Mobile music: Brand-as-you-go

Orange UK has launched a new free music streaming service aimed squarely at 16-24 year-olds today in a bid to capture a youth market hungry for free music. The new service - entitled 'Monkey' - is a JV between Universal Music Group, Orange UK, and Channel 4 and is the first free music package positioned entirely towards pay-as-you-go customers. The new deal will serve up thousands of songs from Universal artists, plus free competitions, news, gossip, exclusive access to artist content as well as providing the ability to share playlists via social networks. All of this will be free if users simply top up their phones with £10 credit.
 
"The free music element of the package fulfils an untapped market that is looking for a low-cost, easy access music service," states Orange. "Unlike some music services, which are either restricted to high-end more expensive handsets or have download costs, Monkey is for everyone," echoes Tom Alexander, CEO of Orange. Mark Mulligan of Forrester Research however takes slight issue with this highlighting how the 600 minutes a month restriction on Orange's new pay-as-you-go music service positions it as slightly less than free in reality. He argues that customers regularly paying £30 a month in phone credit are actually paying the equivalent of £2.14 per album.
 
So where do other brands fit in this new musical picture? Well, the service is also expected to tie-in with Oranges recently announced partnership with Blyk, the mobile marketing company, with Orange suggesting that Monkey will include "great offers from relevant brands". It’s plain to see the youth market wants free music, but do they want this to come with brands on board? The answer seems to be yes for a large percentage of the market. A recent KPMG Consumers and Convergence survey suggested that 40% of UK consumers are happy to watch mobile ads in exchange for free music. A figure backed up by an annual research survey from 3ple-Media, which stated that 41% of mobile subscribers are 'quite likely' to forward mobile ads in exchange for free access to music tracks. (Notably in these cash-strapped times this is up from 30% in last year’s survey)
 
What particularly interesting about the Blyk tie up is that Orange will serve advertising based on users preferences. How this works in practice in terms of what brands a Lady Gaga fan gets over a Razorlight fan is at present not entirely clear. However, the fact that music consumers want personalised advertising is. Around 48% of 18-45 year olds say they pay more attention if an online ad is relevant to them according to Lightspeed Research. One can assume this translates equally favourably across to mobile as well.
 
So can brands reach music consumers via mobile? Undoubtedly. Can they get the relevant cut through? Arguably yes if the ad content is personalised to user preferences. The main factor here is that advertisers need to see mobile as another touch point in a wider music related strategy. Around 51% of consumers say ads are highly effective if they “give me new information” according to a new Harris Poll.  A non-related ad is going to get passed over, but one that drives the user into a deeper musical experience elsewhere is going to have the highest engagement factor. Mobile ads in this respect act as bookmarks to a deeper rooted music association in the minds of music consumers. Not so much music-on-the-go, more a music experience you can go to.

UK Brand investment in music totals £89M in 2008

A new report from UK royalty collection society PRS for Music points to growth within the music sector despite the economic problems and continuing piracy issues - with the overall size of the UK music industry growing by 4.7% to be worth £3.6B in 2008. The report also highlights the need to create a balanced account of revenue across the full spectrum of the industry. As well as traditional label revenue, and the substantial live market, the wide reach derived from B2B revenues, such as licensing, advertising and sponsorship, increased by 10% to £925M during 2008, despite a slump in spending by major advertisers. You can download the full PRS report here.
 
Will Page, chief economist at PRS, emphasizes the importance of brand revenue to the overall picture. He highlights data provided by FRUKT - which outlines an £89M spend in music from brands - saying it "introduces us to a source of revenue which isn't new, but has arguably been omitted from much of the industry analysis to date". Advertising support (£24M) and live sponsorship (£23M) dominate, however there is a ground swell with regards to digital investment (up almost 20%) and brands being prepared to step away from the big names and events to embrace niche and emerging music. Jack Horner, Creative Director, FRUKT, says: "Brand investment in music is more innovative than ever before, with more consumer brands understanding that a long term view and clear definition of a role within music is critical to their acceptance and success. As brands move from the old approach of badging and towards developing content, music offers the opportunity to create truly engaging platforms. These investments in music are becoming a valuable revenue stream for the music industry, hence the openness with which all parties now approach collaborations and the increase in deals".
 
