by : Business, December 2016, Featured Articles

Sponsorship Lift Off

Sponsorship Lift Off

Not too long ago, recorded music sales were a dependable source of income for labels and their artists. Earnings from live music shows added substantially to physical sale of product, so in the recording and live music businesses, a livelihood in music was less tied to sponsorships than it is today (the products industry was always special, for there; going back to the XIXth century, well known artists were engaged by the likes of Steinway & Sons to promote music instruments sales). Pop culture too was different before the 1980s, and performers and recording talent tended to avoid open commercial ties with brands. This has all changed. Artist and live venue sponsorships are part and parcel of the music business, and the value of music sponsorships has become its own quant in the U.S., with an all time high spending in 2015, the latest date for which data is available, of $1.4 billion.1 This is a remarkable figure equivalent to about one-fifth of the current value of recorded music sales and a third of all concert ticket gross revenue.

A big target of the sponsors, of course, is the millennial generation, i.e., those born between 1980- 2000. About a third of all music sponsorships are to this cohort. Generally speaking, brands find them difficult to market to, for they are not a homogeneous group. But it is known that they share a fascination for innovation and technology, are constantly connected to mobile and other devices, and crave to experience unique events. As music artists set trends, have active social media accounts which sometimes reach across the globe, and can drive thousand and even millions of fans to a brand with a simple hashtag at festivals or concerts, the match is obvious.2

Music sponsorships are a thus a winning proposition, especially when the effectiveness of traditional marketing strategies is in question. It explains why brands are choosing to spend more on music than many other trades. Music sponsorships have grown from $1.2 billion in 2010 to $1.4 billion in 2015 and are expected to reach $1.5 billion in 2016. Last year, the percentage change in music spending, at 5.6 percent, outpaced the growth in general sponsorship by more than one percentage point—a big margin.3

Alcohol or Not

Non-alcoholic drinks top the list of music sponsorships. These are beverage companies like Coca-Cola, Pepsi-Co, Mountain Dew, and Red Bull. Anheuser-Busch tops the list of alcoholic beverage; the beer manufacture still comes up as the top overall sponsor, with 29% of all spending.4

But it remains that music at festivals and concerts is most interesting for the promotion it can give to traditional and ‘safe’ drinks. Given the raucous nature of its audience, a vodka manufacturer might prefer an EDM festival that a soda company will ignore. A mainstream festival like Lollapalooza tends to attract instead a more diverse audience, and is therefor preferred by soda makers. In 2014, music festivals in the U.S. were said to exhibit, for example, the following distribution of ages: the 18-24 group represented 24% of all attendance; 25-34, 22%, 35-49, 28%; and the 50+ group, 15%.

In short, the interest shown by soft drinks sponsors over and above that shown by alcoholic beverages speaks to the universal appeal of music gatherings. Indeed, music communities have become a target for business, rather than individual consumers. A good example is Red Bull. The company has created its own Music Academy, an Institute that educates and supports artists of all kinds. It does this without making direct references to the drink itself. Marketing here is all about becoming a part of the community rather than pushing a product overtly.5

Festival Fun

It is easy to see as well that the explosion in music sponsorships feeds on the summer festival industry. As classic festivals experience rapid growth in attendance and ticket sales, new ones rush in. According to Nielsen Music, 32 million people attend at least one music festival each year and about 10 million will go to two or more.6 Festivals, Nielsen concludes, offer the best opportunity to engage teens and millennials. And not just them: over 50 % of attendees view a brand more favorably after the festival, and the figure rises to 70% if there is a product giveaway.7

It is good to point out too that for brands, festivalgoers can become loyal consumers. Attendees of festivals are already invested in the event and that rubs off on the brand. To appreciate this, one need just examine travel habits: festivalgoers cover an average of 900 miles a year for ticket prices that have escalated by as much as a third.

