Brad Scoffern was 15 years old when he sold his first band t-shirt at one of his older brother’s shows at Maritime Hall in the Bay Area around the turn of the century. “I thought I was going to see my brother perform, and then we get to the venue and he’s like, ‘You’re at the merch booth tonight selling t-shirts,’” recalls Scoffern, now the founder/CEO of Ceremony of Roses, which has a merch and branding venture with Sony Music. “Back then, it was a black t-shirt, a foldable table, $20 per t-shirt — as simple as it gets — and I was talking to fans, finding out why they were there — it was just a blast as a 15-year-old. And a lightbulb went off in my head, like, ‘Wow, there’s a real business here.’”
For decades, the business of physical retail in the music business was relatively straightforward: band makes album, album gets pressed to physical format, physical album gets sent to stores, band goes on tour selling t-shirts at the merch table. But the digital revolution in the early 2000s upended the sales status quo, first with digital downloads, then with the streaming era, seemingly relegating the physical business of the record labels to the history books.
But while that may have been the prevailing view in the mainstream, in the background something else was happening: for the past two decades, vinyl sales have continued to grow year over year, raking in more than $1 billion in revenue in the U.S. in 2021, according to the RIAA. Even more, the once-staid world of music merch has exploded in both popularity and creativity: artists have embraced the worlds of streetwear and high fashion, turning themselves into curated brands with the retail strength to match, while each of the three major labels saw their merch-related businesses grow by millions year over year in their respective latest earnings.
“I think what you’re seeing is, the level of care that artists put into their artwork and their merch is no different than it was years ago; the issue is, if you’re only doing streaming, how you see that artwork is in a very small square on a very small phone, and that artwork for these pieces that they love, that doesn’t suffice,” says Brian Nolan, executive vp at Motown Records. “They want to be able to show it off, whether it’s a poster from a tour, or their vinyl collection; it speaks to who they are as a person. So that has created more demand to now where shirts, hats, socks, vinyl, cassettes even, they mean something because it tells you about the person, about the fan.”
In a continuing series looking at how the record labels are changing, their merch and physical retail operations are becoming key drivers in supplemental growth as the streaming era approaches its teenage years, with new innovations and supply chain frustrations continuing to alter the landscape. (Check out previous installments on A&R, radio promotion, marketing, streaming and distribution.) Here, five executives from different parts of the industry weigh in on how the sector is evolving — and its importance to the overall business of breaking an artist and building a career.
“The reality is, the person who is buying a $40 t-shirt, a hoodie, even in some instances bikinis from the music video, that type of person is a super fan — it’s our most important fan,” says Def Jam senior vp of commerce and digital Theda Sandiford. “So that might be the smallest part of your audience, but they’re also the ones that influence and suck in casual fans. They’re the ones at the top of the funnel inviting their friends to come in.”
Theda Sandiford first started working at Def Jam 20 years ago doing single sales, and while the job has certainly changed during the intervening two decades, the inherent philosophy has not. “It’s still audience development and working songs; on the streaming side it’s still literally the same thing, it’s just working it to different playlists and building an audience and audience engagement, whereas before we would be marketing it by saying, ‘Go to TransWorld, go to a mall to buy some music,’ and the strategy was to lower the price,” she says. “Now, the strategy is serious audience development, knowing who the customer is. The record business has really transformed from the record store owning the relationship with the customer to the artist having the personal relationship with the customer.”
That doesn’t mean that the fundamentals are all that different. And to a large extent, the job has remained the same too, despite the transition to digital.
“Every week I’m in a new city, traveling back and forth between LA and New York and Austin, where our offices are, and being out on the road,” says Scoffern. “I like to read the marketplace. It’s always changing and evolving, and when I go to the shows I get to see what not only the fans of the artist are wearing and purchasing and consuming at the merch booth, but what the trends are forecasting. If you went to a show three years ago, the kids or the fans were wearing something completely different from what they’re wearing today.”
In fact, many aspects of the digital world actually help inform the physical retail space — and have made things much easier and sometimes cheaper, whether from a marketing perspective or from a data collection perspective, helping companies better identify and target an artist’s most die hard fans.
