A New Paradigm for CDs - A Music and Advertising Delivery Platform

By Mark Warlick (more articles from this author) 2004-01-26

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Introduction

The music industry is clearly in a state of transition. Some would say crisis. Over the last three years, CD sales have decreased a total of 15%, according to some reports. Many industry insiders believe that the decrease in sales is due to downloading. There has also been a significant amount of industry consolidation with companies of all sizes closing and merging. Clearly, the available technology has surpassed the business model that the industry is based upon. Therefore, the industry is challenged to revamp and evolve its model midstream. A new idea is needed. It is said that the Chinese symbol for "crisis" is "opportunity."

A New Approach

The race is on for the new idea that will be successful. The fundamental change that I propose is to transform the CD into am advertising platform in addition to a music delivery platform. No need to get technologically cute, just use what is available. The approach is similar to what music retail outlets have done. Music retailers sell wall space, windows, display area space, end-caps in order to increase the revenue streams. Anything that draws attention to the CD by the retailer, is up for sale to the record company or distributor.

CDs can be used in a similar manner. Consider utilizing the packaging and label artwork to deliver advertising messages. The message can be as simple as a website address and logo to a concise call to action. Clearly, this opens up a new revenue stream for the artist and the label. It creates the possibility to generate revenue while the project is being developed, thereby, reducing the label risk of the project.

Why it Makes Sense

There are several benefits to this new paradigm. For the sponsor/advertiser, if gives them a new platform to be associated with particular artists and genres. Because of the product lifetime of the music packaging, the advertiser will make hundreds (even thousands) of impressions on the same individual over years, possibly decades. There is also the likelihood that the advertiser/sponsor will get impressions while the CD is in the bins at the retailer. Finally and most importantly, it is possible to target a specific demographic using music. Urban hip-hop listeners are quite different from Pop-Rock or Contemporary Jazz listeners for example.

There are benefits to the artists as well. Artists can utilize their management team to obtain advertisers/sponsors for the project. This can be true for the both independent and the signed artist. Clearly, this opens another revenue stream for the artists, and could reduce the amount that must be recouped. The artist also has more leverage with a label if there are sponsors in place before a project is initiated. Additionally, by creating a relationship with the sponsor/advertiser while the project is being completed, the artist can easily write songs that could be used in the advertiser's TV and radio spots, thereby giving the artist more spins and recognition with the public. The end result will be more CD sales when songs are used for radio and TV.

There are also benefits to the record company. As with the others, it is also a new revenue stream. It can reduce the up front costs in developing a project, thereby reducing the risk. The record company can sell advertising space based on the number of units shipped or "in perpetuity." Additionally, the record company can also sell advertising space for "catalog" CDs. Clearly, this approach gives record companies the ability to create relationships with any consumer company in existence.

Finally, the benefit for consumers is that this approach could stabilize or reduce the cost of CDs from their current rates. Because special offers could become available, consumers would benefit from the synergy of music with other products and services.

Admittedly, this is an unusual idea and an unusual approach to delivering an idea. However, what is important is to find ways to create an economically healthy environment for creative expression.

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