How to get a sponsorship / endorsement deal.

In my second blog post, I want to point out the difference between endorsement and sponsorship in the music business and discuss how to obtain these relationships with companies. An endorsement is "an official relationship between a manufacturer and a celebrity or influential artist."  The artist or celebrity gains publicity through the relationship, while the manufacturer hopes to increase overall sales “by utilizing the artist’s name/likeness through association, advertisement, promotion etc.” Rich Mangicaro (2006).  A sponsorship differs from an endorsement deal by paying money to the celebrity or artist in return for advertising the brand.  In an endorsement deal, the artist / celebrity can receive free products of the company additionally to the publicity benefit. This opens another possibility to relate the brand to the artist especially for fashion brands or manufacturer of musical equipment / instruments.

How to get an endorsement deal? First of all, the person searching for a deal should contact companies, which could be potentially interested in an endorsement. It is important to ask the right questions and to focus on the benefit that the artist can bring to the table instead of looking for the own advantage only. It is all about having a great idea that both parties could do together to bring more business for everyone. For local artists it is always advisable to start with a local business. Both partners need to be equal in their reach to make it a meaningful partnership. When approaching the brand, the artist should be well prepared. Creating a list of 3 to 5 reasons why they would benefit gives the artist a better understanding about how to structure a talk with a representative of the company.

Eventually, I want to mention that branding with human characteristics is becoming more and more important for companies today. This plays an important role in sponsorship especially between music entertainers and brands. It "is the idea that brand personality is a vehicle of consumer self-expression and can be instrumental in helping a consumer express different aspects of his or her self“ (Aaker 1997; Belk 1988; Escalas and Bettman 2005; Johar, Sengupta, and Aaker 2005).  "Humanizing a brand empowers it to play a more central role in the consumer’s life, potentially enabling the consumer to project an aspect of his or her self that might be desirable for relationships he or she seeks (Aaker 1997; Wallendorf and Arnould 1988) or possibly even give him or her a sense of comfort at having found a brand that “fits” with his or her self-concept." (Aaker 1999; Sirgy 1985; Swa- minathan, Page, and Gurhan-Canli 2007). Well-known examples for pop music artists and their sponsorships with brands are: Pitbull and Kodak, Bud Light, Voli Vodka, Pepsi. Jennifer Lopez and Fiat, L’Oreal, Tous Jewelry. Alicia Keys and HP, Glaceau Vitamin Water, GM.

Rich Mangicaro (2006).Getting the deal – The Music Industry’s Endorsement Game.

Retrieved December 11th, 2011, from: www.richmangicaro.com/Press_files/MangicaroPAS-1.pdf

John Deighton (2008). When Brand Personality Matters: The Moderating Role of Attachment Styles.

Retrieved December 11th, 2011, from:

www.csom.umn.edu/assets/120408.pdf

Simon Tam (2009). How to Get Endorsements or Sponsors for your band, tour, record, etc.

Retrieved December 11th, 2011, from:

http://www.musicthinktank.com/mtt-open/how-to-get-endorsements-or-sponsors-for-your-band-tour-recor.html

Digital music and intellectual property: The music industry engages governments worldwide to act.

My first blog post is about the music industry's lobby campaigns to enforce copyright protection of digital content. The music industry has spent "tens of millions of dollars… during the past decade" to engage governments worldwide in putting up a legal framework to protect intellectual property. Bruce Gain (2011). The United States Secretary of the Senate Office of Public Records (SOPR) and the Recording Industry Association of America (RIAA) have spent over "$90 million in lobbying efforts in the U.S. alone since 2000." Bruce Gain (2011).  When the revenue in CD sales began to decline in 2000, the organizations spent $4 million in lobbying. As the problem became bigger and bigger, spending went up to $17.5 million in 2009. (According to the center for Responsive Politics) Additionally, the recording industry has also spent more than $50 million in "legal fees for the industry's lawsuit campaign." Bruce Gain (2011).

David Levinthal, communications director for the Center for Responsive Politics says: "The music industry is spending more than other media groups". Bruce Gain (2011). The motion picture industry e.g. spent less than half in lobbying and was also suffering from Internet piracy since 2000. I think spending in lobbying will increase for media industries such as print media (books and newspapers) or the film industry. Due to the progress of the web  and its speed, we'll see new challenges in terms of intellectual property protection for these industries in the next years.

