by : August 2013, Business, Featured Articles

Samsung Ships Out Jay-Z

Samsung Ships Out Jay-Z

True to its tagline, it looks like Samsung is intent on being “The Next Big Thing.” What better way for Samsung to establish itself as such than partnering with one of the world’s most influential solo artists? Not only is Jay-Z considered as a marketing genius but he is also an innovator who has demonstrated a “good ability to identify what audiences want”1. Yet, all the benefit is not limited to Samsung. Jay-Z too stands to gain from this deal – specifically having a new album that is profitable before it is even released.

Background and Deal

In early June 2013, The New York Post announced that Jay-Z and Samsung were working on a $20 million deal to create a music streaming service. It was largely understood that any service that the two parties created would serve the purpose of promoting acts signed to Jay-Z’s Roc Nation, not to mention his own music2.

On June 16th, Jay-Z and Samsung announced the release of Magna Carta Holy Grail, Jay-Z’s first solo album in four years, on a commercial that was aired during half time at the NBA finals. According to Samsung, the album would be available to Samsung Galaxy users first, specifically owners of Galaxy S III, Galaxy Note II and Galaxy S4 smartphones. These users would gain access to the album through an app, JAY Z Magna Carta, that would be available for download on June 24th. Users would then be able to download the album for free on July 4th, three days before the rest of the world would have access to it. After the lift of Samsung’s 72-hour exclusive on July 7th, Island Def Jam would then distribute Magna Carta Holy Grail at retail3.

Samsung allegedly purchased one million copies of the album from Jay-Z at $5 each and would give away these copies to Samsung Galaxy users with the app. Jay-Z therefore earned $5 million upfront, making Magna Carta Holy Grail profitable before it was even released. Furthermore, Jay-Z allegedly received as much as $7.5 million in music rights and endorsement fees. Sources also put the value of Jay-Z’s entire deal with Samsung at close to $30 million, as opposed to the $20 million figure that the New York Post initially announced. This figure likely includes media spend.

Implications

The deal between Samsung and Jay-Z makes Magna Carta Holy Grail the first major release to be premiered exclusively by a brand. As with many firsts, this deal raises a number of questions about the music business moving forward. Of particular focus here is the deal’s effect on music distribution. Jay-Z’s deal with Samsung would put music from his latest release directly into the hands of one million listeners. In this scenario, the three models of Samsung Galaxy smartphones aforementioned would function as distribution mediums. This raises the question as to whether smartphones are the future of music distribution.

Samsung has been engaged in shifting from being a hardware manufacturer to also becoming a media platform. The company has recently been active in building its music and entertainment offerings. In May 2012, Samsung acquired mSpot, a mobile radio service offering music and video content. MSpot is now the developer of Samsung’s all-in-one music service, Music Hub, which includes streaming, cloud music storage, radio and a music store. For the release of Jay-Z’s album, Samsung itself developed the JAY Z Magna Carta app, through which the company would distribute the one million copies of the album. The firm was therefore actively involved in the distribution of Jay-Z’s album.

According to TJ Kang, Samsung’s senior VP of media solutions, “[Samsung] wants music to be one of the deciding factors in purchasing another device in the future.” Jay-Z’s deal with Samsung instantly turns the Samsung Galaxy into a music device. This phenomenon is not limited to Samsung, however. Music has long been a deciding factor when purchasing mobile devices such as Apple’s iPhone and the Windows phone, which also enable users to purchase and download music, from iTunes and Zune Marketplace respectively. Furthermore, several superstar acts have worked with brands before to promote album releases. Apple’s iTunes, for example, streamed Daft Punk’s latest release, Random Access Memories, prior to its release. In 2011, Lady Gaga partnered with Zynga to let FarmVille users listen to songs from Born This Way prior to the album release4. Nevertheless, the involvement of brands thus far has largely been on a promotional basis.

The deal between Jay-Z and Samsung sets precedence because it marks the first time that a brand has bypassed the record label in the distribution chain. So far, brands have mainly been involved in promoting the album through pre-release streaming or providing exclusive content to a select group of fans as illustrated by the partnership between Lady Gaga and FarmVille. Where iTunes is concerned, albums are still procured through the record label. Additionally, in order for unsigned artists to get their music on iTunes and similar online stores they are required to go through third party services such as Tunecore or CD Baby. By making a deal directly with Jay-Z, Samsung allowed the company access to the album directly from the artist before the record label. Island Def Jam only took over distribution after Samsung’s three-day exclusive.

However, Jay-Z is not the first to attempt releasing an album through a mobile device. Lady Gaga made a deal with Virgin Mobile to give away one hundred thousand copies of Born This Way.’ However, the deal fell apart due to Virgin’s merger with Sprint. Madonna also attempted something similar for MDNA but abandoned the deal when her team discovered that doing so would not count towards first week of sales. Now two years later, Samsung makes a similar deal with Jay-Z but on a grander scale.

