NEW YORK (AdAge.com) -- So you want to be Mick Jagger? You're going to need friends to lug your gear, a drummer who knows how to count, a sound-proof rehearsal space and a branding consultant.
Rock's anti-corporate ethos has softened in recent years (read: totally disappeared in the case of most artists), and labels' opportunities for nontraditional revenue have grown through licensing and branding partnerships. But that hasn't made life any less complicated for musicians trying to retain fans and make a living. As a just-released NPD Group study pointed out, 48% of U.S. teens didn't purchase a single CD in 2007. And while legal purchases of digital music are on the rise, it's not nearly enough to make up for declines in traditional CD sales.
According to 2006 Enders Analysis data, the market for commercial music licensing is in the neighborhood of $3 billion. So while artists in nearly every genre have opened their arms to corporate America, shifting from the polarizing world of "selling out" to the nuanced galaxy of "musical branding" is a challenge many still struggle with.
Last year, indie-rock group Band of Horses licensed a song for a Wal-Mart online campaign only to reverse their decision and cancel further deals with the retailer after a fan backlash. But some say even the slight risk taken by signing on to commercials isn't enough. A recent Forrester Research report recommended, among other things, that pop stars embrace "Nascar-style," logo-splattering sponsorships and get used to promoting their favorite boxer briefs to help make up for the industry's shortfall.
James McQuivey, a Forrester analyst and author of "The End of the Music Industry as We Know It," said that the days when an artist such as Michael Jackson would cut just one high-profile deal with Pepsi are gone.
For new artists, it's become nearly impossible to develop a major following without a branded tie-in. Many of the major breakout music stars of the past year, from Paramore to Sara Bareilles to Feist, have benefited from corporate tie-ins or licensing of their songs via ads. "All brands have become music-promotion houses," Mr. McQuivey said.
Omnipresent performers Beyoncé and Fergie now can have multiple endorsement deals with different brands as their album sales come in millions below the number they would have even five years ago, Mr. McQuivey told Advertising Age. "They make music essentially as a promotional tool to make sure you want to dress like them and smell like them."
Not everyone agrees. Bands, they say, can't simply take on a patchwork of sponsors with little thought to long-term goals. Jon Cohen, president of lifestyle-branding agency Cornerstone, dismisses this approach, which he sees as counterproductive for many artists.
"The music industry wants to figure out a model where they can make money," he said. "I don't think they're that desperate [to try Nascar-style sponsorships], but they're under the gun and have to think outside the box. It may work with a ridiculous bubble-gum pop act, but those deals will never happen with the credible, long-term-career bands."
Not for everyone
Vince Lawrence, founder of music production and brand consultancy Slang Musicgroup, expressed a similar note of caution.
"If the artist is 'next to' the [Nascar] demographic, yeah, [Nascar sponsorships] might make sense," Lawrence said. "It's not the most cost-effective way to sell records, but it's a way." Still, he said, bands will have to get used to embracing brands. "Artists have to start thinking about exposing themselves, because the big record companies aren't as apt to give away marketing dollars."
When Apple picked Yael Naim's song "New Soul" for its MacBook Air spot earlier this year, the Israeli singer-songwriter didn't even have a record out in the U.S. But thanks to a single in the iTunes Store, the song made its debut on the Billboard Hot 100 at No. 9 with 135,000 downloads, and her label, Atlantic Records, pushed the release of her self-titled album forward by two months.
"New artists don't get that kind of exposure," said Livia Tortella, exec VP-marketing at Atlantic, who manages Ms. Naim's licensing and brand partnerships. "We don't have to claw at it, brick by brick, to get people to hear this unbelievable Israeli from France. Apple has done an amazing thing by picking her."
Lots of exposure
According to an executive familiar with music-licensing deals, for U.S. rights, marketers typically pay $150,000 for the master recording of a song and another $150,000 for synchronization -- the right to put the composition in a TV ad. However, because Apple has such leverage in breaking artists, the company paid a total of $80,000 for master and sync rights for Feist's "1234" and another $80,000 for Ms. Naim's song. And those fees are for global rights.
