Modernizing The Merchandise Madness

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Kusek is a senior consultant in technology and marketing and General
Manager of Digital Cowboys Consulting.  Kusek is the former CEO of Berkleemusic.com and co-author of The Future of Music

For artists struggling to make a living in the digital age, a strong merch strategy can be the difference between living life as a starving artist and making a comfortable living. Yet compared to the recording, publishing and ticketing businesses – which have felt the full effect of technology and the Internet – the merch business today is mostly stuck in the analog 70s.

If we are looking to make money in the music industry of the future, why focus our energies on debating the intricacies of Spotify payments or whether licensing terms stifle innovation. Instead let’s examine an area ripe for disruption and revenue expansion.

A Highly Fragmented Environment

Indeed merch seems to be a highly fragmented business ripe for consolidation and transformation. To illustrate, let’s look at some research conducted by a company I work with— Merchluv. We looked at the August 2012 Big Champagne charts and came up with a list of  100 top artists and analyzed their merch availability:

– The 100 artists on the list used 44 different merch vendors (how’s THAT for fragmentation?).

– 75% of artists sold merchandise on their website, Facebook page or through an official supplier.  A surprising 25% of the top selling artists in August did not sell any merch AT ALL.

– 18 artists were “self” merchandisers, meaning they used Topspin, Paypal, Amazon, or a 3rd party services or ran their own commerce site/shopping cart.

– The remaining 57 artists were served by 26 different merch suppliers.

That means to sell merch for the top 100 artists in August you need to make nearly 44 deals with merch suppliers. Clearly a consolidation of merch vendors could help to rationalize the market. Where is the Amazon of music merchandising?

Merch is an Insulated Service

The merch business is largely disconnected from the real heat in the music market today, namely the explosion in digital music services. For example: 45 BILLION songs are streamed or viewed every month, yet there is NO MERCH being sold against this engagement. And that number is just going to BLOW UP to hundreds of billions of streams per month in the next few years.

Imagine if streaming services allowed fans to browse and buy an artist’s merchandise from the same page where they  are streaming their album or buying their tickets? There is a complete disconnect between where most music is discovered today, and the $2.2 billion in annual merch revenue.  The vast majority of merch is sold at the venerable merch table at any given concert. Why not make the effort to expand that experience into the digital realm? An alignment of merch distribution with the direction that the overall music market is headed would serve artists and merch companies extremely well, and potentially unlock a flood of new revenue.

Merch is Analog

Most artists sell 85% or more of their merch directly at live shows at the merch table. As effective as they are, merch tables can stand to be improved on in the digital age.  For example:

– Fans have to know where the merch booth is.

– Why stand in line when you can order from your seat?

– What if the merch guys don’t have your size or color preference at the table?

– When you buy merch at a show you have to hold it and take it home. Do you want it delivered instead?

– What if you want a bundle of something physical and something digital.  Is this easy to buy?

– How about something personalized for you, or something bigger than you can carry home?

There hasn’t been much innovation at the merch table at all, except for perhaps using Square readers to process credit cards. I wonder if the major merch vendors of today are going to be blindsided by technology and the changing habits of music consumers in much the same way that the record labels were hit.  Merch is extremely difficult to digitize.  But the sales of merch are not.

Tons of artists have web stores attached to their web sites and Facebook pages.  Companies like Reverbnation and Bandcamp can help independent artists manage their merch on their web stores and spread the merch offer out via social media to numerous outlets.  There are many businesses such as Bandmerch and Cinderblock, JSR and Bubbleup addressing this niche, providing fulfillment, webstores, warehousing and shipping services.

But the problem with this approach is that fans need to navigate to an artist’s web site and find the merch for sale and be ready to buy.  Today only 15% of merch is sold online.  New companies like Merchluv, which I am an investor in are about to blaze new trails in digital merchandising. The reason to do this? Grow overall revenue.

The large merchandising companies are very aware of the opportunities of snaring a hot band and bringing their merch to market effectively.  The holy grail of this is the long-term sales possible from mega-popular bands over time.  Anyone want to guess how many Dark Side of the Moon T-shirts have been sold?  Companies like Old Glory have been licensing artist merchandise for decades.

Now we can argue whether there will ever be another blockbuster band like Pink Floyd or the Rolling Stones or Metallica – but if there is going to be significant revenue in the music market of the future, merchandise is going to be a huge contributor.  Merchandise might possibly become the single largest revenue generator for artists of the future. You have to think big here and broader to see what I am talking about.

When artists today are being pulled in various directions to run their businesses, create, act, teach, write and express themselves and interact with their audience, what could be better for supporting a career than a good merch strategy?  Think about the merchandising empires built by Jimmy Buffett, Jay-Z, Puffy, 50 Cent, the Grateful Dead.  The merch is the tail wagging the dog and it has made these artists a fortune.

For musicians in the digital age, revenue needs to come from something than other the recording itself.  To some extent this has always been true, but never more so than today.

Creative Explosion

My friend Todd Siegel and partner in Merchluv tells me that these days creating innovative merch and finding things that resonate with your audience is easier than ever, and many clever artists are using fan sourcing and crowd sourcing options like Talent House and Creative Allies to design merch with their fans.  Once you have a design, you can use sites like Zazzle to test ideas for new products without investing in inventory up front.

Bands like Insane Clown Possee (ICP) have created a cult-like brand through the use of iconic imagery and building a strong following by involving their fans.  The Misfits have sold more merch than music because of that iconic skull that people buy because the merch itself is cool and fashonable.

And talk about branding, take a look at what Deadmau5 is doing with the goofy mouse head. This guy has merch everywhere and may just overtake Mickey Mouse in brand awareness across teenagers.  Even if you have never heard him perform, you know who he is.