The music industry is also active in Europe to influence "digital file protection laws". Bruce Gain (2011).  In France and United Kingdom, Internet access can be suspended easily, if the consumer violates copyright law. The government in France has already sent out letters to alleged infringers with the intention to warn them about the consequences.

In the United States, legislation such as the Digital Millennium Copyright Act and the Copyright Term Extension Act were "drafted prior to 2000" and since that time the music industry still waits for an absolute removal of all copyright protected music on the Internet. Bruce Gain (2011).  Adrian Strain, director of communication at International Federation of the Phonographic Music (IFPI) says: “The music industry is responding to the digital environment in three basic ways: licensing repertoire in new ways that respond to what the consumer wants, public education to explain copyright laws and highlight legal services, and copyright enforcement to protect our rights.” Further he continues: “Our digital business is way ahead of other creative industries, with 30 percent of music sales coming from digital channels,” Strain said. “But none of this commercial activity and innovation can succeed unless there is proper protection of music rights and effective intellectual property enforcement.” Bruce Gain (2011).

Bruce Gain (2011). Special Report: Music Industry’s Lavish Lobby Campaign For Digital Rights.

 Retrieved December 11th, 2011, from: http://www.ip-watch.org/weblog/2011/01/06/special-report-music-industrys-lavish-lobby-campaign-for-digital-rights/

Important facts in management, agent and label contracts

1.Management contracts:
Responsibilities are: represent the artist, deal with agents, keep business partners updated, make decisions on behalf of the artist. The role of management is split in personal management / artist management and tour / road management.

The most important cornerstones in a contract are:
- percentage


- termination
- exclusivity
- territory



2. Agent contracts:
Responsibilities: Connect artist or management with venue representatives on a certain territory, where the agent operates. Agents are responsible for touring. They need exclusivity to ensure that their show price is fixed. If more than one agent operates on a territory at the same time, it can happen that two competing agencies undercut a price for a show until one of them gets the deal. Venue representatives are angry if they hear from somebody else about a different pricing for a show they just bought. The agents business advantage is to know venue representatives in person, so the artist belongs to a catalogue of other artists who all stand for certain quality standards. Management can't deal with venues, directly. Management always deals with agents and tour management is not agent work.

Again, these are important facts to negotiate in a contract:


- percentage


- termination
- exclusivity


- territory

3. Major Distribution combined with secured marketing investments and a strong image are the key for success on the market. Labels try to sign as many artists as possible to have an option on them, in case they develop and generate a request. Major labels typically use their names to sign artists exclusively. The artist gets a (huge) advance. For instance 20.000USD. The management sometimes gives advice to sign the contract because of their percentage of the advance and the dreams, the major A&Rs promise.

IMPORTANT FACTS IN CONTACT: 


1. Exclusivity and image control -> No other releases than the ones, approved by the label


2. Push back option -> The label can push back the album release as many times as they want. Exclusivity applies and artist can't release official songs.
3. No marketing investments -> The label makes the advance recouple from artist royalties and minimize the risk of failure by leaving the marketing budget out of the contract.


4. Major label often put other clauses in the contract and then name the contract „Standard recording contract“ to give the artist and its management the impression these are market standards.  Other things that benefit labels in their contracts are i.e: "pro rata royalty rates" or "controlled composition clauses"

360-degree model - Artist Management and labels

Today, consumers attach no direct value to music anymore, because the way how they get new music changed through technology. In the past, music labels generated most of their income by selling records. An artist released a record and went on tour to stimulate sales. Today, consumers listen to new music on YouTube, Facebook or via subscription services. Many young people share their favorite music online or copy gigabytes of music to hard drives. Music lost its value and labels have to find new ways to earn money with their artists. Nowadays, most labels sign artists "360-degree". Besides the right to use the recordings of the artist, the record label participate in other income streams, including publishing, live performance, merchandising, sponsorship and endorsement deals. For this reason the model is also known as an "all rights" deal. If the publishing rights are excluded, it is called a "270-degree" deal. It is often necessary to sign such a deal because marketing investments are high and a label only invests, if investments can be recouped. Another way is, to produce music on an independent label and license it to a major label. In this case, it is possible to sign a package & distribution (P&D) or master licensing deal without giving the label a piece of everything, the artist earns. A typical breakdown of the 360-Degree record deal for new bands can look like this:
"Label gets approx. 90-95% of record sales. / Label gets approx. 10% of touring income. Label gets approx. 10% of merchandise income. / Label gets 9c publishing cut per song (or more, depending on media distribution)" Unknown, U. (2008).
Established artists often sign 360-degree deals and receive huge advances. Madonna received a 80 million advance from Live Nation in 2007 for giving them 360degree rights. When independent labels sign 360-degree, they need to have a good business plan and success in their past business operations to convince an artist about the benefits of their label. Its a huge commitment for artists to sign 360 degree.