Brand investment: the numbers
 
•    Advertising support = £24M (27%)
•    Live music sponsorship = £23M (27%)
•    TV = £25M (28%)
•    Event creation = £8M (10%)
•    Digital = £5M (5%)
•    Artist endorsement =  £3M (3%)
 
We’ll be looking at this area again in our upcoming FRUKT Music Intelligence Report 003. In the meantime it’s worth considering how ingrained endorsements have become in both the brand psyche and the bank accounts of major artists.  
 
Beyonce was ranked 4th on Forbes Celebrity 100 earlier this month with fairly staggering earnings of $87M. The Beyonce brand has gone from strength to strength with revenue diversifying away from the more traditional roots of album sales. That's not to say she's not shifting plenty of albums, around $29M of her earnings came in from direct music sales. However, other revenue generators based around the Beyonce brand dwarf this. She netted $14M in a combination of concert ticket and merchandise sales, highlighting the importance of her new tour on forthcoming earnings. However, putting album sales and live revenue to one side, Beyonce has pulled in $15M from her fashion line (Dereon) - she has announced her intention to give away Dereon handbags and a pair of Dereon sunglasses via a text competition during her current tour - and a massive $20M from brand endorsements.
 
With a string of endorsement campaigns for Armani, Nintendo, L'Oreal and Trident gum under her belt, the figures here highlight just how much brands are financing music. The question however is whether brands are getting the required ROI by aligning with artists in this way? Simply badging a product with a celebrity, or having product touched by the hand of a major singer can often provide the midas touch for artists but not always for the brand. Many brands are now moving to deeper relationships with musicians that offer additional creative freedom for the acts involved and also provide more long-term investment opportunities for fans. Badging certainly has its place, but followed up with deeper long-term music investment it can offer a more lucrative reward for all parties - brand, band and fan - over time.

Music fans want a return on their festival investment

The saturation of the music festival market – which reached its peak in 2007 – echoed the mounting problems that arose from the saturation of the sub prime mortgage market of the same period. With live music the lucrative end of the music industry - following the dramatic falling away of the CD market - everyone wanted a slice of the financially satisfying festival pie. But as seen in the mortgage business, short-term gain isn’t always as lucrative as it’s cut out to be. As a result this year started out with the festival sector facing an uncertain future and an entirely plausible festival recession.  Would music fans ever don their wellies again?  Would sponsors pull out on mass? Which festivals would find that their sub prime tent pitch was up for repossession?

The festival sector has undoubtedly seen some natural wastage as strapped for cash consumers become increasingly picky about where to spend their hard earned festival dollars.  We conducted some research into the habits of festival goers this year in the UK - in partnership with Virtual Festivals - and over a third of music fans said they were cutting back on the amount of festivals they were attending this year – with around a quarter not attending at all.  Having said that by far the biggest cut back is in overseas festival attendance, with 88% opting for festival ‘staycations’ as the recession makes even the most attractive line ups abroad financially unpalatable.

The knock on effect of the Credit Crunch clearly hasn't stopped music fans hitting festivals in their droves, as attendance at UK festivals so far testifies to. Surely it has hit brand involvement though?  Not at all. In fact despite the feared slump, the opposite is actually happening. Brands are investing more in the live space according to a new IEG Sponsorship Report. The spend across North America will increase from the $1.084B injected into the sponsorship of music venues, festivals and tours in 2008, to $1.08B (a 3.8% rise). Notably, in a period where traditional music sales are severely diminished and a global recession is throttling the world's finances, this is the highest ever recorded sponsorship spend reported by IEG. "The fact that music sponsorship spending is holding its own in today's turbulent economy demonstrates the growing importance of music to corporate marketers," states Bill Chipps, senior editor at IEG. Another recent study (conducted by EMI) found that 67% of marketing executives are continuing to invest in live events as part of their branded entertainment strategies.