For new artists -- and especially those who are still recouping debt to their labels -- this exposure is well worth the lower fees.
"Apple says to Feist, Daft Punk -- people who want to be associated with a hip, cool brand like Apple, 'We're gonna throw you this bone,'" said the executive. "It's not much of a negotiation. 'This is our deal.'"
Most musicians would want to align themselves with Apple's audience -- according to Mindset Media, Apple users are more likely to purchase music in both physical and digital form than PC users -- but Mr. Cohen said a new artist's career could be threatened by wide exposure.
"Less-established acts make a big mistake if they rely on brands to drive their careers," Mr. Cohen said. "They need to make sure the focus is on their career more than a song in a commercial. That's a fix for quick success but not longevity."
Take the money and run
But sometimes, the short-term cash infusion is impossible to pass up. The Walkmen's Peter Bauer said his band did not expect a Saturn Ion commercial featuring their song "We've Been Had" a few years ago would further their career. Like many emerging artists on small, independent labels, the decision was made out of financial necessity.
"We needed to take the money," the organ and bass player said. "If you don't need the money, why do it?"
Assuming there are no debts to recoup, artists typically retain half of the fee for the rights to a recording master and 75% to 85% of the synchronization fee, said an industry executive. On top of that, the songwriters also earn fees for the broadcast through performance-rights organizations such as ASCAP or BMI. Deals with labels vary, but assuming a marketer pays $300,000 for master-recording and sync-licensing fees and the publisher's cut is 20% of the latter, this could earn a band $195,000 for a 30-second spot -- leaving out performance fees and, again, assuming there is no debt to recoup.
And the deals get more lucrative if a band is willing to go all-in and partner with a brand. According to one music-branding executive, branded partnerships -- including everything from tour sponsorships to original content and often paired with some sort of traditional TV or radio spot -- can fetch from $5,000 to over $1 million for a single artist.
The Walkmen have licensed more of their songs since the Saturn spot, but Mr. Bauer said the idea still makes him uncomfortable. Certain opportunities -- particularly with fashion marketers such as the Gap, who have wanted to dress up the band -- have made them queasy enough to say no. But he also stressed the upside: Money from marketers allows the Walkmen to take some time off from the road and focus on making new music. Since the group's 2002 debut, they've made three more albums and have found a prominent place in the indie-rock festival circuit.
"We're interested in making records and living in a way that we can continue to make records and make other stuff," he said.
Signing to 'Diesel Records'
Those same priorities are shared by the Crystal Method, said their manager, Richard Bishop. But the long-established dance act's lucrative side business in commercial licensing doesn't hurt either, he said, and it creates impressions for new material.
"I can see no reason why artists like Crystal Method or Paul Oakenfold [whom Bishop also manages] should not put their albums out on 'Apple Records' or 'Diesel Records' or 'Urban Outfitters Records,'" he said. "I don't think that, in this day and age, there are that many examples of artists' careers being damaged from commercials early or late in their careers."
Mr. Bishop, the owner of Los Angeles-based artist-management firm Three AM, said he doesn't often turn down marketers looking to license tracks, but he usually works with brands that share Crystal Method's sense of speed and agility, such as auto, tire and video-game companies.
Ultimately, Mr. Lawrence said, whether it's Apple or Nascar, musicians need to stay true to their art when considering branding and licensing opportunities.
"Artists know who they are and who their fans are," he said. "That's what makes an artist valuable to brands: the fact that they have such a visceral connection with a particular segment of the public. There's nothing like that."
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Contributing: Andrew Hampp
For more on the wild and wooly world of music-branding, licensing and partnerships, check out Ad Age's Songs for Soap blog.
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CORRECTION: An earlier version of this story incorrectly stated that assuming there are no debts to recoup, artists typically retain 15% to 25% of the synchronization fee. The publisher keeps 15% to 25%; the artist retains 75% to 85% of the synchronization fee.