References:

Phillips, C., & Shepherd, M. (2010). The 360-degree Deal and other Music Business Models. Retrieved October 1, 2011, from: http://www.boltburdon.co.uk/en/Business%20Clients%20Bolt%20Burdon%20Solicitors%20London/Media%20and%20Entertainment%20Bolt%20Burdon%20Solicitors%20London/The%20360%20degree%20deal%20and%20other%20business%20models.aspx

Unknown, U. (2008). 360 Degree Music. Retrieved October 1, 2011, from: http://brettgoldberg.wordpress.com/2008/01/11/360-degree-music/

Meyerowitz, J. (2009). 360 Record Deal. Retrieved October 1, 2011, from: http://www.podcomplex.com/blog/why-360-degree-deals-wont-turn-the-music-industry-around/

Marketing costs in the music business

To launch an artist’s career, it takes a lot of money. For a new pop act in the UK, it takes about 1.5 Mio Dollar to break the first song into major charts, what is necessary to start a national career for the artist. How a company manages its marketing can determine the success of an album and the artist. In general the return on investment chart shows an exponentially route. On the point of 1 Mio dollar is the break through point for a rock act on the national U.K. music market. Before reaching this point investments, can't be recouped and the investors loose money. In terms of radio promotion for example, it takes a certain amount to get the song played on the bigger radio stations. Big stations compete to play the hottest songs and that's how it can take over to the next station. But if only a few stations are playing the new act, radio DJs are not willing to take the risk and play something, that is not proven on the market. Besides the production of a record, marketing costs include: The imaging/ branding of an artist, advertising at both trade and consumer publications (push and pull the message through the channels), publicity, radio promotion and retail positioning in stores.

Account advertising also known as co-op advertising:

This is besides radio and video promotion the most expensive marketing element. Record labels invest hundreds of thousands of dollars to place their records in the most prominent positions in the retail environment. The pricing and positioning (P&P) of an album means i.e. to offer the product at a reduced "sale" price in connection with prime real estate placement in-store. Other types of account advertising are: print advertising in stores, end-cap positioning, listening stations, artist in-store visits, point of purchase material placement guarantees etc.

Advertising: Basically marketers distinguish between internal and external advertising.

Trade advertising is an internal promotional activity. All efforts are concentrated to attract the decision makers of companies and in the industry. In this context its important to focus more on objective information and relevant facts such as sales statistics, radio success, tour information and the people who are working behind the project if they are known for quality standards, while consumer advertising is often much more based on emotions and easy and clear marketing messages. The mentioned decision makers include music buyers for retail stores, program directors of radio stations, talent bookers for TV shows, reviewers for newspaper and consumer magazines and talent buyers for venues.

Consumer advertising is considered external advertising, because it targets the end consumer. While internal advertising searches for decision makers, the goal of external advertising is to build up a audience, that buys music. This means, external advertising is often mass advertising, where it is about to reach as much consumers as possible and affect them to make a buying decision. Nowadays, micro targeting and an integrated approach become more important and for this purpose, consumer advertising changes to focus on certain target groups with exactly defined demographics and psychographics i.e. the Amazon.com buying recommendation or advertisement in the internet (on Facebook or Google).

Video production:

The cost of video production decreased in recent years, because the internet made it possible to show videos to fans without having them in the rotation of a music channel on TV. On the other hand, music channels on TV changed their program. However, major music video productions have budgets between 30.000 - 250.000USD and often 100 percent of the overall costs are recoupable from video/DVD sales and streaming income and about 50% from record sales (plus a percentage of all other artist income, in case the label has a 360degree deal with its artists).

Artist promotion:

This is normally the cost of introducing and promoting the artist to radio. Labels often take artists to radio stations, including on-air interviews, dinners with music programmers, and Listener Appreciation events. These costs are often hard to document and that's why they usually not recoupable.

