Smart Money: Live Music Deals Ramp Up.

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Author: Waddell, Ray

TOURING

Corporate America is investing more than ever in live music, with sponsorship dollars for tours, concert series and venues expected to jump 15% this year, according to the IEG Sponsorship Report, which tracks the sponsorship business.

IEG predicts live music-related sponsorships will hit $867 million in 2006, up from $754 million on music deals last year.

The spending increase outpaces last year's 8.5% growth and IEG's projected 10.6% increase for the overall sponsorship industry.

"Music provides direct access to a highly targeted audience that is increasingly difficult to reach through traditional media," IEG Sponsorship Report senior editor Bill Chipps says. "As a result, more and more companies are aligning with music to break through the clutter and gain one-on-one marketing opportunities."

Several factors are driving the rise in music sponsorship spending, among them increased spending by telecommunications companies. Already one of the most active in music marketing, many telecom players have ramped up their investments in the live music business as they seek platforms to showcase new products to the highly coveted youth and young-adult market.

Content is playing a key role in telecom's growing interest in live entertainment. Chipps cites Sprint Nextel as an example. The company leveraged its sponsorship of Bon Jovi's North American tour to gain exclusive content for subscribers, including access to a streamed concert and two previously unreleased songs. Sprint customers can also download Bon Jovi ringtones and access the band's music videos.

Chipps says large festivals and festival tours are also attractive for sponsors, with Lollapalooza, Austin City Limits Music Festival, Coachella, Milwaukee Summerfest, Vans Warped tour and Ozzfest drawing more and more interest from marketers.

"These types of events often generate more excitement than one-off music tours, and they are usually easier for sponsors to activate because they often take place over a couple of days as opposed to months on the road," Chipps says. "On top of that, these types of events typically have more staff and other resources to work with sponsors as opposed to tours."

Interest in niche music is also on the rise. "We're seeing a growing number of companies aligning with niche musical genres, which gives marketers something to 'own' and gain a point of differentiation," Chipps says, citing Rolling Rock's sponsorship of Little Steven Van Zandt's Underground Garage Tour, the RockStar Taste of Chaos Tour and Absolut's sponsorship of the Ultra Music Festival as examples.

New product categories sponsoring music include flash memory and computer chip manufacturers, with SanDisk sponsoring punk rock's Vans Warped tour, and Advanced Micro Devices supporting the Austin City Limits Music Festival.

Other emerging industries within the music sector include energy drinks, secondary ticketing outlets and financial services categories. Deals include RockStar Energy Drink's title sponsorship of the Taste of Chaos tour; Stubhub.com's sponsorship of New Orleans' Superfly During Jazzfest concert series; and First Midwest Bank's title of the Chicago area's former Tweeter Center amphitheater.

Companies are increasingly moving away from the signage-driven deals that marked the birth of tour sponsorships 20-plus years ago. "Companies want integrated marketing platforms that can be leveraged through advertising campaigns, one-on-one marketing opportunities and other vehicles," Chipps adds. "Companies use sponsorship to engage consumers. Signage doesn't do that. Companies that are just looking for impressions should buy print or radio ads."

For tour sponsorships, the days of slapping a banner onstage are pretty much over. "Companies are looking for bigger, more robust partnerships that offer multiple touch points," Chipps says. "Music properties can, and should, help them achieve that goal."

Multiple touch points deliver dollars.

2004     $695 mil
2005     $754 mil
2006     $867 mil (projected)

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By Ray Waddell