The mainstream music business is now finding out what many hard-touring bands have known for years: Merchandise is in many cases a far more reliable source of income than record sales.
It’s a new world order, where record labels desperately seek new revenue streams and client services to offer, and newly empowered promoters like Live Nation make merch a key component of multirights deals with such acts as Madonna, Jay-Z, U2, Shakira and Nickelback. At the same time, boutique merchandisers like Cinder Block and newly launched Cut Merch offer distinctly different business models and DIY ideology.
As everyone jockeys for position, merchandising has acquired a new status. Beyond tour merch, there is increased focus on retail deals and the lucrative direct-to-fan online business pioneered by MusicToday (now under the Live Nation fold). “Merchandising is playing a much bigger role than it ever did before, there is no question about that,” says Dell Furano, founder of industry leader Signatures Network, whom last year sold his company to Live Nation. And with that role comes newfound respect for merch veterans. “We get a soda now when we go to the shows; we never got anything before,” says Tom Bennett, CEO of Bravado, the merchandising arm of Universal Music Group. Bravado became a division of UMG last year when the music giant paid around $90 million to acquire the merchandiser’s parent, Sanctuary Group.
But from labels to promoters to the DIY guys, what defines a successful business model for merch is still shaking out; becoming a merchandiser takes more than wanting to be a merchandiser. “For the record companies that think merchandising is going to get them across this huge chasm of their business model, I think they’ll find it challenging,” Furano says. “It is comforting to realize all these years later that the ability to design really great product, print it, get it approved, get it distributed to the road, sell it, collect the money, pay the royalties and do every step of that process with experienced, qualified people at the right price is a hard skill to duplicate.”
“The record companies have the most difficult decisions to make as they see their core business evaporating,” says Steve Gerstman, whose SGS handles merch for such acts as the Stray Cats and Eric Clapton, and who recently launched the more DIY-oriented Cut Merch. “Maybe they’re in a little bit of a panic mode in that regard.”
And when it comes to turning merch into cold hard cash, there’s a number of intricate details that can affect the deal. Royalty percentages paid to artists vary according to the product and the outlet. “Also, you have to consider the quality of the artwork, and the online presence, and the cross-promotion with promoters and retailers, and ticketing that can be brought to the table,” says Ross Schilling, a manager with Vector whose clients include Kid Rock, Lynyrd Skynyrd and Hank Williams Jr. “There can be many options and ideas to be considered.”
For some, merchandising remains simply “a necessary part of touring,” according to Bruce Springsteen manager Jon Landau, who doesn’t put merch on the level of publishing, recording and touring. “My philosophy is for us to come up with the best possible quality and to keep the prices as reasonable as possible,” he says.
Here, Billboard profiles the merch movers and shakers — and their strategies.