It’s American Brandstand: Marketers Underwrite Performers
By ROBERT LEVINE
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The hip-hop and R&B producer Jermaine Dupri has discovered best-selling acts like Kris Kross and Da Brat, has produced hits for Mariah Carey and Jay-Z, and now runs the urban music division of the Island Def Jam Music Group. He’s also looking for fresh talent for a new label financed by a company new to the music industry.

The new player? Procter & Gamble.

The consumer goods giant is part of a wave of companies getting into the music business to promote their own products, essentially becoming record labels themselves.

Procter & Gamble, for example, is joining Island Def Jam in a joint venture called Tag Records, a label that will sign and release albums by new hip-hop acts. It is named after a brand of body spray that P.& G. acquired when it bought Gillette.

And Mr. Dupri, a music-industry veteran and the longtime partner of the singer Janet Jackson, sounds quite pleased with his new gig.

“I’ve never seen someone wanting to devote this much money to breaking new artists,” said Mr. Dupri, who will serve as president of Tag Records while keeping his position at Island Def Jam. “Nobody in the music business has the marketing budget that I have.”

At a time when online file-sharing is rampant, record stores are closing and consumers are buying singles instead of albums, getting into the music business might seem like running into a burning building. But as record labels struggle to adjust to a harsh new digital reality, other companies are stepping up their involvement in music, going far beyond standard endorsement contracts and the use of songs in commercials.

These companies — like Procter & Gamble, Red Bull and Nike — are stepping outside of their core businesses to promote, finance and even distribute music themselves.

A few months ago, Bacardi announced that it would help the English electronic music duo Groove Armada pay for and promote its next release. Caress, the body-care line owned by Unilever, commissioned the Pussycat Dolls singer Nicole Scherzinger to record a version of Duran Duran’s “Rio” that it gave away on its Web site to promote its “Brazilian body wash” product. The energy drink company Red Bull is starting a label that is expected to release music before the end of the year.

And at least some of this music is credible: a hip-hop song that Nike released by Kanye West, Nas, Rakim and KRS-One was nominated for a Grammy Award for best rap performance by a duo or group.

Unlike Starbucks, which got into the music business to sell CDs at its stores, these companies want to use music to promote products they already sell.

“It’s not about money,” said Sarah Tinsley, a global marketing manager at Bacardi. “It’s a branding exercise.”

Unlike the exclusive album deals that Wal-Mart is striking with groups like the Eagles, these companies are attracting artists at the height of their relevance. Two weeks ago, Converse released a single by a combination of artists that The Times of London called “a three-headed Frankenstein’s monster of coolness”: the Strokes singer Julian Casablancas, the producer Pharrell Williams and the R&B performer Santogold. Offered as a free download on Converse’s Web site, the song received mostly favorable reviews from both blogs and newspapers.

“Our instructions to them were to have fun, as though they were doing any song,” said Jon Cohen, co-founder of Cornerstone, a music marketing company that has set up music deals for Converse, Nike, Caress and Smirnoff. “It doesn’t matter where the music comes from as long as it’s great.”

A decade ago, signing a record contract with a body spray company would have been unthinkable for most artists. But at a time when labels’ promotion budgets are declining, consumer brands can offer valuable exposure in print and television ads. Jeff Straughn, Island Def Jam’s vice president for strategic marketing, said that Tag might spend seven times as much promoting a release as a traditional label.

“When I started in this business 10 years ago, it was hard to get an artist to stand in front of a sign with a logo on it,” said David Caruso, the co-founder of Acme, the agency that negotiated the deal between Island Def Jam and Tag. “Now brands are engaging their audiences with content.”

But the brands walk a fine line by making sure that consumers are aware that they financed a song without having it simply seem like a commercial.

“We wanted it to be like they were making their own record,” said Rob Stone, a Cornerstone co-founder, referring to the song that Kanye West, Nas and KRS-One made for Nike with a celebrated producer, Rick Rubin. “None of them had to mention the Air Force 1,” a Nike shoe.

Instead, Cornerstone asked the artists to write a track about the theme of timelessness and promoted it like any other song, making a video, promoting it to radio and selling it on iTunes. (Nike’s profits went to the Force4Change Fund, a charity for youth leadership programs.) As it turned out, the song, “Better Than I’ve Ever Been,” does mention the sneakers as well as “Nike’s straight classic.”

For artists, deals with brands can be more lucrative than traditional record contracts. Performers usually get an advance or fee in addition to a royalty rate higher than that given by record labels, which is usually $1 to $2 per sale. If the artist is signed to a label, he usually has to share the money he makes. In most cases, control of the recording copyright reverts to the artist or label after a set period of time.

In another deal Cornerstone negotiated, the electronic music duo Crystal Method remixed some of its songs to create a workout soundtrack that Nike could sell on its page in Apple’s iTunes store. The sneaker company gave Crystal Method a small advance but a generous royalty, according to Richard Bishop, the duo’s manager.

The mix sold nearly 40,000 copies online, according to Nielsen SoundScan, and more than 15,000 copies in traditional stores once Nike’s period of exclusivity ended. Crystal Method’s last traditional album sold 184,000 copies, but Mr. Bishop said the duo made more money on the Nike project because the royalty rate was so much better.

“I think in the world today, it doesn’t make a difference to the consumer if a record comes out on Warner Music, EMI, Red Bull or Diesel Jeans,” Mr. Bishop said. “Artists may be better advised to put their music out with a brand to get better reach and bigger advertising.”

Groove Armada should also do well in its deal with Bacardi, according to the band’s manager, Dan O’Neill. The yearlong contract calls for the duo to play 25 Bacardi events and give the liquor company online distribution rights to its new E.P. — a release with less music than a CD — which is due in October.

In exchange, Groove Armada receives a monthly fee, money for recording costs and a generous royalty on music Bacardi sells or gives away. It retains the copyright to its recording, as well as the right to sell its E.P. in traditional outlets, where it will presumably benefit from the money Bacardi spends on marketing.

Music executives say many of the acts now striking deals with brands are popular enough to do so because they have already benefited from major-label marketing campaigns: Crystal Method was signed to Interscope, Groove Armada to Sony.

Although consumer brands are taking on roles once reserved for labels, they are investing so much money in music because the same digital technology that whipsawed the music business is also making it harder to reach consumers.

“We don’t just want to talk to people,” said Anne Jensen, a brand-building director at Unilever who works with Caress. “We want to give them something that adds value to their lives.” She said that Ms. Scherzinger of the Pussycat Dolls was perfect for the campaign because she embodied the spirit of Brazil. (Though, truth be told, she is Hawaiian, Russian and Filipino.)

Ms. Scherzinger will get money from her deal with Caress as well as exposure in the brand’s television campaign — the kind of advertising that a major label would not buy, even for a star.

“If you’re only looking at these deals in terms of money, you’re going to miss what they do for each party,” said Jeff Haddad, who manages Ms. Scherzinger and the Pussycat Dolls.

Danny Goldberg, founder of the management company Gold Village Entertainment and former chairman and chief executive of Mercury Records, said that deals with brands would turn off fans of some bands but could be effective in promoting other performers.

“In another era, there was a stigma attached to this,” he said. “Now it’s just another way to expose your music.”