Music Video Business Principles Applied To The Real World
[It's 10:00 am somewhere in New York. The PepsiCo president sits in the boardroom wating to meet with the head of the Promotions division to get an update on their recent progress. The head of the Promotions division and his several assistants enter the boardroom and sit down.]
Video Promotions Division of PepsiCo: Good news sir, we have just finished the latest commercial videos for some of the new PepsiCo products.
PepsiCo President: Glad to hear it.
Promotions: Yes, we’ve secured some very hip, young director and got the spot made for pennies on the dollar. Even at a reduced budget, we got what we needed.
Pepsi: Awesome! So when is it going to air?
Promotions: That’s the best part, we sent it to Commercial TV and they are the largest name in commercial placement! Most hip people refer to them as CTV.
Pepsi: Spectacular! So when will CTV have our commercial aired?
Promotions: Ah, well, you see… they decide their own programming, so it’s really up to them.
Pepsi: Oh… well, I’m sure it will at least get some prime time play.
Promotions: [nervous laughter] ha, umm… not exactly. I don’t think commercials are aired at that time.
Pepsi: Really? Commercial TV does not air commercials during prime time? What do they air?
Promotions: Reality shows! They are very successful with our target demographic.
Pepsi: Oh, I get it… so they’ll air our commercial during breaks between the reality programming. That’s cool.
Promotions: [shaking head]. No no no… I don’t think you’re getting it. They don’t play any commercials at all during prime time.
Pepsi: So when the hell do they play commercials?
Promotions: Well, they, umm [looks down at feet]. They don’t.
Pepsi: What?!
Promotions: [A member of the promotions team whispers something]. Ah! I take that back! They DO play commercials. From 2-5 AM.
Pepsi: What the hell? Nobody is watching TV then!
Promotions: Well, perhaps. But the good news is that Commercial TV made a second channel to address this issue. CTV2.
Pepsi: So our commercial will play there!
Promotions: Probably! They have 3 full hours a week dedicated to commercials.
Pepsi: 3 hours a WEEK? That’s nothing!
Promotions: Sir, I don’t think you fully understand the market. This is how it is done.
Pepsi: [Begrudginly]. Fine. Look, this television thing doesn’t sound too great. What about the internet?
Promotions: No worries there: we have you covered.
Pepsi: [perking up] Ok… good.
Promotions: Yes sir, we have teams working round the clock making sure nobody can get access to your commercial.
Pepsi: That’s grea… What?
Promotions: Yes sir, we are out there making sure we protect your copyrights from pirates. Piracy on the internet is a very big concern, sir.
Pepsi: Of course, we don’t want our property used without our permission.
Promotions: Exactly.
Pepsi: But what does this have to do with our commercial?
Promotions: Come again?
Pepsi: Our commercial. What does our commercial have to do with unauthorized use of our products?
Promotions: Ah, well those geeky internet bastards are out there distributing our commercials without our express permission. They put them on personal websites and even worse on video sharing sites and then send the links to each other. It’s horrible.
Pepsi: Wait. So our customers are out there sending our commercial to each other?
Promotions: Yes.
Pepsi: For free?
Promotions: Yes.
Pepsi: And you’re stopping this?
Promotions: Yes sir. We send them cease and desist letters, sometimes we sue them.
Pepsi: You are suing our customers?
Promotions: Yes.
Pepsi: For distributing our advertising? For free?
Promotions: Yes sir.
Pepsi: This doesn’t sound too good…
Promotions: But it is, sir. In the internet age people are stealing intellectual property left and right. We are simply protecting the products of PepsiCo! We must make a stand!
Pepsi: Well, that’s great, but we don’t sell commercials. The whole point of the commercials is for people to see them and then want to buy our product. We WANT people to see the commercials for free and then pay us for our product. That’s how advertising works. Usually we have to PAY for advertising. If we can get free advertising that sounds even better.
Promotions: I assure you sir, those individuals are stealing from you and costing you money.
Pepsi: [Sighs]. Fine. So how do people see the commercial then?
Promotions: Ah, that’s the best part. We have set-up the Pepsi website to stream the commercial to whoever wants to see it using tried and true technology from 1999.
Pepsi: So they can see the commercial on our website? For free?
Promotions: Correct.
Pepsi: Good. But how do people know they want to see it?
Promotions: Pardon me?
Pepsi: The people, how do they find out about the Commercial? If we are selling a product they’ve never heard of, how do they know to go find it on our website?
Promotions: Well…. um…. their friends tell them.
Pepsi: How do their friends hear about the commercial?
Promotions: …
Pepsi: Well?!
