Digital Music: Record labels turning to Web to boost sales

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On a chilly spring night, hundreds of 20-something fans of Staind packed a New York City concert hall to mark the band's return after a two-year hiatus and the impending release of its new album, "14 Shades of Grey." The concert bore all the typical trappings-a mosh pit, sporadic bursts of body-slamming and bodies suspended over the crowd like petrified mummies. But this one was broadcast live, in real-time to broadband subscribers on America Online's AOL Music.

Record labels are now aggressively doing deals with online providers like AOL Time Warner's America Online, Yahoo!'s Launch and Microsoft Corp.'s MSN in an effort to rack up record sales for their artists. And the sites are anxious to showcase those artists as a way to keep people coming back and entice them to pay for premium services.

pregame show

Avril Lavigne, a virtual unknown until early 2002, offers a testament to the power of online marketing. The rocker's single "Complicated" debuted on AOL Music's Artist Discovery Network, a showcase for emerging artists, on March 8, 2002 before the track had even hit radio. "Complicated" logged more than 350,000 digital streams in a month's time, sending demand soaring for her first album "Let Go," released on June 4 of that year.

"As a whole, these [online] services are tremendously helpful to us," said Adam Lowenberg, VP-marketing for Arista, which also represents Pink, Dido and Sarah McLaughlin. "The fact that it's so difficult to break new artists especially, any leg up you can gain goes such a long way these days," he added. The 350,000 streams even helped him convince radio stations to put "Complicated" on their play lists.

Staind's label, Elektra Records, has done online promotion for the band before, but not to the extent of its current AOL program. "This was something different-doing Artist of the Month and doing a live Webcast was a cool component," said Camille Hackney, VP-strategic marketing and new media, Elektra. "It was a big, concerted effort that pushed the needle."

Indeed, between BroadBand Rocks! Special Edition concert, exclusive performances via [email protected], the First Listen and CD Listening Party franchises, Staind had more than 600,000 streams of its music on AOL in the five days leading up to the release of its new CD.

The push seems to have paid off-"14 Shades of Grey" debuted at No. 1 on the Billboard Top 200 album chart for the period May 20 to 27, translating into sales of 221,000 CDs in a week. Staind also grabbed the No. 1 slot as the most-streamed artist on AOL properties during the week of May 16 to 22, beating out sexy songstress Beyonce, rapper 50 Cent and Pink.

Record labels are anxious to score all the online promotion they can for both emerging and well-established artists. With radio airplay harder than ever to secure and reality programming flooding the MTV schedule, labels are desperate for creative outlets to break new artists and music videos, as well as launch singles, albums and other content.

"It's vital when we book major TV shows. When you look at the audience reach that AOL has and Yahoo! Launch, it puts them up there in a competitive position with TV outlets and radio and all the rest of it," said Nikke Slight, senior VP-new media, Atlantic Records. "[Online] is a critical part of our marketing plan. We have to be there."

different approaches

J Records' Tom Corson, exec VP-worldwide marketing and sales, agreed. "It's like radio play or press ... everything is an impression and in a highly competitive environment. You want to get as many impressions for your artist in the right way as you can," Mr. Corson said.

A division of BMG, J Records, like the other labels, is an equal opportunity promoter: It works with Lycos, Yahoo! Launch, MSN,, AOL and others to push its stable of artists. "They all have different products and different approaches," Mr. Corson added.

For the online sites, especially subscription-based ones like America Online, offering exclusive access to artists is a way to entice users to spend more time online. In AOL's case, the race is on to convert the thousands of streams to MusicNet premium subscriptions and ultimately to broadband subscriptions. AOL needs to flog its music offerings in order to move millions of narrowband subscribers to broadband.

"Our mantra is `discover, experience, own'," said Bill Wilson, general manager, AOL Music. The biggest opportunity for labels is in CDs, DVDs and VHS sales. By the fourth quarter, Mr. Wilson said, AOL will offer digital singles for 99¢ apiece, much like Apple Computer's iTunes does, though providers like RealNetworks' Rhapsody have already undercut that with 79¢ singles. This summer, AOL will add a $13.95 price tier for unlimited music streams, downloads and five CD burns, as well as upgrading search, purchase and recommendation features. Since launching in late February, MusicNet on AOL has more than 70,000 subscribers, adding about 1,000 subscribers per day, according to people familiar with the situation.

competitive race

In some cases, labels are locked in a competitive race to get premium real estate on the sites. "During the last couple of years, as the outlets have become really seriously programmed entertainment channels, we're competing to get on there, to get that space," Atlantic's Ms. Slight said.

Even well-established artists like Jewel, whose latest release "0304" hit stores June 3, benefit from online promotion. The Atlantic artist's single, "Stand," was streamed 740,000 times in one day (May 26) on AOL First Listen. That's pre-radio play.

After the second day on First Listen and a Netscape promotion, the platinum-selling artist shot to No. 3 on Amazon's Top Seller's List of the 100 hottest CDs based on advance orders. Atlantic saw a 30% jump in CD sales in the first week of the release of Jewel's last album, "Spirit."

Major labels have high hopes that for-pay online music subscription services will reverse their declining fortunes. Apple reported that its iTunes sold more than 2 million 99¢ downloads as of May 14, only two weeks after its debut. While the labels are enthusiastic about the Store's prospects, there are some drawbacks-there are only 200,000 tracks available and a Windows version of the enabling software won't be available until later this year.

Compact-disc shipments in the U.S. fell nearly 9% in 2002, while shipments across all music formats dropped 11%, according to PricewaterhouseCoopers. Illegal file-sharing, peer-to-peer networks and free music download services like iMesh, Grokster and Kazaa, have had an impact. Most analysts maintain that the music labels will probably never completely kill free music download and file-sharing services. Kazaa averages about 14 million visitors monthly while the music channel on AOL logged 10 million unique visitors in April, according to Nielsen/NetRatings.

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