Beats by Dr. Dre is another example of merch that has gone over the top and transcended the music entirely to become a lifestyle product that in some respects is becoming a big part of the music industry.  This in only a matter of a few years.

The brainchild of artist/producer Dr. Dre and Interscope Chairman Jimmy Iovine, Beats is bringing high-quality audio to fans through their headphones, sound systems, and now the recently acquired MOG digital music service. Dre has taken a brand established as a recording artist and is in the process of turning it into the music industry of the future, through a grand merchandising strategy.


In the face of declining recorded music sales, many of us are looking hard at the opportunities for generating money in music today. Most of the investment from VCs, Angel investors or Private Equity in music has been in streaming music, discovery, ticketing, crowd funding and artist services. Businesses like Pandora, Spotify, Beats, Ticketfly, Soundcloud, Songkick and Indiegogo all have received significant investments in recent years.

There are two ways that bands have always made money. One is by performing and the other is by selling merchandise. Both are tried and true methods, difficult to download or duplicate, and solid and reliable opportunities.

Why have hundreds of millions of dollars in venture capital been poured into online music services in the face of severely declining recorded revenue, when one of the most profitable parts of the music business—namely merch—been largely ignored by investors? Wouldn’t it make more sense try to increase sales of an already healthy and expanding market segment, ripe for disruption?

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  1. Glad to see this topic addressed here. I, too, have written about this in the past.
    People act as if music merchandising is separate from similar forms of sales in other industries. There’s a ton of experience among direct sales specialists and among those in the collectibles market. The music industry doesn’t need to reinvent the wheel. There’s a lot that can be learned by researching what others have done selling products direct to fans in other markets.
    If, for example, bands want to sell t-shirts, then start studying companies that sell t-shirts. See what they are doing.
    If you want to create an online catalog of band-branded products, look at other online catalogs of branded products.
    If you want to put out limited edition products, study companies that sell limited edition products and also look at what is being done to market to collectors (e.g., conventions; secondary markets which maintain prices and encourage people to buy what you put out as soon as you put it out).
    If you want to improve your merch table, read up on pop-up stores and how to create temporary displays that lure people in.

  2. Suzanne – great comment. There is so much more that can be done with bundling, special offers, physical and digital bundles, custom products, personalized products, limited editions, etc.

  3. Fantastic article. The person following the band in a van full of what hasn’t sold yet is no way to run a business. Sadly, each digital innovation in the past hasn’t been the most positive for artists. Let’s move forward on disrupting the old model to the benefit of the artist.

  4. What a great article–well said and I couldn’t agree more. When you consider the massive amounts of creativity and innovation that keeps the music industry moving forward and adapting, it does seem strange that merch is still “analog.”
    It’s time for artists to look at merch in a brand new way and offer something MORE than just shirts and hoodies. Instead, artists should offer something that gives fans a chance to get to know them beyond their music. The closer fans feel to their favorite artists, the more dedicated they become.
    And yes, it is time to optimize the way things are sold. To echo Kusek, fans should be able to buy show-related gear RIGHT NEXT to ticket links. Additionally, studies have found that fans expect to be notified about upcoming shows…so why not tell them about merch at the same time? Tools to optimize the sales process in this exact way DO exist, it’s just up to the artists to adopt them.
    The gang here at Bandsintown, a free app that helps artists promote their shows and sell tickets, recently launched a direct-to-fan platform called Specials. It was created to give artists a way to make money while on tour, and while reading this I realized that it addresses many of the points Kusek raised. Good to know we’re on the right track!
    Creativity and innovation are what makes the music industry so inspiring, and I’m confident artists will apply that same mindset to what they sell and how they sell it.

  5. I found this to be very insightful. Thank you! I’ve also been getting a lot out of drummer Brian Doherty’s website as well. He has some interesting views on music and the music industry at briandoherty.net

  6. Thanks for the great article. As you mentioned in the article, one of the problems with the band merch business is the fragmentation of the manufacturers that supply the merch (especially for large bands). Until there is consolidation of who is making the merch, this going to be a hard problem to solve.
    We work as wholesale distributors of band merchandise from the larger manufacturers here in the U.S. (Bravado Entertainment, Cinderblock, Liquid Blue, Live Nation Merch, FEA Merch etc). The problem with this model is that, although a few of the big companies will ship orders placed on the band’s official webstore (also run by the manufacturer) directly to retail customers, these manufacturers do not want to ship out single-item retail orders. After working with these companies for a number of years, it is obvious to me that they are true wholesale suppliers. They make their money (and the band makes their revenues) on volume. Shipping single orders (compared to wholesale distribution) is much more labor intensive (even for the most technologically advanced warehouse) than shipping wholesale. In addition, more technology is needed for this type of business (real time inventory, real time catalog info, payment api???). Lastly, these larger manufacturers are notoriously bad at retail customer service. Read some online reviews about customers experiences buying from official band web stores run by the large manufacturers and this becomes painfully obvious.
    In addition to our wholesale and retail sales, my company works as a “dropshipper” of licensed band merchandise. We consolidate wholesale quantities of licensed band merchandise in our warehouse and ship single items directly to the retail clients of bands that are using certain software companies to build their band stores. Using the example of Pink Floyd. If they were a client, they have merch manufactured by multiple manufacturers. We consolidate that merchandise so they can offer it all on their webstore (not run by a major manufacturer). We also dropship for direct online retail companies featuring band merchandise “superstores”. It seems to me that this is the closest we will be to “consolidation” of the merch industry. Just my 2 cents…
    Josh Lundorff – President – Rockline Enterprises LLC

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