Promotions: [The promotions team huddles together and murmur furiously for several minutes]. Got it! They learn about the product when they come to visit the PepsiCo website, of course!
Pepsi: Why would people who aren’t already our customers be visiting our website? How would they even know about us?
Promotions: [the promotions team once again huddles together and murmur furiously for several minutes]. We have the perfect solution: let us make a commercial to advertise our website!
Pepsi: You’re fired.
Brilliant! That is exactly the stupidity that is killing the whole industry. Very funny.
Bravo sir, BRAVO!
so, you’ve been c&d’ed again
?
fun. howevah: they *are* selling mv’s (and folks are buying them…)
yeah…you forgot about iTunes…but PROGOSK, what do you mean people are buying them? where are the numbers? i know they sold a bunch when they launched…but buying a music video for 1.99 to check it out and watch it on your ipod doesn’t mean much…i’d be interested in seeing some real figures…but i haven’t been able to find any real numbers online. the business has to move towards music videos as a Value Add…like the dual disc/bonus DVD thing a lot of labels have been doing…but digital…i know itunes does that sometimes (more before they started selling videos)…buy the “record” on itunes and get some bonus videos for free…i LOVE that.
Proggy, I had an “iTunes” section to this story but I left it off for a few reasons:
1) As hungry said above, we don’t know if these things are actually selling. I guess any sales are good sales in music video land, but if it is coming at the expense of promotion and thus album sales, I’m not so sure the labels are coming out on top with this approach.
2) This particular article is about music video as *advertisement*. There will be another coming up about music video as *product*. It is there that I’ll handle iTunes and tackle the question of how something can be an effective ad and product at the same time (sneak preview: music videos can’t be both).
3) The clincher was that I looked at the top 20 albums on iTunes and simply tried to see if a video for ANY song of those albums was available via iTunes. On average there seems to be 25% success rate. If I can only buy a music video for a hot new artist 25% of the time, then music video has some serious, serious problems as a product (again, to be addressed in a future article).
The real question is whether selling the promotional video years later and making a paltry sum (the iTunes “MV as product” approach) is really worth killing the revenue generating aspects of the music video as a promotional tool which can help move new album sales. My suspicion is that if music videos are going to be justified not as promotional tools but by how much revenue they can generate in and of themselves, then music video was just given a death sentence.
“If music videos are going to be justified not as promotional tools but by how much revenue they can generate in and of themselves, then music video was just given a death sentence.”
Huh? Somehow I feel that isn’t the case. Prog just cataloged some info on this, anyway. If anything pumping money into music video may give it the boost it’s currently lacking. It’s a long time coming, too.
(comment was disappeared – huh-wah? here goes again:)
looks to me like the industry’s definitely hoping to milk the idea of selling videos. (whether their tack will succeed is another question.)
i’m no marketer or sales analyst, but here’s what i’ve found being reported:
- itunes store started with 2000 music videos in october ‘05. after 19 days they’d sold a million of those (avg. 26 downloads per vid per day); early hits were “weapon of choice” and “thriller”.
- itunes sells music videos at $1,99 a pop (of which record co’s pocket $1,40)
- the riaa estimated music video download sales at $3.7mil til end of 05
- during ‘06 itunes upped their music video catalogue to 9000 .
- according to the ifpi ‘07 report, music videos accounted for 3% of total digital revenues in the first half of ‘06
- jt’s itunes-only video release scores 50000 downloads/sales in its first 4 days in feb ‘07
- the Official UK Charts Company, having recognised “the explosion of the music video download market” led by iTunes and mobile network 3, plans to count music video download sales towards the UK singles charts as of jan ‘07
- combined audio and video sales (50/50 split) on the ‘3’ network now surpass one million units per month; the company claims second place in the UK digital music market, behind itunes, with a 20 per cent share
- total video sales (mv’s tv eps, movies, shorts) on itunes have quadrupled in ‘06 (jan ‘07: 50mil. tv eps 1.3mil. movies sold)
- something like thirty million video ipods have been sold since oct ‘05
- the itunes music video catalogue is currently reported at 10000
is it skewed to think their pace of mv sales will have increased from the early 1.5mil per month?
in the rather unlikely event it hasn’t, here are a couple of hypotheses:
A. multiplying the original overall average 26 downloads per day times the number of vids available comes to roughly 30 million videos sold since 0ct ‘05
B. assuming they merely held the pace of 1.5mil sold per month, you’re still looking at 26 million videos sold.
either way, for the record co’s this means a fresh new revenue stream worth somewhere between $37mil. and $42mil – so far. not exactly peanuts.