Although there were many problems with the JAY Z Magna Carta app, including and not limited to technology glitches, privacy concerns, file sharing and missing content, the results have been fairly rewarding5. Magna Carta Holy Grail is Jay-Z’s 13th No. 1 album on the Billboard 200 chart, selling 527,000 copies in its first week according to Nielsen SoundScan6 – this despite Billboard opting not to count the one million Samsung giveaways. This is the second-biggest sales week from a single album in 2013, trailing behind Justin Timberlake’s The 20/20 Experience, which sold 968,000 copies in its first week. The album also earned Jay-Z his first solo No. 1 album on the UK charts7 and set a record for the most streaming activity on Spotify in the United States to date with over 14 million streams during its first week8. Furthermore, Jay-Z and Samsung got increased exposure from a combination of Samsung’s aggressive marketing, the free publicity from news coverage, and the built in nature of the JAY Z Magna Carta to encourage users to share content. Even the technology glitches in the app ended up contributing to increased exposure as some users would post repeatedly after being unable to successfully access content. Samsung’s competitor, Apple, also did not want to be left out, and iTunes advertised extensively the option to pre-order the album.

Now that Jay-Z has successfully released an album through a mobile device, many question whether this could be a growing trend. As previously stated, other superstar acts such as Lady Gaga and Madonna have considered distributing their albums via mobile devices. It is plausible that an artist of Jay-Z’s caliber would attempt a deal like this. Nevertheless if similar moves follow, it is unlikely that consumer electronics companies like Samsung would displace major record labels in the future. Jay-Z’s efforts, though successful, were not void of the involvement of Island Def Jam, which took over distribution on July 7th. Samsung’s deal with Jay-Z was also limited to digital copies warranting the involvement of a label or major distributor to cater for the distribution of physical copies. Therefore, should Samsung continue its involvement with Jay-Z, or start one with another artist, or should another consumer electronics company explore a similar deal, it seems likely that these brands would work in conjunction with record labels to market and distribute future releases. This could be beneficial to the music industry through the creation of alternative revenue streams9.

It should be noted that the novelty of the deal between Jay-Z and Samsung arguably contributed to its huge success. As history would suggest, the chances of a deal like this being repeated with the same level of success are low. For example, in 2007 Radiohead made waves in the music industry with their three-month exclusive name-your-own-price policy on their self-released album In Rainbows. The band sold 936,000 units once the album was released through traditional retailers. However, when Madonna gave away copies of 2012’s MDNA with ticket sales and Prince gave away 2007’s Planet Earth in a British newspaper, both albums underperformed against expectation selling 530,000 and 276,000 units respectively as of June 2013. Radiohead arguably benefited from the publicity generated by the experimental nature of their sales policy just as Jay-Z and Samsung did from their deal. Nevertheless, musicians, particularly unsigned artists have attempted Radiohead’s model to various degrees, largely without great success.

It seems unlikely, that Jay-Z’s deal with Samsung can easily be repeated. The success of the deal was dependent on Jay-Z being a superstar act with a large audience and Samsung being a brand with a large consumer base and a sizeable global ad spend. While artists of Jay-Z’s caliber may be able to consider using mobile devices as a medium for grand scale digital music distribution, it would be difficult for unsigned artists, with smaller audiences to pursue this as an option. However, it may be possible for an indie artist with a significant fan base to explore a similar deal but on a smaller scale. Nevertheless, Samsung and Jay-Z seem to have confirmed the feasibility of large-scale music distribution via mobile devices.

 

By Annette Oduor

 

Endnotes

1. Greenburg, Zack O’Malley. “Jay-Z and Samsung Mull Music Streaming Service, But is the Market too Crowded?” Forbes, Jun 7, 2013. http://www.forbes.com/sites/zackomalleygreenburg/2013/06/07/jay-z-and-samsung-mull-music-streaming-service-but-is-the-market-too-crowded/

2. Williot, Carl. “Jay-Z Working on $20 Million Deal for Samsung Mobile Music Streaming Service: Report,” Idolator, Jun 5, 2013. http://idolator.com/7461871/jay-z-samsung-streaming-service-20-million-deal

3. Hampp, Andrew. “#Next Big Thing,” Billboard, Jun 29, 2013.

4. US Weekly. “Lady Gaga Releasing “Born This Way” Songs Early via FarmVille,” May 10, 2011.

5. Buli, Liv. “Hold Up: Samsung, Jay-Z Partnership might not be the Flop you Thought,” Next Big Sound, Jul 10, 2013. http://blog.nextbigsound.com/post/55111614409/hold-up-samsung-jay-z-partnership-might-not-be-the

6. Caulfield, Keith. “Jay-Z’s ‘Magna Carta’ Debuts at No. 1, Has Year’s Second-Biggest Sales Week,” Billboard, Jul 16, 2013…

7. Sexton, Paul. “ Jay-Z’s ‘Magna Carta Holy Grail’ Opens at British Summit,” Billboard, Jul 15, 2013…

8. Peoples, Glenn. “Jay-Z’s ‘Magna Carta’ sets Spotify Streaming Record — Despite Samsung Giveaway, Topping Album Chart,” Billboard, Jul 17, 2013. http://www.billboard.com/biz/articles/news/branding/2004929/jay-zs-magna-carta-sets-spotify-streaming-record-despite-samsung

9. Christman, Ed. “Retail’s Holy Grail: Some Retailers aren’t Pleased to Play 2nd Fiddle to Samsung’s Mobile Platform for Hotly-Anticipated Jay-Z LP,” Billboard, Jun 20, 2013. http://www.billboard.com/biz/articles/news/1567919/retails-holy-grail-some-retailers-arent-pleased-to-play-2nd-fiddle-to

 

 

 

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