As CD sales have declined, bands have turned to something that was once relegated to the back of the auditorium next to the beer and hot dogs: merchandise.
It’s not just T-shirts. These days, band “merch” includes a host of sometimes bizarre items including dolls, toothbrushes, pinball machines and sunglasses. With major artists such as Madonna and Dr. Dre leading the way — Madonna with her H&M limited-edition clothing line and Dr. Dre with his Beats headphones — dozens of lesser-known bands have found lucre in selling things other than music.
Turning up the volume a notch on this growing segment, Universal Music Group, the label of Lady Gaga, Justin Bieber and the Black Eyed Peas, on Wednesday announced it had struck a deal with fashion designer Tommy Hilfiger to develop rock-'n'-roll-inspired clothing for high-end boutiques and department stores.
Hilfiger and Universal, through its Bravado business unit, plan to work with bands and musicians to craft branded merchandise that would hit stores later this year. Terms of the venture, which involves Hilfiger personally and not the clothing company that bears his name, were not disclosed.
For Universal, being in the fashion business isn’t as much of a stretch as one might think. The music company in 2008 bought Atmosphere Apparel, a Britain-based company that had deals to develop merchandise for Metallica, Iron Maiden and others. The acquisition followed its 2007 purchase of Bravado, another United Kingdom merchandising company, and its parent, Sanctuary Group.
Bravado logged sales in excess of $300 million last year, has seen a 28% uptick in sales so far in 2011 and is projecting it will hit $400 million this year, according to sources familiar with the business unit. That doesn’t include the sale of CDs that come bundled with bonus items such as T-shirts and wristbands.
Though that’s just a fraction of Universal’s overall music business, which reported $6.3 billion in sales last year, it’s a segment that’s growing rapidly amid deteriorating CD sales and continuing problems with illegal online song sharing.
“Music’s not dead,” said Tom Bennett, chief executive of New York-based Bravado. “There’s an awful lot of people who are still very keen on music. It goes back to Elvis or the Beatles. People wanted to own a piece of them, be it a doll or a T-shirt. But with our stuff, you can’t download a T-shirt, you can’t download a doll.”
Among the unexpected hits from Bravado was the $50 Lady Gaga Halloween costume, among the most sought-after outfits for trick-or-treaters last year. Justin Bieber has sold 5 million dolls that retailed for $25.99. Bieber also has a $14.95 singing toothbrush, inspired by the teen idol’s manager, whose mother is a dentist.
But wait. There’s more. How about a $4,999 Rolling Stones pinball machine? Or a $65 Michael Jackson varsity jacket? Did we mention T-shirts? Last year, the top-selling version of the Rolling Stones’ “Exile on Main Street” re-release was one that came bundled with a T-shirt, Bennett said. At $20 to $29, it was also the most expensive version offered at Target, Best Buy and other major retailers.
The packaging of bonus merchandise has allowed record companies to regain some of the precious retail space lost after stores such as Tower Records and Virgin Records shuttered years ago. Bravado has sold its bands’ merchandise in stores such as H&M, Restoration Hardware and Hot Topic.
“As much fun as it is, it’s also a very real and viable source of income for the vast majority of our acts,” Bennett said. “And it’s big business for Universal. It gets the music back to the front of the store.”
With Hilfiger, Universal is hoping to further crank up its clothing business. In addition to a stable of clothing designers, Hilfiger works with Li & Fung, a Hong Kong company that sources billions of dollars’ worth of consumer products and distributes them to retailers.
Universal’s ability to scale its merchandise business may be limited to the number of artists it has with long-term mass appeal, said Eli Portnoy, who owns the Portnoy Group brand consulting firm in Los Angeles.
“Music tastes shift, and people like Justin Bieber disappear,” said Portnoy, who noted that female movie stars and supermodels tend to have more staying power.
In addition, the joint venture will have to tread carefully when it comes to using Hilfiger’s name to market its products, Portnoy cautioned. That’s because the Tommy Hilfiger brand is owned by Phillips-Van Heusen Corp., which also owns the Calvin Klein brand.
“But is it smart for Universal to bring in Tommy for his expertise?” Portnoy said. “Absolutely.”