“When we are able to reach super fans, and they make a purchase, they’re giving up a lot of data: We know where they live, their credit card, their age, so we learn more about the audience, which helps us be smarter and invite more people into that funnel,” Sandiford says. “We also find that super fans drive most of the streaming — 10% of your audience drives 80% of the streaming. And that person who is buying the t-shirt, hat and hoodie is the person who also is listening the most, repeating streams, inviting their friends, sharing. So we see the merch opportunities and opportunities to build super fans as one of the most vital things we need to do to impact all areas of our streaming and consumption.”
“If you count the way in which retail marketing has changed, now it’s on-platform on Instagram or TikTok or Facebook,” says Billy Fields, vp of sales, account management at Warner Music’s commercial services division WMX. “We’re trying to reach music fans and connect them to stores and to our music, so in a way we’ve sort of grabbed the parts of the digital business that tend to support what we do in the physical world.”
But in a global music industry — and an increasingly digital one — physical is critically important, and will arguably only become more significant moving forward. And that international aspect has helped to broaden what’s possible in the merch and physical retail world.
“When I ran international marketing for Columbia, I really saw how outside the U.S., even with streaming taking full force, a number of markets still had a strong physical presence, like in Germany and Japan,” says Nolan. “So having that knowledge of what was happening ex-U.S. was really important to see, because what you’re seeing now is the super fans specifically, if they’re really into that artist, want to have as much product that’s authentic to that artist as possible, whether that be merch, vinyl, CDs. And because artists themselves are such strong global brands, when they’re partnering with a fashion brand, it makes sense. A lot of times, you might discover a new fashion brand by way of an artist partnership, [or vice versa] — it’s about entry points and acquiring fans.”
It’s also about revenue — and not just for the highest-end of superstar artists. While the biggest acts will always rake in big bucks in physical goods, it can be just as significant for a younger or smaller act, depending on how the retail market shapes up and how preferences in fashion and consumption are trending.
“Some of our newer artists like Rico Nasty and Pooh Shiesty are in our overall top 10 revenue drivers across all labels, despite not having the star power as some of their label counterparts who have a larger following,” says Ron Lee, director of retail merchandising at WMX, noting that hip-hop merch is much bigger than pop merch at retail. “People also may not know how much revenue can truly be generated through a successful retail program. Our 2021 retail revenue was 110% up year over year from 2020, which was the highest retail revenue in the company’s history, and then 2022 revenue is up 31% from the previous year. And this is with most of the brick and mortar stores being closed for most of 2021.”
Inside the record labels, those who work on the physical side of the business often work across departments — dealing live events, shipping, accounting, retail management, artist relations, inventory, supply chain issues, marketing and liaising with organizations like Record Store Day. It’s product managers, production and design, coordinating with artist managers, signing off on quality and making sure that, yes, there is still a t-shirt available when the tour kicks off, and more.
“It’s a lot of Zooms, lots of calls, looking at data, talking to partners and really trying to get under the hood on who is the audience and what are their preferences and what do they want and how do we meet them where they are,” says Sandiford, who also hosts what she calls Digital Happy Hours at Def Jam, inviting experts in the digital space from places like Discord, Spotify and the radio world to talk about how the business is changing these days, and encourage digital literacy across all departments at the label. “To me, it’s a thrilling environment to be in, because we’re not standing still,” she adds. “We’re meeting the future head on.”
How It’s Changing
“It’s always been pretty easy to make a t-shirt and a hoodie, to be honest with you. Now things are more complex — artists also want to make letterman jackets and fake fur jackets and all types of headwear and accessories and button down shirts and custom prints and use all these new materials — so there is a lot more work,” Scoffern says. “And there are more challenges.”
Scoffern would know. Before starting Ceremony of Roses in 2016, he worked at 4Strikes Management, working on the management team of Odd Future and Tyler, the Creator, including serving as general manager of Tyler’s Golf Wang clothing line, which rose alongside the streetwear explosion of the late 2000s/early 2010s and has always revolved around creative merch and imagery in addition to the music. “There’s been an increase in sales of collectibles — not just t-shirts, but keychains, tote bags, patches, statues, toys, dolls,” he says. “Fans want to collect and support their artists, and vinyl is cool. There’s usually a good amount of art inside it, the vinyl is almost the size of a poster. A lot of my friends that collect them put them in cases on their wall. I think it’s just another form of a collectible, and collectibles have increased tremendously over the last few years.”
