March Madness

      

James Yamasaki

To sell music these days, artists and labels are in an arms race to sweeten the deal -- with lots and lots of stuff.

A few weeks before the release of Tyler, The Creator’s latest album, IGOR (Columbia Records), his team launched a campaign to drive first-week sales. It began with a bundle of goodies, the Vote IGOR Pack, that included a t-shirt, lawn sign, button, vinyl sticker and coupon for a digital album download, all for $40. Fans were limited to four packages per customer, and they would start shipping May 17, the album’s debut date.

Then came the Golf IGOR Pack, a nearly identical offering with slightly different artwork, no lawn sign and a $30 price tag. The IGOR Vinyl Pack ($25), Cassette Pack and CD Pack (both $15) appeared next, with a digital version of the album that could be delivered instantly before the rest of the gear -- including the physical music -- shipped. After the album’s release, bundles with hoodies appeared for $80 and with hats for $40.

The same week, DJ Khaled released his album Father of Asahd (Epic Records), which was offered as a digital download in some 50 different merch bundles -- packaged with items like t-shirts, coloring books, board shorts and bucket hats -- at his own site. But in an even more unusual move, Khaled shopped the album with nutritional supplements through a North Carolina-based product brokerage and internet marketing company called Market America Inc., that boasts 180,000 distributors and “UnFranchise Business Owners” worldwide who’ve earned “over $2.9 billion in commissions and estimated retail profits,” according to its website.

These business owners must meet monthly sales quotas to remain in good standing at the company and must also pay for automatic shipments of wholesale products, at volumes that grow up to a limit as the commissions they earn increase, according to an explainer of costs on shop-consultant.com. (“By retailing and trial-size marketing more of these products, you can create more lifelong customers,” one promotion for the Khaled bundles read.) Ultimately, these specific Market America bundles did not count towards Khaled’s unit count or chart standing.

In the end, IGOR landed at No. 1 on the Billboard 200 with 165,000 equivalent album units, according to Nielsen Music for the week ending May 23, 74,000 of them from album sales; while Father of Asahd came in No. 2, with 137,000 equivalent album units, 35,000 from sales. (Columbia declined to comment; Epic didn’t respond to a request for comment.)

Welcome to competitive music marketing in the streaming age. As artists’ crank out a widening swath of products to pair with their digital albums, often eliciting multiple purchases from single buyers, a debate is emerging over what the resulting album sales really indicate. Some music executives argue that merch-bundle sales are a fine measure of an artist’s or album’s popularity -- even if the merch is the main attraction -- since it signals a special devotion among fans who are likely already paying $10 a month for a streaming subscription that gets them the same music for free. In today’s world, buying merch bundles isn’t much different from collecting old-fashioned CDs or vinyl records when it comes to fans’ motivation, some executives add -- the focus is on collecting as opposed to on-the-spot listening.

But other executives feel the bundle-driven numbers no longer reflect album demand -- and worry that in some cases, sneaky merch-marketing tactics are skewing the results by offering incentives to buy bundles that have little to do with fandom.

Billboard requires all merch bundles to be submitted in advance for approval. As these offers have become more voluminous and creative, Billboard is reviewing its rules regarding the bundling of albums with merch.

“The pot keeps boiling over and seemingly every new effort requires a new rule,” one label executive says. “When another [competing] label does something to beat out your artist, everyone moans about it and says that doing these chart marketing things is absolutely outrageous. Yet, the labels still want to have that market fight. It’s a catch-22 and it’s what is causing the label staff to be creative in how they sell.”

Bundling music with other goods goes back decades, of course, but in the CD era it was clearer that more fans were buying bundles to hear the music, before it was as readily available online. Over the years bundles have become increasing more popular -- and elaborate -- thanks in part to the lack of manufacturing and distribution costs associated with digital albums.

Merch madness began mounting two years ago when Logic sold 115,000 copies of his album Everybody (of 196,000 total) in its first week, according to his label Def Jam, through a dedicated online shop by bundling it with goodies like a print of the album cover or a 44-page book, setting a record for first-week direct-to-consumer sales for all of Universal Music Group.

Since then, dozens of albums have benefited greatly from such campaigns, including titles by Ariana Grande, 2 Chainz, Lana Del Rey, Fall Out Boy, 5 Seconds of Summer, Lil Pump, Travis Scott and Panic! At the Disco. Sometimes the campaigns can be profitable, but they can also cost the record label money, leading to a frequent tug of war between a label’s marketing executives -- hellbent on exposure, attention and chart success for the artists -- and its financial executives.

When merchandise/album bundles are priced robustly -- say, a hoodie/album combo for $80, or a T-shirt/album bundle for $30 -- there is little doubt that a profit is being made. But when even pricey bundles are shopped by an artist’s management, the label may be supplying the music -- whether a digital download, CD or cassette -- at a discount off the wholesale cost. Some labels also take a cut of merch sales, depending on their deals with the acts. “At our label, we are not going to not make money just to get chart position,” says a major-label commerce executive.

But sometimes labels are willing to lose money to establish the artist’s brand. “Having a No. 1 record can help management get a better guarantee from promoters and sell more tickets,” says another major-label executive. (One good indicator of a merch bundle’s profitability: how soon the offer disappears after the album’s debut week.)

Over the decades, Billboard and its data partner Nielsen Music have worked to adapt to new music marketing trends while guarding against fraudulent behavior that unfairly games the system. A decade ago, when data analysts at one major label told an artist’s management that its album was in contention for No. 1 that week in a race too close to call, the artist’s management bought 5,000 copies of the album on Amazon, spending $50,000 to help ensure that they finished No. 1. However, Billboard and Nielsen guard against bulk-buying behavior, and that transaction was detected and disallowed.

One major-label sales executive wonders why purchases of merch or music should determine the popularity of an artist at all. Billboard and Nielsen are "trying to protect the value of the music,” says that executive. “But that train has left the station. Fans can now get free music, and music has been reduced to the added value, as opposed to having value. So what are we really trying to protect?”

One side effect of merch bundles madness: some physical sales data is disappearing. Because labels want sales to be counted in the debut week, only the downloads are reported to Billboard, and the vinyl record or CD sales don’t register in the industry’s overall count. In some cases, more than 10,000 vinyl copies have gone unreported to Billboard, sources say.

Still, says a longtime major-label sales executive, “it’s a prevalent way of marketing albums now; you have to do it. You can’t put the toothpaste back into the tube.”

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