Why Beyonce's album changes everything
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BEYONCE released her self-titled surprise album via iTunes less than a week ago, and the record-breaking results are pouring in.
According to Apple, Beyonce reached the top spot on the iTunes charts in 104 countries en route to selling 828,773 copies worldwide in its first three days - including 617,213 in the US. That's more than the combined opening week sales of Katy Perry's PRISM and Lady Gaga's ARTPOP, and the numbers make Beyonce's latest effort the fastest-selling album in iTunes history.
The world's leading advertising experts say Beyonce's album launch - with no hype or pre-warning - is a total game changer for the marketing industry.
"Marketing as we knew it is dead," Saatchi & Saatchi CEO Kevin Roberts said in an interview with Bloomberg.
Others are more conservative. An article on CNBC.com points out that few could pull off what Beyonce has done. She has been building up her brand and loyal fan base since her Destiny's Child days in the 1990s.
But the move does suggest that marketing is reverting back to a 1960s styles of "relationship marketing".
"Artists, authors, Fortune 500s, entrepreneurs, and everyone in-between is learning that social media and online marketing can only get you so far. Building great relationships with your customers (or fans) is the single greatest form of marketing you can do. Beyonce's new album isn't successful because she kept it a secret and dropped it out of thin air, it's successful because she has a huge fan base, has poured her life into her brand, and is an incredibly talented human being," CNBC.com reported.
One veteran entertainment lawyer who declined to be named told Forbes : "The fact that nearly 900,000 customers were willing to pay full price to buy this album is testament to the passionate dedication of Beyonce's legions of fans. Most artists have to pre-sell or hype albums by giving away singles on various websites, or streaming the album."
So how does the album impact Beyonce's bottom line? The aforementioned attorney believes the "Single Ladies" singer has already turned a profit on her latest launch, thanks in part to a deal with Sony's Columbia Records rumoured to be structured more like a joint venture than a simple superstar royalty rate of 20 per cent or thereabouts (a spokesman for Beyonce declined to comment for this story and a representative from Sony did not immediately respond to a request for comment).
A partnership-style setup would be particularly lucrative given Beyonce's iTunes launch. Apple typically takes a 30 per cent cut of sales, which would leave 70 per cent, or a little over $11 per $15.99 album sold, for Beyonce and her label. Take out the statutory 9.1 cents for publishing on each of the album's 14 tracks (Beyonce has songwriting credits on the album, but let's assume her co-writers take the lion's share) and you're left with about $10 per unit.
Mainstream pop albums' production budgets can easily soar into the millions, and Beyonce's includes videos for each track, which could push the total cost into the mid seven-figures. But even assuming that she co-financed a whopping $5 million budget, the album's opening weekend alone would have earned Beyonce and her label a multi-million-dollar profit to split.
Of course, those details may be moot. According to a different attorney, Lori Landew of Fox Rothschild, the deal was probably a moneymaker for Beyonce before the album even went on sale, even if her agreement was structured as some sort of joint venture.
"Presumably, Beyonce's deal entitled her to a nice advance payment on sales before a single unit (digital or physical) was sold," she says. "However you slice it, it seems safe to say that her label will work hard to make and keep her happy so that they can enjoy a mutually rewarding relationship now and into the future."
Under this likely scenario, Beyonce won't see another dollar from the album until she earns back her advance, plus any share of production costs added to it. But if big upfront payments run in the family, she's already in good shape - her husband Jay Z's Live Nation deal called for advances of $10 million per album.
As profitable as Beyonce may end up being in its own right, its most valuable contribution to its namesake's bottom line may be more difficult to quantify. The buzz created by the launch should help boost sales for her Mrs. Carter World Tour, for which she is signed up for 26 more dates through the end of March.
She's currently grossing over $2 million per city, and if her album helps sustain the addition of more shows and sell more tickets for her existing winter gigs, the financial impact could be far greater than that of Beyonce's record-setting iTunes sales.