodes as a result of the rise of digital media, brands are getting into bands as never before, and creating a new kind of “record company”.

It is a situation that has led to the creation of companies such as Harvest Entertainment, which act as a conduit between brand and band. Harvest has signed up Placebo, McFly and 1980s band Madness as its clients. Its job now is to find an appropriate brand to fund and support the activities of each group, which will be able to retain complete ownership of their copyright.

Harvest, which launched at the end of last year, is run by Ric Salmon, a former vice-president of Warner Music International. He of all people knows how much the music industry has been transformed since the days when record labels held a monopoly. Thanks to the Web, barriers to entry have broken down to the detriment of the traditional record label model. Significantly, established artists are no longer making the bulk of their revenue from record sales. In the UK last year, album sales dropped nearly 11%, according to British Phonographic Industry figures. So musicians and their backers are now turning to more lucrative revenue streams such as touring and merchandising.

While some are choosing to go independent, others are opting for the venture capitalist investment model. Record labels themselves are also launching spin-off labels in partnership with brands.

Last week Procter & Gamble and Island Def Jam Music Group announced they would launch a music company called TAG Records, named after P&G’s TAG men’s deodorant and body spray. Even former Beatle, Paul McCartney, has got in on the act, last year teaming up with coffee shop chain, Starbucks, through its new Hear Music record label.

Groove Armada, which recently came out of a five-year deal with Sony BMG’s Jive Records, has chosen Bacardi-Martini. The British dance-music duo signed a one-year deal with Bacardi in March which will see the brand fund a four-track EP. As part of the deal the duo will also perform at Bacardi-branded events and present radio programmes created to air on various radio stations.

Groove Armada will also appear in Bacardi’s advertising campaigns. Bacardi global experiential manager Sarah Tinsley says the duo will write a song for the drinks brand’s TV commercial, working closely with Bacardi’s advertising agency RKCR/Y&R.

He says: “I don’t think Prince’s fans were disappointed when they got his music free if they bought a copy of The Mail on Sunday. I don’t think Radiohead’s fans were cynical when the band allowed them to pay however much they wanted to for their album. It was a brilliant marketing ploy and it worked, because it went straight to number one in the US and UK.”

Other pitfalls include what happens to a brand if its musical partner finds itself making headlines for all the wrong reasons. As Tinsley says, any scenario which involves using a third party as a brand ambassador always carries a risk. The point is to go through the necessary processes to make sure that risk is minimised.

Salmon suggests that some brands see the value of being associated with controversial characters like Peter Doherty. “Who would have thought that Lily Allen would become the sensible, mainstream artist she is now. In that way, some brands may like that journey and risk,” he adds.

But while tie-ups between bands and brands is nothing new, this brave new world of brands acting like record labels is still largely uncharted territory. And with the likes of Harvest negotiating these deals, a new kind of service company is also emerging and forming part of this new model.

Whether or not this will become a viable business model in music’s brave new world is something not even the “experts” can second-guess. But there is no question that the relationship between brands, bands and the music industry will continue to grow.