Independent promotion and publicity:

Record companies often outsource services to independent promotion companies and independent publicists. In addition to the label's efforts, these companies and agents should enhance the label's marketing strategy by extending exposure for the artist via additional radio airplay nod media coverage. This line item is not recoupable.

Media travel:

A media event is usually an isolated event, i.e. a TV appearance or an award show. The interest of the record label is to make the artist more valuable for the industry and that's why they pay for the costs associated with travel, which are not recoupable.

Typical example of a new pop act

Advance US$200,000

Recording US$200,000

3 videos US$200,000

Tour support US$100,000

Promotion and marketing US$300,000

TOTAL US$1,000,000

More established pop artist with much greater levels of expenditure.

Typical example of a superstar

Advance US$1,500,000

Recording US$400,000

3 videos US$450,000

Marketing and promotion US$2,300,000

TOTAL US$4,650,000

REFERENCES:

Hutchison, Tom (2006). Record Label Marketing

IFPI (2010). Investing in music.

Retrieved June 12th, 2011, from: www.ifpi.org/content/library/investing_in_music.pdf

Pricing methods for events:

Price setting for intangible music related products like concert tickets is a critical step in developing an event budgeting plan. If the price is set too low, customers classify the event as product of poor quality and think it is not worth to attend. If the price is set too high, customers won’t be able to afford to attend. In this context, it’s important to determine an appropriate price-quality relationship with the aim to educate customers about the value of the event and to ensure that demand meets supply:

Cost-plus pricing of events: This might bet the most popular method of pricing products. The marketer simply adds a percentage (or margin) to the total cost of the production of the event to reach the break even point and gain a profit.

Market skimming (price skimming): This method is used when demand for tickets far exceeds the venue capacity. Concert promoters can charge very high prices for shows in venues they know will easily sell out. Promoters maximize the profit margin per ticket until demand meets supply and ensure, that there are no empty seats left.

Market penetration: This pricing method is used for events, which have no premium market position. The prices are set low to maximize sales. Market penetration is widely used in highly competitive event markets i.e. touring of a new pop act introducing a debut album. Premium buyers, such as opera visitors have generally more money to spend and don’t expect to pay a cheap price for a high quality event.

Service quality leadership: The events, which use this method, have a high level of actual and perceived quality. Their consumers are willing to pay the highest prices to have the best quality. The highly coveted seats at concerts of A-status artists (like U2 or Alicia Keys) are sold in this premium and super-premium pricing segment.

Professor Larry Robinson from the Ohio State University says in an interview on YouTube:

“Value-based pricing starts with educating customers about the additional value, that they get from your product, that they can’t get from the next best alternative.“ Further he says, he knows about cases, where customers switched to another company/ brand because of increased prices. They recognized, that they can’t get the expected quality from the competitors and returned, now willing to pay a higher price for the product/ service of the company.

References:

Robinson, Larry (2009). How value-based pricing works.

Retrieved July 11, 2011, from:

http://www.youtube.com/watch?v=3i2YguzXsnQ&feature=related

Beard, Mark & O’Hara, Ben (2006). Music Event & Festival Management.

Integrated Marketing Communication (IMC)

Integrated Marketing Communication (IMC)

„Integrated marketing communication is a way of looking at the whole marketing process from the viewpoint of the customer" Vargas, R. (2005).  It is "built upon a deep appreciation of the needs and expectations of customers" Beard, M. & O’Hara, B. (2006). When looking at the four Ps (product, price, place and promotion) in marketing and how they relate to the four Cs (Customer value, cost, convenience and communication) from the customer perspective, it becomes clear, why an integrated marketing approach is so important for the effectiveness of a marketing campaign.  At its basic level, this means to integrate and coordinate all promotional activities like: media advertising, direct mail, personal selling, sales promotion and public relations. All these communication tools work better, if they work in harmony and not in isolation. When all areas are working together, the effect is much greater, than just an addition of every single part. It's more a multiplication. The aim of IMC is to "produce a clear, unified, consistent and compelling customer-focused message about the organization and its product" Vargas, R. (2005).  The process of IMC can be divided in horizontal, vertical, internal, external and data integration. Horizontal integration means, business functions like production, finance or distribution working hand in hand and their "decisions and actions send (similar) messages to customers" Unknown, U. (2009). A centralized database connects the different departments such as sales, direct mail and advertising and it ensures measurable marketing results. This data integration also avoids, that "marketing efforts are being performed in an unprofessional and uncoordinated manner" John, P. & Foley Jr. (2009), because every part of the marketing mix has the same information about already reached customers and their reaction on the marketing message. It saves time and money as well. Vertical integration defines common marketing and communications objectives and it helps to step away from the multiple point solution approach. All departments involved, should be briefed about the common objectives. "The task of the IMC is to translate marketing objective into a communication objective that directs the specific communication tasks necessary to reach a stated sales figure" Beard, M. & O’Hara, B. (2006).

