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Walmart's Revivals of AC/DC, Others Are Reviving Music Industry

Exclusive Deals With Bands Have Created Successful New Business Model

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NEW YORK (AdAge.com) -- It's only fitting that Walmart, the retailer that brought back Faded Glory jeans as a house brand in the 1990s, has also helped revive the Eagles, Journey and AC/DC more recently by launching their new albums as exclusives.

The latest results from Wal-Mart's exclusive deals include a chart-topping 784,000 opening-week sales of AC/DC's 'Black Ice' in October.
The latest results from Wal-Mart's exclusive deals include a chart-topping 784,000 opening-week sales of AC/DC's 'Black Ice' in October.
But while the apparel deal didn't transform the industry, at Walmart and beyond, the music deals are doing just that.

The world's biggest retailer has taken bands that seemed well past their prime and put their new releases at the top of the charts. That has created a new business model that has opened a new revenue stream for Walmart and promises -- at least for some bands -- a way out of the music industry's download-fueled downward spiral.

'New and fresh'
The exclusive deals have become a "good business model for us," said Jeff Maas, divisional merchandise manager for music and movies at Walmart. "They tend to drive excitement into our stores. They keep our stores new and fresh. And so you'll see us do more."

How many more and with which bands, Walmart isn't saying -- or doesn't know yet. But it sounds like the success Walmart has engendered is getting the attention of musicians who might have turned up their noses at the retailer.

"We've been in conversations with lots of acts and are still in conversations with lots of acts," said Greg Hall, Walmart's VP-entertainment.

And no wonder. The latest results include a chart-topping 784,000 opening-week sales of AC/DC's "Black Ice" in October and more than 3 million sales overall for the Eagles' 2006 release of "Long Road Out of Eden," according to Nielsen Soundscan.

Walmart's exclusive-deal formula began with country star Garth Brooks in 2005. But more recently, it has had considerable success with deals involving bands that had big followings in the 1970s or '80s but hadn't had releases or major hits in several years -- including partnerships through Irving Azoff with the Eagles and Journey.

The revival deals have been "more of a coincidence than a strategy to be honest with you," Mr. Hall said. Mr. Maas said those bands happened to be the ones easiest to work with and the most open to the direct model.

'Lots of loyalty'
"These are bands that have lots of loyalty with our customers," Mr. Hall said. "And even though they maybe hadn't done a new studio album for a few years, we look at: How does their catalog business sell in our stores? How does the brand translate to other merchandise like apparel? And all of these acts that we've done [deals with] have a real day-to-day strength in our stores."

The concept of a "win-win-win" is, of course, beyond hackneyed in business. But in the case of Walmart's music deals, it's a core part of the model.

The exclusive deals are helping boost sales of electronics, such as iPods, MP3-capable mobile phones, and even video games such as 'Guitar Hero' and 'Rock Band.'
The exclusive deals are helping boost sales of electronics, such as iPods, MP3-capable mobile phones, and even video games such as 'Guitar Hero' and 'Rock Band.'
Walmart and the bands win because the retailer can merchandise a wide array of apparel and other related products in major in-store events, helping promote concert tours and move products beyond CDs in ways no other retailer could.

Consumers win because the deals include album prices well below the industry standard for new releases, such as $11.88 (with free shipping when bought online) for AC/DC's "Black Ice." Rivals such as Virgin or Tower Records have had no qualms about selling imports or simply reselling CDs bought from Walmart at $14.99 to $16.99 without topping their usual price points for new releases by much.

AC/DC, the Eagles or Journey haven't exactly been hit machines in the new millennium, but they all had strong catalog sales at Walmart, Mr. Maas said. That helped persuade the bands to do the exclusive deals. Now Walmart is similarly mining data to find artists with strong catalog sales -- possible candidates for new deals.

Big advantage for bands
The other big advantage for bands in the exclusive arrangements is considerably stronger marketing support than they could ever hope for from a conventional record label. The AC/DC launch was one strong case in point: The October rollout included a deal with Clear Channel to run a Walmart ad for "Black Ice" after each time one of the songs was played on a radio station, as well as a mobile tour featuring "Black Ice" ice-cream trucks in markets such as New York, where the retailer doesn't have a presence. And, of course, a deal with Walmart also means a prominent display in a retailer where more than 130 million people shop weekly.

For Walmart, the exclusive deals also are helping boost sales of electronics, such as iPods, MP3-capable mobile phones, and even video games such as "Guitar Hero" and "Rock Band," Mr. Hall said.

Despite the troubles the music industry has faced, "consumers have never loved music more nor wanted to interact with music more," he said. "It's one of the most emotional products in our store. ... I think because customers are so passionate about music and consuming it differently than in the past that both artists, artist-management labels and distribution companies are looking at retailers to try to help them figure out what are some ways we can do things differently."

He's willing to concede that some bands might be better suited to one of Walmart's competitors as an exclusive. But as long as retailer exclusives are a way of life in music, he said, "we'll be in the thick of it."

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