Wednesday, December 05, 2007

Pepsi, Amazon, and Licensing Fees

Pepsi is planning a music promotion with Amazon in 2008, and Billboard has the details. It's pretty simple, and here's a description of how it will work:
According to sources, Pepsi will feature a download promotion on the inside of 5 billion of its soda bottlecaps. Sources say Pepsi customers will need to collect five caps in order to exchange them for a download; this yields the potential for 1 billion redeemable tracks.

...Amazon will serve as the supplier for the downloads, and customers will need to visit a specific redemption store on the Amazon site to access music from participating labels.

Here's more, and this is where it gets interesting:
...While all majors have been approached about participating in the offer, the price that Amazon is willing to pay appears to still be a sticking point for some labels.

Sources say that Amazon will pay labels in the area of 40 cents per track. This compares to the 65 cents-70 cents labels currently receive from Amazon for digital track sales and the 70 cents they get from Apple.

That makes sense, really, because an artist featured in this promotion should see a huge increase in sales of their CDs.


Isn't that the same situation that Rock Band and Guitar Hero create?

There's a story over at Ars Technica, and in spite of the graph being a bit muddled, it's still clear that being in Guitar Hero boosts song sales (and often CD sales as well).

I guarantee you that sales of "The Hand That Feeds" are going to go through the roof. That song is red-hot in Rock Band--it practically melts my speakers. And who knew that the band Yeah Yeah Yeah sounds a bit like The Pretenders? There are dozens of songs in the game that sound amazing and are very fun to play, and I'm finding out I like bands that I didn't even know existed before.

Here's the other thing. I think people are far more likely to buy a song when they've played it in one of these games because they've experienced it in a far more personal and active way than just listening to it on the radio. It's a concentrated, intense experience. Concentration brings attachment.

So again, and I've written this before, labels should be willing to accept a lower licensing fee to get a song into one of these games. According to the Billboard article, CD sales in the U.S. are down 18.6% for the year. This is a turnkey sales opportunity for them--they provide a master track, Harmonix (or Neversoft) does all the work, and bam sales go up.

If Rock Band tracks are $1.69 individually, and labels reduced their licensing fees down to the forty-five cent level noted in the Billboard article, that could drop individual song prices into the $1.49 range. I'd be willing to bet that the difference in sales, even with a twenty-cent difference in price, would be significant. That translates into more sales of the single and more CD sales.

Plus, there should be far more creative ways to tie all this together. For any of the songs in Rock Band, why isn't there a "purchase song" or "purchase CD" option inside the game? If I selected it, I'd then be taken to the Xbox Live Marketplace, where I could buy the single or the CD at some kind of nominal discount. That way, a direct attach rate gets created, and Harmonix can use that as leverage when they're trying to get publishers to accept reduced licensing fees.

Sure, I know there are details there that have to be worked out. But the idea of making it relatively seamless to purchase music when you're most in the mood to do so makes sense.

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