When EMI owner Guy Hands announced what he called a “revolutionary structure” at the music company, including swingeing cuts across its marketing departments (MW last week), he also said he was planning to introduce corporate sponsorship of albums and artists.
While the notion of the next Coldplay album being brought to you by Sudafed, or Blur being backed by Specsavers, has amused many people, the possibility of a new potential revenue stream for Hands is very serious indeed. One of private equity’s most powerful figures, Hands took on a huge challenge when his company Terra Firma paid £3.2bn for ailing EMI in August last year.
Record labels are suffering and EMI has been hit harder than most. Its market share is declining – last year by 9% in the UK and 9.3% in the US. Retail sales of albums are in freefall, down 10.8% last year, according to figures from the British Phonographic Industry. And, although digital sales are rising, illegal file sharing is rife and the increase in sales is failing to compensate for the decline in revenue from album sales.
Generate Sponsorship managing partner Rupert Pratt says/ “It has been promoters and artists that have benefited so far from corporate sponsorship in the music industry, with events such as Carling’s Reading Festival and Virgin’s V Festival. You can see why Hands would want a piece of the action. Sponsors would do a lot of the marketing – it could drastically cut EMI’s costs.”
Pratt points out that there are a number of hurdles to overcome, such as legal issues relating to who owns the rights to material and a potential backlash from music lovers turned off by the idea that artists might be “selling out”.
He adds: “Fans accept commercial messaging in sport but this is not true in the music market. The challenge would be to do it in such a way that the brand is perceived to be contributing something to the experience.”
Head of consumer insight at music marketing agency Frukt Sarah Cratchley thinks brands are looking to the music industry because the sports market has limitations. She says: “Sport is very successful at reaching certain male consumers, whereas music reaches people of both sexes from all different demographics.”
Cratchley adds that having the right fit between artist and brand is essential. “Consumers are incredibly passionate about their music, so it needs to be handled delicately. In the pop environment, commercialism is more readily accepted but in other music genres there is a need for great care,” she says.
Industry observers believe sponsors will be interested in what is essentially a new market. Stream managing partner Dominic Caisley says: “It’s not exactly a new philosophy at EMI, but this announcement seems to indicate it will be placing more emphasis on this kind of thing and opening the doors a bit wider.”
And while some acts claim that corporate backing would compromise their artistic integrity, Caisley believes that industry attitudes have largely changed over the past 15 years and adds: “Actually, there are very few artists who will not consider it these days. It all depends on what the level of the partnership is.”
Hands’ cost-cutting measures infuriated some of EMI’s best-selling artists, including Robbie Williams, who threatened to go on strike. Hands may have some way to go to convince Williams and many other best-selling acts that EMI is the best label for them but experts feel that developing an effective new marketing strategy is a good place to start.