Celebrities

It is not unusual either now for brands to work in conjunction with a top-level artist to sell out a concert venue and drive business for its partner. In a deal worked out by MAC Presents, Citibank sponsored Billy Joel in an agreement with Madison Square Garden, hosting one concert per month in 2014. Selling out Madison Garden on consecutive dates was one of Joel’s long time dreams. Citibank helped Joel achieve his goal while providing their cardholders with pre-sales, backstage passes, soundcheck access, and meet-and-greets. The deal has now been renewed in 2015 and 2016.8

But the marriage between a brand and a music celebrity is not always smooth, as Rihanna recently found out. Samsung’ signed a $25 million dollar contract with Rihanna in October 2015 to cover the tour and promotion of her new album ANTI. But things went wrong from the start. Rihanna was a co-founder of the streaming service Tidal, Jay Z’s baby, and the album was leaked onto Tidal a week early, much to Rihanna’s annoyance and Samsung’s despair. Contractually, Rihanna may have made commitments to Tidal that were not clear to her sponsors or even her. Samsung, who paid for the first million downloads of the album that Rihanna’s fans got for free, barely got a mention because it could not tie its name, as it wished, to the leaked release. Only a twitter post alerted fans that the album was out and that Samsung was involved. The untidiness of the operation hurt Samsung and in the event Samsung’s ties with Rihanna went largely unnoticed.9

Here is an example too of brand pushing up a record in the charts. Samsung’s investment helped Rihanna achieve platinum status in just 14 hours. The danger here is real. If a charted position of an album is affected by a prior investment to purchase the release, like Samsung did for Rihanna, artist rankings could begin to reflect the patronage of the sponsor rather than the true market value of the record. This type of sponsorships deal may not be in the best interest of the recorded music market, for labels and the buying public constantly take cues from the charts. If the charts are misleading, the very notion of a hit becomes blurred. It appears the Billboard organization may have to work much harder to maintain the integrity of its music charts.

At the other end, of course, is the relationship between brands and indie artists. There is an incipient market there too. A company such as Music Dealers receives submissions from independent musicians and finds companies such as Coca-Cola, McDonalds and AirBnb to license their songs for advertisement.10 CD Baby, among others, offers its own platform. On the other hand, less intermediation can work too: Cordelia Vizcaino of the band Cordelia and the Buffalo recently told this writer about her experience licensing her song 7th Sea directly to BeIN Sports for the Copa America, a big soccer event in Latin America. A few contacts in Boston made the difference. The song became the theme of the event and was broadcast to thousands around the world. Vizcaino received public performance royalties through her PRO as well as a license fee from the television network.11

Overview

As this article showed, music sponsorships are growing in importance for practical reasons. Sellers of sponsorships value music as a commodity that both cuts across many demographics and has an inherent ‘coolness’ factor that is good for consumer brands. On the other hand, buyers of music sponsorship, including artists, are more dependent on alternative revenues to supplement their incomes. Festival promoters and operators, in particular, need big money contributions to pay for the headliner act on which the festival may stand or fall. Finally, recording artists, in what may be a troubling development for the signals that the business sends as to what constitutes a hit or not, are starting to engage sponsors to promote the free distribution of music early on in a release.

All of this, most of it good but not all, will likely continue. In the meantime, major labels are using their Business Development department in ever more proactive ways to seek the opportunities discussed in this piece. Absolut’s Vodka partnership with emerging electronic duo Bob Moses to stream, using virtual reality, a forthcoming private concert is but the latest example.

 

By Karin Harvey

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Endnotes:

  1. http://www.sponsorship.com/Latest-Thinking/Sponsorship-Infographics/Sponsorship-Spending-On-Music-To-Total-$1-47-Billi.aspx
  2. http://www.nielsen.com/us/en/insights/news/2014/meet-the-millennial-multicultural-music-listener.html
  3. http://blog.midem.com/2016/05/5-ways-brands-flipping-music-endorsement-deal-ear/
  4. http://www.sponsorship.com/iegsr/2015/09/21/Inside-Anheuser-Busch-s-Evolving-Sponsorship-Strat.aspx
  5. http://www.redbullmusicacademy.com/
  6. http://www.nielsen.com/us/en/insights/news/2015/a-sound-opportunity-how-brands-connect-with-consumers-at-summer-music-fests.html
  7. Nielsen 360 Music: 2016 Highlights. N.p.: The Nielsen Company, 23 Sept. 2016. PDF.
  8. http://www.eventmarketer.com/article/cover-story-magic-moment-inside-citis-entertainment-sponsorship-portfolio/
  9. http://nypost.com/2015/10/29/rihanna-inks-25m-sponsorship-deal-with-samsung/
  10. http://www.thembj.org/2012/03/music%E2%80%99s-fizzy-logic/
  11. Cordelia Vizcaino, phone interview. October 3, 2016

 

 

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