But what about the music fans, are brands getting their message through to them? A recent study highlighted in Marketing Week suggests they are. It pointed to the fact that 41% of music fans have positive feelings towards the brands that sponsor music festivals, with an equally sizable 40% showing positive feelings towards the brands that advertise at these events.

In our research alcohol brands were far and above the most recalled by music fans, which is good news for those brands that are securing lucrative pouring rights, but it does also highlight how much more can be done on the ground by others in order to ramp up that recall rate. Brands need to realise that simply badging an event isn’t a strategy in itself, and that hitting 50,000 eyeballs isn’t the same as reaching 25,000 hearts and minds. “Festivals are unique in offering a large market share of target audience in one place at one time but you’ve got to be communicating something relevant to the right people in the right way,” says Ziggy Gilsenan, MD Get Involved and Co-founder of Bestival/Camp Bestival. “Quality of audience over quantity is key if you want to achieve a deeper, more relevant dialogue with the consumer.  Many brands still go for the shopping arcade approach of hitting events with big audiences but have no creative appeal to that audience – it  all becomes a bit like Tescos in a green field, soulless,” says Gilesnan. “You cant just drop a shopping mall sampling exercise into a field of 50,000 festival goers and expect to have the same consumer reaction”

On the ground activations from a brand need a proper, considered focus, tailored to its intended market. Which means defining clear goals prior to the ‘big idea’,  nurturing how it is communicated pre and post event, and understanding just what function and value you will ultimately be bringing to the fans experience of the event. "Consumer brands really need to think 'beyond-the-field' - just turning up at a couple of events with a bus and some deck chairs may be fun, but it's going to be tough justifying ROI on these light and 'idea-less' promotions when so many brands are building festival activity into a well considered year round programme," echoes Jack Horner, creative Director, FRUKT.

Experience is everything, give fans a return on their investment and it’s likely that brands will find themselves centre of mind with music fans as they recall the acts that were centre stage.

For more on brand activity at festivals see the FRUKT Music Intelligence Report 002.
 

Ad-funded music streaming heats up

We7.com, the 4M track strong free streaming music service founded by Peter Gabriel, has announced that it has topped 2M monthly unique visitors. The news comes hot on the heels of its main competitor Spotify announcing its own 2M user landmark. However, this vast intake of users amounts to very little if advertisers don't get behind both services, something highlighted well by We7 CEO Steve Purdam in a recent interview where he suggested the focus of the site was to "Sell more adverts, get more music, get more audience". That is very much the priority order today, without advertisers on board survival is reliant purely on funding to ride out the downturn which is no doubt holding potential advertising back. With Spotify recently seeking a further £20M-£30M in investment, funding should keep the ad-funded ship afloat for a while longer. With few other bold options on the digital music deck, no one wants to see the ad-funded ship sink. The interesting part of We7's 2M milestone is that 50% of that figure comes from it's "play anywhere" strategy - where music is accessed via online media partners, including NME, the Guardian, the Sun and Daily Mirror. With added reach outside its site and users spending on average 30 minutes within the We7 site itself, the free consumer becomes a valuable customer for brands - but the question still remains as to whether brands can become key customers of these services and support them to a level that can sustain their business model long term?

Today Microsoft announced their intention to enter the space. ""Music is an important area for Microsoft," said MSN executive Peter Bale. "We are looking at launching a music-streaming service imminently." He went on to reveal the primary reason for the quick turnaround: "It will be a similar principle to Spotify but we are still examining how the business model will work." Microsoft's previous music service via MSN was pulled in 2006 after two years on the market and any new model may end up utilising technology from the company's acquisition of digital music service provider Musiwave. The new venture will be promoted through MSN and other parts of the Microsoft network as well as potentially though its Xbox gaming console - with a view to making the device an "entertainment hub" in users homes. The traffic that MSN brings and the existing relationships they have with brands and media agencies may well make them a major competitor to the existing players in this space.