Bob Dylan and Starbucks: A Sign of the Changin' Times

Even a music icon like Bob Dylan realizes that sometimes you have to smell the Starbucks and realize the times they are a-changin'.

Dylan raised some eyebrows -- and drew some criticism -- when he sang and appeared in the backdrop of a Victoria's Secret lingerie commercial last year. More recently, Garth Brooks sparked headlines last week with reports of a deal to make recordings to be sold exclusively at Wal-Mart stores, Sam's Club and their online outlets.

With today's release of "Bob Dylan: Live at The Gaslight 1962" -- a previously bootlegged collection of 10 rare recordings at New York's Gaslight Cafe -- exclusively at Starbucks coffee shops, the singer-songwriter is confronting a dilemma facing both older and young artists today: Finding new, alternative ways to market and sell their CDs and reach their audience.

"I think you're going to find more and more artists trying to build community ties in a sort of brand integration where they bring more people into a store and the store in turn helps them sell records," said M. Sean Agnew, managing executive director and chief executive officer of Blue Metallic Entertainment. "With older artists, traditional retail stores might not give them the same shelf space they reserve for the younger artists who target the younger audience -- the teens -- who buy most of the CDs. An artist like Bob Dylan is iconic but not necessary a commercial hit. So, the challenge is really knowing your audience and finding the places where they go."

According to Nielsen Soundscan, approximately 282.6 million music CDs were sold in the United States in the first six months of this year, down 7 percent from the approximately 303 million purchased by the end of the first half of 2004. However, Nielsen Soundscan reported, paid download sales were up by 104 million units.

This, some experts say, indicates that music lovers are going to retail stores less and turning more to downloads for their iPods or other alternatives. And artists currently atop the music charts and beloved by MTV watchers -- such as Gwen Stefani, Coldplay, 50 Cent, Missy Elliott, The Foo Fighters and others -- have adjusted to their fans' lifestyle and expanded the way they present their music.

"The hotbed for young people is definitely the Internet. If you ask most young people where they hear about music, they'll tell you either from their friends or on the Internet and usually those two things go hand in hand," said Terry Dry, co-founder of Fanscape, a Los Angeles-based online music marketing company. "That's why I think the Starbucks strategy is such a great idea. The Web, downloads, ringtones are skewed towards younger people -- in college and high school. And the challenge facing artists like Sheryl Crow and Bob Dylan is finding the people who will buy the new music or the exclusive recording. Most people are not in record stores as frequently as they used to be when they were in college. So the key is hitting them where they are."

Ringtones Equal $$$

Last year, U2, perhaps in an attempt to tap into the coveted younger market while showing longtime fans that it's still keeping up with the times, had "Vertigo," the first single from its last CD "How to Dismantle an Atomic Bomb," featured on a 30-second commercial for iTunes. They also brokered a deal with Apple Computer to sell custom promotional iPods before the album's release.

More artists have been making samples of their singles and albums available on cell phone ringtones. Missy Elliott announced last week that 26 of her tracks will be available in ringtones to customers of Cingular Wireless. In April, Coldplay's single "Speed of Sound" debuted as a ringtone through Cingular in advance of the release of its CD "X & Y."

The anticipation surrounding Coldplay's "X & Y" -- the follow-up to its Grammy-winning "A Rush of Blood to the Head" -- was so high that the group and its record label believed the new album's release had to be innovative.

"There was so much buzz surrounding the new album -- there was so much said, was it any good, was it bad, that we thought, 'How can we make this CD's release an event?'" said Mary Stuyvesant, general manager of entertainment marketing services for Infospace, which distributes content through Cingular Wireless.

Stuyvesant said different record labels have had different levels of enthusiasm about merging their artists' work with wireless technology. But, she argues, they fail to realize that their talent can be exposed to so many more consumers instantly than through traditional methods.

"They can have the ability to reach 50 million people and that's just with one operator," she said. "The numbers are astounding."

The Fan Base Time and Technology Left Behind

Still, not all artists have a young, tech-savvy fan base. Some fans may still prefer CDs or have not warmed up to music downloads, iPods and ringtones. Artists who have these kinds of fans -- or potential consumers -- must recognize them and identify the best ways to reach them.

Chip Davis, music composer-entrepreneur and creator of Mannheim Steamroller, has used his knack for marketing to outsell industry legends such as Michael Jackson, Bruce Springsteen and Billy Joel during the last 15 years and to make the group's Christmas albums the best-selling of all time. Davis produces Mannheim's music through his own independent record label and has a line of different Steamroller products such as gourmet foods, scented candles and body lotions that he sells through a quarterly catalog.

Davis says one of the keys to his success -- and perhaps any artist's success -- is knowledge of his audience and making sure Mannheim CDs and other products are sold in the places they frequent the most. And according to Davis, those places are not necessarily music stores like Tower Records or Virgin Megastores.

"We created a motto: Put music in the path of people doing what they do every day," said Davis. "The average person goes into a music retail store maybe once a month. But how many times does a person go to the grocery store or the drugstore?"

Davis has had Mannheim Steamroller CDs and products sold in drugstores and grocery stores from the beginning. Also, Mannheim Steamroller has branched out beyond Christmas music and produced "American Spirit," a Fourth of July-themed album, as well as Valentine's Day and Halloween-themed CDs. Specific placement of the CDs and other seasonal items are important, Davis said, since consumers' purchases are often impulsive. He asked stores to place "American Spirit" near hot dog buns and chips and other barbecue and picnic products and that Mannheim Steamroller's Halloween CDs be placed near Halloween candy.

Davis readily concedes that he does not have a degree in marketing and business and that his strategy, though effective, seems simple and logical. He said he hopes to have Mannheim Steamroller's music sold in Starbucks one day, like Bob Dylan, Ray Charles, Alanis Morissette and others.

"It's an excellent way to market CDs," he said. "While people are waiting on line for cappuccinos, they can't help but browse and take a look at the groovy mugs that are being sold or take a look at the other cool things. … And Starbucks is such a strong brand that it kind of gives an automatic stamp of approval."

And besides established stars like Dylan and Morissette, some up-and-coming artists have hoped that stamp of approval rubs off on them in CD sales. Female folk rock band Antigone Rising recorded its live acoustic CD exclusively for Starbucks and has sold more than 65,000 copies while getting exposure on VH1. Soul singer-songwriter Amos Lee has sold approximately a fifth of his self-titled debut out of Starbucks. Starbucks enjoyed success with CD sales, most notably with Ray Charles' final recording "Genius Loves Company," which has sold 775,000 copies.

Exposure That Knocks on Heaven's Door

Today's release of Dylan's "Live at The Gaslight 1962" coincides with the simultaneous release of the soundtrack to "Bob Dylan: No Direction Home," Martin Scorsese's feature-length film on the music legend that will premiere on PBS' American Masters series in September.

The soundtrack will be sold in both Starbucks and in traditional music retail stories. So, besides having the opportunity to capitalize on his own legend and months of press about the Starbucks deal, Dylan gets two platforms -- traditional and alternative -- to sell CDs. And sales may increase after the Scorsese film premieres.

With that kind of exposure, who needs ringtones?