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
