Strategy August 07, 2019
Sony Makes Bigger Push Into Music Merch
A just-announced acquisition heralds the intensifying emphasis mega music entertainment brands are placing on artists’ branded swag.
Sales of branded merchandise promoting musical artists are on the rise – and the competition among leading entertainment media companies to gobble up market share appears to be intensifying.
The latest evidence comes from a just-announced acquisition that sees The Thread Shop, Sony Music’s merchandising division, buy the music merch division of New York City-based The Araca Group for an undisclosed fee.
Founded in 1997, The Araca Group’s roster of music swag clients includes household name acts like Led Zeppelin, P!NK, Shania Twain, Sugarland and Zayn. Those artists are now in The Thread Shop’s portfolio, which already includes performers that range from Bob Dylan, Miles Davis and Foreigner, to DJ Khaled, Camila Cabello and A$AP Ferg.
“As artists continue to seek out merchandising opportunities to complement their music revenues, branding, and marketing, Sony Music is significantly expanding its presence in this growing area of the business,” said Richard Story, President, Commercial Music Group, Sony Music Entertainment, in a statement. “The acquisition of The Araca Group’s music merchandise division will further strengthen The Thread Shop’s artist roster and infrastructure and the competitive capabilities we offer to the music community.”
Sony’s acquisition occurred only about a half-year after its competitor Universal Music Group bought Los Angeles-based merchandiser Epic Rights. Last year, Warner Music Group spent about $180 million to purchase EMP, a Germany-based etailer of music and entertainment swag. “Consolidation is rife in the global artist merch space, it seems – and the major labels are splashing the cash to secure their positions,” reported Music Business Worldwide.
And, some are certainly having success. The Licensing Industry Merchandisers’ Association reports that sales of music merchandise tallied $3.1 billion in 2016 – a 10% increase over the prior year. Furthermore, in the previous two years, the volume of branded music merchandise available for consumer purchase has tripled, according to Edited, a company that specializes in retail analytics.
Universal Music Group is among the big companies reaping the rewards of the merch blitz. Its merchandising revenue through the first six months of 2019 increased 75%, rising year-over-year from $130 million to $228 million.
The music industry’s intensifying emphasis on swag is, in part, a result of changing marketplace dynamics. Sales of recorded music – especially in the form of CDs and the like – are declining. Artist-branded merchandise, live performances and artists’ influencer partnerships with brands are becoming ever bigger drivers of revenue for the music industry. For savvy promotional products distributors, that equates to potential opportunity to expand sales in a lucrative market.