Madison Avenue and the Music Business

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This is Celia Hirschman with On the Beat for KCRW.

Lots of news in music this week. Snocap, the online music retailer, announced they would be cutting staff by 60% and putting the company up for sale. This comes only two months after they launched their online retail campaign for bands on MySpace. Meanwhile Sony BMG just announced they've finalized a licensing deal with MySpace to receive a portion of the social online-site's ad revenue, in exchange for Sony BMG video streaming.

And in related news, Facebook announced they were developing a retailing interface, to rival the MySpace widget, complete with deep social-networking features. Amazon Digital announced they'd also be creating a widget as well.

Live Nation just announced they've signed Madonna for $120 million. The deal, more commonly referred to as a "360" deal, covers many aspects of Madonna's music career – her recording sales, touring income, films and merchandising sales. It's the largest "360" deal made to date.

Meanwhile, on the indie side of life, this week New York City has been taken over by thousands of musicians, journalists, bloggers and college radio programmers, for the annual CMJ Music Festival. In its 27th year, the CMJ conference remains one of the leading music conferences in America. I'll give a full report on the events next week.

Finally, Honda announced this week an online-advertising initiative that would generate $500,000 to $1 million for Sony/BMG. The advertising plans will include interactive video exposure for Avril Lavigne, Dido, Christina Aguilera, and Alicia Keyes.

For decades, artists and record labels scoffed at the notion that Madison Avenue would one day own the record business, but those days are over. Advertising agencies are now doing significant business with all the major labels, generating millions of dollars in income. This seismic philosophical shift was inevitable. As music sales began to recede, the market had to change.

And change it has. While some bands would rather quit music than sell their songs to a commercial advertiser, many have made the transition with great ease. Money, of course, is a great motivator, but the secondary benefits of a strong advertising campaign can be equally important to an artist's career. Consider this: In the past, hit songs got repeated commercial radio airplay in America, but with programming so tight, many artists will never achieve a hit record that way. Commercial radio programming is just too narrowcast.

So, artists have to look elsewhere for their exposure and TV advertising is the most effective way to generate mass awareness.

Putting a song in a car commercial still won't get an artist a hit single, but millions will be exposed to their music.

As the Norwegian band Royksopp knows, selling the rights to a strong song can be enormously effective. Their track, Remind Me, has been used on many of the Geico "Caveman" commercials. Royksopp is not alone. The list of recent bands who sold their music for ad campaigns is amazing. Critical darlings like Postal Service, Bloc Party, Of Montreal, the Flaming Lips, MIA and Badly Drawn Boy are all on that list. And legacy artists can really cash in. Songs like Queen's You're my Best Friend to AT&T and the Rolling Stones' I'm Free to Chase have earned a pretty penny for these bands.

When done right, the advertisers add credibility to their brand in selecting the right songs. Target, Apple, Budweiser, Volkswagen and Motorola have all demonstrated excellent A&R sensibilities with their choice in song selections on TV ads.

For those naysayers, it's important to remember that the artist makes the final decision whether to associate with a product or service.

And given that it's impossible to watch more than a few minutes of ads, without a contemporary song cutting in, the artists are clearly comfortable with this change in the business marketplace.

This is Celia Hirschman with On the Beat on KCRW