• by Hank Kim , August 31, 2007

Judging by the flurry of recent merger news and speculation, the music industry didn't exactly take the summer off. Of course, with the tunes biz still groping for footing in a post-Napster, iTunes-centric world, that's not surprising. The four beleaguered major labels, Universal, Sony/BMG, Warner and EMI, are still flailing, trying to reinvent a broken bricks-and-mortar business model in today's online-driven marketplace.

A slew of startups like Qtrax, Project Playlist and Music Nation are offering new models, including an ad-supported online music service, which lets consumers download free music for a limited number of replays by agreeing to look at ads. These companies haven't been shy so far about waving wads of cash, sometimes in the millions, in front of the labels to license their catalogs, as well as promising to cut the labels in on the ad revenue.

And if we're to buy into the prevailing wisdom that physical CD sales will only account for 50 percent of music sold by 2011, and that paid digital downloads through iTunes and other vendors won't make up for it, it's easy to understand why the record companies are interested.

Former Universal McCann media agency honcho-turned Internet entrepreneur Robin Kent, for one, has staked his future on the bet that ad-supported online music will flourish. He has launched a new company called Rebel Digital that will offer online music sites ad sales, marketing and ad-serving capabilities. Qtrax, which has signed up all four majors, is a client. "The opportunities are huge for everyone involved. Advertisers are chasing [an audience] which is increasingly difficult to connect with through traditional media," says Kent. He adds that marketers also shy away from running ads on peer-to-peer sites that offer pirated material. Ads on LimeWire or any other illegal peer-to-peer site isn't an option."

The question now is to what extent brands will embrace this new platform?

In an overarching sense, it seems like brands are still keeping the music industry at elbow's, if not arm's, length.

In early 2004 I moderated an industry panel in Los Angeles about the increasing coziness between the music industry and advertisers. It was an animated discussion with a handful of music vets and their Madison Avenue counterparts, including Dixie Chicks' manager Simon Renshaw, Interscope Records marketing chief Steve Berman and Reebok CMO at that time, Mickey Pant.

The event turned into a sprawling debate that served as a primer on the rewards and perils for brands in their pursuit of bands. The loquacious Renshaw recalled the damage control he performed after his client Natalie Maines, the lead singer of the Dixie Chicks, criticized President Bush in March of 2003 at a concert in London at the beginning of the u.s. invasion of Iraq. At the time, the platinum-selling Dixie Chicks were in the midst of a lucrative partnership with Lipton Tea.

The relationship between the group and Lipton was dissolved - ostensibly not caused by Maines' comments, though they couldn't have helped.

Those present that day were also intrigued by Mickey Pant's success stories about Reebok's high-risk and ultimately high-reward gamble on getting into business with notorious hip-hop icons Jay-Z and 50 Cent, with branded shoe lines for both. Both shoes were hugely successful and neither ended up on the police blotter or behind bars.

I remember leaving the panel thinking how much untapped co-branding potential exists for marketers and how Madison Avenue was, for the most part, either not recognizing or ignoring the opportunity to expand its purview to music deals beyond just synch licensing of music for TV commercials.

So why haven't agencies been more aggressive in this space? As one forward-thinking account director at a media shop recently said to me, "A tour sponsorship is as much a media channel as network TV or [print]." He went on to say that there are ways to adapt evaluative and success metrics from traditional media to apply to platforms in which media shops traditionally have not delved and that inertia in this space is the result largely of fear of stepping out of their comfort zones.

"Sure there are a lot of hucksters in the music biz, but the opportunities are well worth the risks and any growing pains."

Hank Kim is director at MPG Entertainment. (hank.kim@mpg.com)