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Shifting Gear // Merchandise Sector Focus PART 1 //

Tighter margins, fierce competition, a constantly changing marketplace, who’d want to be in the merchandise game? Plenty, writes Clive Rozario…

Until a few years back, the music merchandise industry was powered by black T-shirts and posters sold out of boxes at the back of sweaty venues. These days, a KISS fan in rural Malaysia can buy condoms printed with Gene Simmon’s tongue along the length of the latex, via Facebook. And as artists’ other revenue streams have declined, merchandise has become both a valuable source of income, and a pivotal branding tool. But the increase in merchandising services, and the subsequent dilution of the market is forcing merchandise companies to accelerate the speed at which they innovate or risk falling behind.

With the demise of the CD, and the shift in music’s format to ostensibly a digital product, artists are beginning to realise the importance of having a footing in the physical world. “In the digital world, that T-shirt, that poster, that sticker, or that hat is the physical image and brand point for the artist,” says Aaron Rosen, director of Canadian company Kill The 8, which includes Deadmau5 and Sony BMG Music Canada Inc. among its clients. “Merchandise is becoming an important bridge for creating, maintaining and nurturing their fan connections.” Rosen reports a mounting desire by artists to have greater creative input into their merchandise, whether it is self-designed clothing, as with pop-punk outfit Kids In Glass Houses and their range of own tie-dyed shirts, or Radiohead’s involvement in the Stanley Donwood-designed newspaper edition of their album The King Of Limbs. And as the range of merch has widened, so too has the distribution network.

More and more artists are emerging with their own fragrances, fashion lines, and even electronic accessories – as with the Dr Dre-endorsed Beats headphones – in a move that has seen the merchandise sector link even closer to the retail industry. “This is a huge area of growth,” says Keith Drinkwater, the co-founder of premier merchandising company Bravado, which counts the Rolling Stones, Justin Bieber and Lady Gaga among its artists. “Over the past two years we have developed partnerships and relationships with the likes of River Island, Arcadia Store Group, Sara, H&M and numerous high-street fashion multiples throughout Europe.” In addition, Bravado recently announced a global branding deal with Music Entertainment Sports Holdings (MESH), which includes Tommy Hilfiger as a partner, to create music- and fashion-inspired lifestyle brands.

“A lot of the record shops and alternative clothes shops are moving to other lines, purely because they haven’t got the buying power to compete.” – Angus Choice, Loud  Distribution

However, as major music and fashion companies start to compete for the top artist-branding opportunities, the emergence of corporate high street and online mechandising deals pose a threat to the traditional role of the independent record shops. “A lot of the record shops and alternative clothes shops are moving to other lines, purely because they haven’t got the buying power to compete,” says Angus Choice, account coordinator for Loud Distribution, which has an annual turnover of £10million (€11m) and includes clients such as HMV and Play.com. In an attempt to provide emergency aid to the struggling independent shops, Loud Distribution has launched the Indie Collective range, and plans to twin an Indie Collective Day with next year’s Record Store Day. “We’re releasing exclusive T-shirt designs that are only available at the stockists, so you cannot buy them anywhere apart from the independent retailers that have them,” says Choice. “This is something we’re really trying to promote to get people back into the shops spending money.”

Just as the big clothes retailers have shaken the indies, a recent deal might leave them feeling threatened in turn. With the arrival of the ‘value sector,’ or grocery and home shopping networks, a new merchandising channel is emerging. “The trend for licensed products and artist merchandise has seen more and more volumes and ranges making their way into ASDA, Tesco, and Sainsbury,” says Ruth Blakemore, CEO of UK-based Firebrand, which marks its tenth anniversary this year, and has the venue per-head merchandise sales world record for Miley Cyrus at The O2 Arena. When considered with Tesco’s recent announcement to begin selling booking fee-free tickets for selected summer shows (see IQ news this issue), it becomes a particularly interesting proposition.

“We are now seeing as much as 25% extra activity coming from the artists” Facebook page, as opposed to the artists’ fan site.” – Ruth Blakemore, Firebrand Live

Mass market appeal might be one thing, but the direct-to-fan area is a current focal point for the retail strategists, with sales increasingly driven both pre- and post-concert via the artists’ online stores, and more recently, by their social media efforts. “Social media does have an effect on merchandise sales, as it does with ticket sales and brand building,” says Jeremy Goldsmith, MD of UK-based Event! Merchandising, which counts Jeff Beck, A-ha, and Imelda May as clients, and has secured official merchandising rights for the 2012 Olympics. “An artist can plug their merchandise from their Facebook or Twitter sites, to lead to an uplift in sales.” Fewer and fewer fans are subscribing their emails to fan sites, so the real time updates of Facebook and Twitter are becoming the most significant portals in which to announce an artist’s news – whether that be a new single, or a new range of shirts. “We are now seeing as much as 25% extra activity coming from the artists’ Facebook page, as opposed to the artists’ fan site,” says Firebrand’s Ruth Blakemore, “and that’s happened in the last few weeks.”

However, while some companies such as Loud Distribution claim that most of its business is done via the internet, the majority of merchandise companies still make most of their profits from venue and retail sales. Dell Furano, CEO of Live Nation Merchandise counts KISS and U2 among his clients. He says, “If you have a major tour – like a Bruce Springsteen or U2 – it’ll gross maybe $10million [€7m] in concert merchandise, and they’ll do another 10% on their online merchandise sales, so it’s still about touring artists.” Universal-owned Bravado reports similar statistics, saying that 8-10% of their sales are from online sales. But while the percentages are low, they’re rising. “We make a bigger and bigger effort on online sales, because we can reach our fans globally and directly,” continues Furano. “The business has definitely become more global in all respects.”

Progress and the advent of the digital age might be one thing, but in many respects the merchandise sector is still following some very old school rules, particularly when it comes to what sells. “Ultimately, the be all and end all of music merchandise, the one product that will stand the test of time and be here through all the different fashion and innovation trends, is the T-shirt,” says Steve Lucas, owner of the UK merchandising company Green Island Promotions, which was established in 1992 and counts MTV, ITV, Channel 4, and Sony Music as key clients. But that’s not to say that no one’s trying, and recent notables include an Ozzy Osbourne Ouija board game, the infamous KISS coffin (the KISS Kasket) and the Snoop Dogg hot dogs (Snoop Doggs). All of which surround the digital age where fans are able to download or pick up recordings of the show they just attended via a USB stick, CD or Quick Response (QR) code…

[Continues in Part 2 here…]

Originally published by IQ Magazine here

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~ by cliveparisrozario on July 6, 2011.

One Response to “Shifting Gear // Merchandise Sector Focus PART 1 //”

  1. […] [Follows on from Part 1 here…] […]

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