Verizon’s Music Strategy – Prince lets Music Labels feel the Sting again

Only a few weeks after Verizon launched their integrated music identifications (ID) service that lets music lovers buy songs they hear anywhere on the fly, the company has upped the ante again. Prince is exclusively providing his first single off the new album to Verizon Wireless customers who use their music ID service and ID the song that is playing on the site – and all of it free of charge. The initiative is supported by an integrated advertising campaign. This initiative gives consumers the incentive on a risk free basis to learn how to use the music ID, show them how to improve their music discovery experience, and keep a brand new song from a legendary musician on top of it.
If we take one step back, the significance of this announcement becomes quite considerable, especially when taken together with an announcement from early May 2007. Prince, a legendary music icon without a record label contract has found a new way of how to launch his new single and album, promote it and secure an additional distribution channel. This is actually the third event in a progressive development that will most likely lead to the record labels losing their most iconic artists. In 2000, rumor has it that Sting felt that his record label was not adequately supporting his new album Desert Rose. In a move that turned record merchandizing rules upside down, Sting licensed Desert Rose to Jaguar for the use in an automobile commercial. Typically, artists frown upon being used in advertising and it is only used as a last step to extract the final value from a popular tune. Sting instead used the ubiquity of the Jaguar commercial as a music discovery tool and made it to the Number 1 spot of Billboard’s Hot Dance Music Charts and Number 17 of Billboard’s Top 100 – and that was seven years before an integrated music ID service. The second event was the launch of Shakira’s Hips Don’t Lie single and album exclusively with Verizon Wireless before a general release to the public. The success of the Shakira’s single and album by limiting distribution to just one outlet confounded common wisdom in the music industry. The single was the smash hit of 2006, having built significant momentum during the period of limited distribution. While Sting and Shakira remain within the construct of his record label relationship, Prince is a completely free agent. If Prince’s new single “Guitar” is even moderately successful I can imagine that he will earn more money for himself than if he would have had a mega-hit with a record label.

In early May 2007, Verizon announced a partnership with Fergie around her VIP concert tour that eliminates paper tickets. This takes the development that started in 2006 with a Fugees concert to the next level, where a barcode that was sent wirelessly to the handset was one of the ways to get into the concert. In the case of Fergie’s VIP tour, with the exclusion of winners of various contest and lotteries, the only way concert goers can attend Fergie’s concert is through the barcode that is sent to a Verizon Wireless phone. At first glance one can see the cost reduction of no longer needing to print and send paper tickets, elimination of fraud and marketing potential for the associated wireless service provider, but the puzzle pieces of a concurrently evolutionary and revolutionary development are starting to come together.
The combination of music discovery though advertising and radio with music ID, the subsequent immediate monetization of the identified song and album (with or without the associated DRM), and the cross selling opportunity ranging from song, album, ring tone, ringback tone, to concert tickets all within minutes hearing the tune for the very first time. If record labels are not going to adjust their business model to this shift they are risking of becoming merely optional. If you thought online music was a shock to the music ecosystem, think again what the wireless industry is going to do to revolutionize the industry and to bring music to more people than ever in a completely new and direct way.
The likely success of the Prince Guitar/Planet Earth campaign with huge cross-over appeal combined with Fergie’s concert tour will lead other superstars to question if they will actually need a label as it operates today to promote and distribute their music. Their new songs featured on television advertising, combined with an integrated music ID service that lets people buy the song or album on the spot will create enough of an interest to get radio play, which drives again revenue through integrated music ID discovery and regular record sales. This development will lead to the superstars needing record labels less and less as they exist today. At the same time, television commercials become will become the preferred outlet of brand new music.
How can other wireless service providers benefit from this development? Be a fast follower. The barcode initiative that allows concert tickets to be displayed is within the reach of every wireless carrier. On the music side Sprint has it probably the easiest. They have the same basic capabilities as Verizon and can put it together the same fashion. Service providers that do not have the same integrated music store capability such at AT&T and T-Mobile still have music ID features available to their customers today. They have to work with selected music portals ranging from iTunes to Napster to name just a few to connect the music ID discovery mode with actionable purchase decision. For example (not having seen the iPhone), I would expect the iPhone to have a music identification function. I hope that once somebody has identified a song with the iPhone, it gives the user the option to purchase the song with iTunes. Once they get home, the song has already been downloaded onto their computer and is ready for side loading.