(i’d love to hear abler number crunchers’ take on this.)
Damn, you guys are making me write a “comments article”! Here goes:
I don’t dispute anything Prog reported. And I’m not surprised that the JT video sold well.. except I don’t trust the RIAA’s or IFPI’s numbers. Having dealt with bold-faced lies from them firsthand, my assumption is they inflate numbers to create an impending sense of doom for unlicensed downloads or make things look rosy for licensed downloads. I’m not saying they’re wrong in this case, but my stance is guilty until proven innocent.
Also, I wouldn’t throw the video ipod/ itunes TV and movie sales in this argument as they just aren’t relevant. They show a willingness to pay for downloadable video, I suppose, but Gray’s Anatomy and the new Bright Eyes video are two different beasts.
Music video sales as a revenue stream are good. The JT thing shows that when you take an immensely popular artist and make a video exclusive you can generate decent sales. However, if you break down the numbers you realize that 30,000,000 videos sold / 9000 videos x $2 per video = $6666 per video. The question becomes whether this $6666 costs you at least $6666 in album sales as you did everything possible to prevent the video from working as a promotional tool for the album (removing in from youtube, not allowing the blogs to post it, etc.). You only need an extra 666 people to buy the album (roughly) due to the promotional power of the video to match those video sales numbers. I would classify $6666 as chump change. Record labels GIVE away more copies of an album than that total equal. Hell, the video, even at today’s budgets, probably costed more than this to make in the first place. This is the fundamental problem with video sales.
If you look at the non-JT success stories, they are all older, classic videos from established artists released for purchase well after the initial buzz of the album they were connected to. If music videos are products, then why are we making them before the album is released just so we can hide them for 6 months and THEN sell them. Why not make them a year after the album is out? Like I said, only 25% of top albums have a purchasable video. Music videos are schizophrenic right now: they don’t know what they are or what they are for. They are adverproducts. If the record labels insist they are both ad and product, I would imagine that the best model is to flood the market with the video early as an advertisement on YouTube and blogs in OK quality, and then sell the thing in super-nice quality on iTunes or wherever after the album itself has built a fanbase willing to purchase the video. But what do I know…
The moral of the story is that the $37 million from the video isn’t exactly coming at no cost. Making money off old videos sitting in the vault is brilliant: same brilliance as selling seasons of old TV shows on DVD. But the new stuff… that’s more tricky. You have to judge whether the video will help the artist or the artist will help the video before you can make a call of what to do with the video (when, how, and where to release it). That kind of conditional thinking is probably far beyond what executives in the record industry are capable of (zing!).
First off…awesome article and awesome comments. Second, what does this all mean for unsigned artists where a low budget video is used solely as a promo tool…and heavily counted on?
- regarding the numbers, riaa and ifpi numbers sound like they haven’t got much of a clue beyond what companies (apple, 3) tell them – or don’t. none of their stats sounded too fanciful. mainly, they’re far too distracted by the whole piracy paranoia to really wrap their heads round what to do (but you do see signs that might change this year).
- movie & tv eps sales were only meant as a guideline for itunes sales trend. kumquats and pomegranates, indeed.
- you’re spot on a lot of aspects: first that there’s no single strategy to follow anymore. free lo-q paid-for premium-q sounds like the obvious choice for mainstream mv sales. the long tail for classic vids (thriller is currently still in the top 20) is a no-brainer. release-events (with corresponding production/marketing budgets) is another easy model for some. freshhead: seems evident you’d want that to make the rounds as much as possible – of course you want to be careful to have it make the *right* rounds (stereogum-/nyt-/sro-exclusives, and suchlike).
- as these strategies emerge, quality habits will cristallise (what counts a give-away quality vs. what quality standard folks are prepared to pay for). and this, in turn, might subtly bolster quality considerations when making videos (as opposed to the feared on-youtube-no-one-can-tell-the-difference-anyway effect).
- i’m not sure labels are actually trying to stop their videos from doing maximum promotional work. it’s that they might not think more=more, and in some cases they might be right (jt, el-p, dylan). sure, you’re annoyed they’re throwing spanners in your works (and i’d wager their mistaken in doing so, given your niche). not to worry: you guys are on the map, and labels will (eventually) figure this out. whether you want to skirt “danger” in the interreign, or whether your rôle is to call bullshit on the throttling paranoia – that’s your choice. keep on truckin’…
ps: sorry to have pre-empted some stuff here. still looking forward to your mv/adverproduct skit.
Ha, ha. Hi-larious. I too have consumed the crazy pills. There is way more truth in this than in all the sales charts and technological projections.
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