Since the digital revolution in the music industry, there have been several distinct shifts when it came to physical: first, the shift from CDs to .mp3s, and then to streaming; second, the expansion of what it means to be an artist, from just a musician to being a brand, complete with partnerships across industries, an expansion of goods and services, and the steady decline of the idea that a true artist exists outside of the commercial space — or, more commonly, the idea that a “real artist” doesn’t “sell out.”
“When Tower Records finally closed its doors, that sort of was the end of all the retail consolidation, and a lot of the companies got a lot smaller and the teams shrank down,” says Fields. “And once digital began and the download stores started, which was after the chaos of free music for a while, then it was all about, where do you put your resources? Where are your sales opportunities? And that’s what shifted staffing and resources over to what became the digital business.”
And the onset of the digital — or digital-first — business led to a lot of restructuring at the label level in terms of who was working on the physical side of things. “People whose job it was to go out and put up the poster in the store, we don’t have staff for that anymore, so now I have to look at much more creative ways to do it — the street team, sometimes the radio person,” Sandiford explains. “So it’s really required everybody at the label to take on some more of that retail focus.”
When it comes to vinyl, there are significant challenges in the current business — and the supply chain issues that have frustrated all kinds of industries are nothing new in music. But that can just as often mean multiple windows to sell physical products: digital release day, and physical release day.
“With the lead time issues, it’s challenging to get vinyl — the entire industry is suffering in trying to get this done — and it could be six months, so there are projects we’re working on with an eye toward the future that are gonna come next year that we’re thinking about the release dates now, knowing that we’d like to have that vinyl day and date,” says Sandiford. “But it requires a level of patience. So there’s this balancing act of being nimble and moving now while developing products for the audience.”
At the same time, the evolution of music merch, particularly at retail, has evolved significantly in the past decade-plus, as attitudes on both the sales and artists sides have changed.
“[When I started] music merch at the retail level was basically nonexistent; it was mainly sold at shows and record shops, and many artists and bands weren’t really concerned with retail and some even saw it as selling out,” says Lee. “Back then, it was a bunch of Coca-Cola t-shirts and stuff like that; it wasn’t the Grateful Dead everywhere. But it’s just another revenue stream. And basically, the musicians started to see it as promoting their music, and others wanted to get more involved in fashion. I don’t believe musicians ever really saw themselves as fashion icons [in the past], whereas now, almost all the musicians see themselves that way and are trying to push their own brands and promote their projects and albums.”
If there’s one thing that has tied both sides of physical retail together — selling vinyl and selling merch — it’s that labels are no longer driving the campaigns or projects in the same ways they used to. In a similar way to how social media and streaming has put more power in the hands of the artists themselves, the speed and relative ease of releasing music — and the multi-faceted campaigns that go into promoting those releases — has changed the dynamic on the physical side, too. It comes down to the artist to promote releases, to promote new product and fashion lines, and to get their fans involved in new releases, whatever they may be.
“I think the biggest single change in my decades in the business of how music is marketed is that, it used to be all dictated by the label, and now, I think it’s more about artists saying, ‘I want to drop a single today, I’m gonna do it without telling anyone, and you’ve gotta help me get that done,’” says Fields. “Overall, the biggest change has been the position of initial announcement, which has moved from label to artist in a way that has caused all of us on the label side to be a lot more nimble and a lot more last-minute, ‘Don’t freak out, let’s just get this done,’ sort of thing.”
Historically, an artist will have two tentpole moments with which they can capture their fans’ attention the most: an album release and on tour. Other industries that rely on sales, or receive significant revenue from them, are driven by multiple new collections and multiple hooks to drive customers back again and again each year, something that Nolan sees as being the future for artists, many of whom he says could see merchandising become their number one revenue driver.
“You know that you’re gonna buy merch for the Super Bowl if your team is in it. You know the All-Star Game is this year. You know when Paris Fashion Week is. So I think the more tentpoles that artists can create, [the better],” he says. Nolan points to Quavo, who hosts Huncho Day each year around his birthday near Easter, as someone who has developed a new tentpole where fans can expect new merch and brands can plan around it to develop opportunities. “The more tentpole moments that can happen that are authentic to what they’re doing, the more you can scale that business. And I think there’s no ceiling, because you see the brilliance of artists like Travis Scott, Tyler The Creator — you see what’s possible when there’s authenticity from the beginning.”