"Internal integration requires internal marketing" The goal is to "keep all staff informed and motivated about any new developments from new advertisements, to new corporate identities, new service standards, new strategic partners and so on" Unknown, U. (2009).

External integration is focused on all external partners like advertising or PR agencies. The aim is to work closer together and to communicate a cohesive, integrated message with them.

The advantage of a working IMC is increased economic efficiency through creating competitive advantage, boosting sales, saving money, saving time and saving a lot of stress. The IMC is strongly focused on customer needs, like explained in the introduction. It encourages moving the customer through the various stages of a buying process. A successful IMC communicates an image of the organization and improves the development of a dialogue and a long-term relationship with the customer. Brand equity and brand loyalty can be established more easily. Creating a strong IMC means to communicate a "consistent, consolidated and crystal clear message" in a busy word, full of confusing messages and competitors. The customer finally can "move (more) comfortable through the stages of the buying process.

References:

Beard, Mark & O’Hara, Ben (2006). Music Marketing, PR & Image Making.

John, P. & Foley Jr. (2009). An Integrated Marketing Approach.

Retrieved May 6, 2011, from:

www.webfulfillment.com/ilinkno/ef/marketings_holy_grail.pdf

Vargas, Raul (2005). Integrated Marketing Communications - An Effective, Comprehensive Approach

Retrieved May 6, 2011, from:

www.varcom.com/BizVentures4q05.pdf

Unknown (2009). Integrated marketing communications.

Retrieved May 6, 2011, from: 

http://www.multimediamarketing.com/mkc/marketingcommunications

Communication objectives in marketing

When a company develops a marketing plan, it has to determine communication objectives. Objectives are important to understand, where the company wants to go with the marketing plan. Do they want to educate their customers? Build support or create demand for their product? Do they want to get people to do something differently than they are used to do it?

If the company has already set marketing or business objectives, these objectives can be translated into communication objectives of a marketing mix. After understanding the stakeholders, the external environment and the organizational context, it’s “possible to set communication objectives for a campaign” Baker, S. (2005).  

Marketing objectives can include an overall sales value, profit margins or a certain market share. They differ from communication objectives, which describe the “direct effect of communication e.g. brand awareness, response rate, attitude change, offer take-up, personal recommendations etc.” Baker, S. (2005).

In the music business a marketing objective could be to sell 100.000 copies of an album over a 12 months period. This marketing objective can now be translated in a communication objective. e.g. to gain 50% awareness of the product among the defined target audience.

In this context it’s important to remember the integrated marketing approach. “The communication plan may include sub-objectives for each stakeholder or target audience and for a period of time within the planning stage. Baker, S. (2005). But there should be no separate objectives for each communication method in the marketing mix, because the integrated marketing communication sets common communication objectives for all elements of a marketing mix and directs specific communication talks that are all based on the same communication objectives.

Communication objectives “fall into three basic categories” Beard, M. & O’Hara, B. (2006).

1.     To create a certain level of awareness in the target audience i.e. “To create 40% awareness of product x in the target audience over the campaign period” Beard, M. & O’Hara, B. (2006).

2.     To influence an audiences preference for a product or service i.e. “To create 40% preference for a product x amongst the target audience over the period of the campaign” Beard, M. & O’Hara, B. (2006).

3.     To stimulate sales, which is a communication tactic directly linked to the sales performance of a product or service. i.e. “To sell 30% more CDs than in the previous interval by using a new sales force strategy in sales promotion over the period of the campaign”

References:

Beard, Mark & O’Hara, Ben (2006). Music Marketing, PR & Image Making.

Baker, S. (2005). Section 1. Integrated Marketing Communication

Retrieved May 13, 2011, from:

http://v5.books.elsevier.com/bookscat/samples/9780750663618/9780750663618.PDF.

Unknown, U. (2009). How to write a good communication plan.

Retrieved May 13, 2011, from:

http://davefleet.com/2008/05/how-to-write-a-good-communications-plan-part-5-objectives/