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Shifting Gear // Merchandise Sector Focus PART 2 //

PART TWO:

[Follows on from Part 1 here…]

…With fans’ perennial love of the T-shirt, plus all these new items and on- and offline retail channels, merchandisers must be back-flipping for joy? Not quite, they say.  The price of cotton has nearly doubled over the last 18 months, while escalating fuel costs have caused production problems and, in certain cases, led to dips in sales. Add onto that the decline in ancillary revenue spend at shows, increases in VAT in many European markets, plus the standard 20-25% venue concession rates, and the fact that the sector is making any money at all becomes all the more remarkable.

“It has been somewhat of a challenge to fulfill orders for our clients and get it in on the price point they’re used to, “ says Kill The 8’s Aaron Rosen. “I don’t see the price of products going up for fans but we’re definitely affected.” Rosen’s is a sentiment shared throughout the sector: protect the customer. “Don’t make the deals so difficult on us, the merchandisers, that we have to pass the price onto your fans – the higher the royalty rates, the higher the prices,” warns Live Nation Merchandise’s Furano.

Meanwhile, Ruth Blakemore from Firebrand says it’s about operating creatively: “We have to work very hard to try to keep the volumes and revenues where they are, and growing,” she says. “We do that by extending or shrinking the range – we do everything we can so that we’re not putting people off by having prices that are too high, despite VAT and cotton.” And by driving innovation in the sector, many companies are guaranteeing future business. Print-on-demand is one such idea, whereby the customer is involved in designing their merchandise. It’s a concept which cuts down on surplus stock, while the ability to buy on impulse and on the move via mobile apps, is another area to watch develop, as is the opportunity that cashless RFID wristbands and cards is sure to bring.

This summer has seen a number of high profile trials, such as Coachella and Bonnaroo festivals in the US with Intellitix’s new access control system. In the UK, Wrist Marketing is working with Ticketmaster, Mama Group and AEG Live. Rory Musker, head of sales, says RFID bands remove the need for physical tickets and cash, but also work to deter ticket touts. “RFID wristbands are becoming a lot more attractive to live music events, to prevent cash shrinkage, to manage production staff and give the consumer a better time so they don’t have to wait to get into the event.”

Such future innovation is likely to drive progress in an industry that has felt the full winds of change over the past few years, not least when the major labels sat up and took notice. “Merchandising is much more of a priority for record companies now, in an attempt to offer 360° deals and find additional revenue streams as a result of the downward trend in income from recording sales,” says Event! Merchandising’s Jeremy Goldsmith, referencing Universal Music Group’s purchase of kingpin Bravado in 2007, and EMI snapping up Loud Distribution in 2009. Bravado co-founder Keith Drinkwater has welcomed the integration of Universal into the sector he helped launch over 30 years ago. “Communications and planning are the big plus points,” he says, “but also dual marketing initiatives – we are endeavoring to make one plus one equal two and a half.”

“[Merchandise] is not going to save the record industry. These are all big fat cats with massive salaries, and they are all clutching at straws…” – Barry Drinkwater, Global Merchandising Services

According to some, the ongoing effect of the big boys being involved could be consolidation, as the smaller companies struggle to find a foothold. “It may well be that the number of merchandising companies will shrink too,” says Keith Drinkwater. So should the merchandise sector be scared of major labels? “No, not reallythey need to do something to help them survive,” says Green Island Promotions’ Steve Lucas. In fact, the involvement of the labels may add to business, as Kill The 8’s Aaron Rosen proposes: “They don’t have people who can source products, there’s no quality control function, and it’s hard to warehouse the stuff through their traditional channels. So a lot of record labels are outsourcing their merchandise initiatives – it’s been a very positive thing for us.”

Perhaps no one understands the record label’s sudden lunge for the merchandising sector more than industry pioneer, Barry Drinkwater (brother of Keith Drinkwater), the co-founder and former CEO of Bravado, who left shortly after it was acquired by Universal. In 2008 he set up a new, independent company, Global Merchandising Services (GMS), which has seen some of his old and loyal clients move over to him from Bravado, including Iron Maiden and Motörhead, while scoring new clients such as The X Factor. “The margins in merchandise aren’t huge at all compared to the record business, and they’re seeing it as a natural adjunct to what they do with these acts because they spend a lot of money breaking them in,” says Barry Drinkwater. “But it’s not going to save the record industry. These are all big fat cats with massive salaries, and they are all clutching at straws to try and consolidate this by doing a land grab and bullying acts.”

“We see the larger, corporate sponsored merchandise companies losing more of their clients to independents that are able to offer a more tailored service.” – Christiaan Munro, Sandbag

Guy Gillam, MD and founder of UK-based TCB Inc, which was established in 1989 and has clients including Orbital, The Flaming Lips, and Glastonbury Festival, says, “In my opinion, the current state of music cannot continue. Too many people want a bigger slice of every pie. There’s not enough money to go round, and the ‘big boys’ are just getting greedier and greedier.” Gilliam’s “big boys” also include the larger solo operations, but Christiaan Munro, director of UK-based Sandbag, the ethical merchandiser behind Radiohead’s inventive In Rainbows and The Kings Of Limbs campaigns, believes that it’s just a matter of time before the threat implodes. “We see the larger, corporate sponsored merchandise companies losing more of their clients to independents that are able to offer a more tailored service,” he says. “This is because the lure of a whopping advance, firstly, isn’t as attractive to the more business savvy managers, and secondly, they won’t exist as the merchandise companies struggle with cash.”

Territorial squabbles aside, as merchandise companies look ahead to the future – to the potential of corporate consolidation, the game-changing trends in innovation, and the increased participation from the artist and their management – they can be confident about one thing: that their sector has never been more vital. “Fans will always want a souvenir of the experience,” says Firebrand’s Ruth Blakemore, “and as long as the product is the best possible value for them, and innovative, merchandise will sell.”

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 2 //”

  1. […] [Continues in Part 2 here…] […]

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