That’s a significant possibility for the expansion of the marketplace. But the sales world will continue to grow digitally, and merch will eventually move online as well, setting up a future where goods will no longer only exist in the physical space.
“I think that the next evolution of the artist merch space is the metaverse and creating digital clothing,” Scoffern says. “There are so many different outlets now in the digital world to buy clothes and merchandise, whether it’s the artist’s website, whether it’s Instagram, whether it’s a TikTok shop that’s probably coming, the other online retailers. I think those are the two areas where the merch business is heading: online and the metaverse.”
“I think literally everyone at a label, from a receptionist all the way to the highest levels, are all gonna be super data experts,” Sandiford adds. “Not in a nerdy way, but understanding, ‘We did this, and here’s where we saw a difference.’ Actually knowing how songs move in and out of communities at different times during the life cycle, and analyzing that data, if everyone knows how to do that, you will see all sorts of opportunities.”
That will inevitably include embracing the web3, metaverse and NFT evolutions, as fans continue to grow accustomed to the opportunities there and artists and labels figure out ways to maximize that experience for their fans. That could include digital avatars, virtual goods, all kinds of NFTs built on the scarcity model, and a dizzying array of possibilities that will reveal themselves with time. But the retail world will continue to follow the platform evolution, even if that leads everyone back to the physical world in the end, also.
“What happens when TikTok is no longer the thing that everybody goes to? As platforms evolve, as other mechanisms of connection develop, then we’ll have to pivot to those, because we have to be where the most influential and connected eyes are,” says Fields. “I think there will be a double down of going back to places of community, having record shows, having record stores, having bigger events sponsored by record stores. Because they’re key to the community.”
What Makes For a Great Retail Campaign?
Billy Fields: “The cleverness of it. The thing you really get surprised by and go, ‘Oh, that’s just really great.’ Light In the Attic is putting out early Lou Reed demos, and they sent out yellow Flexi discs of an entirely unreleased song from Lou Reed to a whole bunch of stores. That, to me, is super clever and a difference-maker between just paying for advertising or posters or outdoor billboards. We put up a mural where we livestreamed the painting of the mural that you can interact with, and then get fed to a pre-order campaign. And it’s also about the record itself. When you walk into a store and there’s something they’ve done with the packaging that is above and beyond. That’s really important, because you’re showing the fan the benefit of investing in something. But that has a lot to do with what the artist’s vision is, how they want to present what they’re doing to the market itself, and we’re all on our side saying, ‘How can we help you do that?’”
Ron Lee: “Artist involvement is one of the most important parts. Nothing gives more relevance to a campaign than the artists themselves promoting and wearing the products. Also, products and designs that really speak to the artist’s style, interests or music play a part as opposed to generic merch that’s only meant to exploit the artist for revenue. The campaigns that showcase the marriage of the artist’s vision to the current trends in retail have been our most successful.”
Brian Nolan: “It has to be part of the overall storytelling. It’s not an add-on, it’s not checking a box. It’s, ‘We’re telling this story, and one of the primary chapters in this story is what our approach is to the physical space and the merch space.’ And within a book, sometimes it can be part of chapter one, where the first thing you see for a new product or a new album could be the merch angle. Or it could be chapter 16, where the vinyl comes in a really integrated moment in a second or third phase of the campaign. If you’re doing great storytelling and you’re intentional in where you’re placing each part of the drop, then I think that’s the most effective.”
Theda Sandiford: “Artist buy-in. It’s not just merch — artists are asking for fashion, for lifestyle fashion. So merch has to elevate, and the expectations of an artist is around it elevating. So you’ll see actual fashion, and if you want to buy a t-shirt, that might be on the lower end. But super fans want to represent in a way that’s not always an all-over print, it might be something a little more subtle and just be something that looks similar to what might be in the music video. But they want to feel closer to the artists. And we’re getting requests from artists to really deliver fashion when we’re putting together our merch strategy.”
Brad Scoffern: “The participation of the artist in all aspects. At the end of the day, the artist is the reason why people are buying something. And if the artist is part of the design, then that means they’re probably going to want to wear it, or it’s going to speak to their audience, and once it’s available they’re going to want to promote it. Because fans are not dumb. They know if their favorite artist is actually into what they’re selling. So you have to have the participation of the artist to be successful. You need the artist to promote it.”