Those Newspaper Music CD Giveaways Work To the Chagrin of Music Retailers

Philip M. Stone October 13, 2004

One of the most successful, but expensive marketing ploys for European newspapers, is to wrap free music CDs as part of their publication. It works for that particular issue of the newspaper, but there are no clear indication the freebie earns brand loyalty.

But music retailers are fighting back, claiming the free gifts are hurting their sales, and they are threatening to boycott those artists whose songs are on the newspaper CDs.

This has become a particular issue in Italy, Belgium, and the UK.  In Italy it’s not just CDs, but also DVDs and books, with one report saying that La Republicca hopes to earn some € 200 million from the circulation spikes such promotions bring.  Italian retailers, meanwhile, are promoting restrictions to stop such marketing.

Wrapping disks with a publication is not a new phenomenon. During the boom Internet days when the magazine racks were full of thick weekly or monthly magazines promoting every gizmo possible for a PC, it was near impossible to find a publication which did not have a free floppy disk within the wrap containing computer programs and games.

But in the UK today, the free CD has become the de facto marketing tool to spike circulation. Among those newspapers that have marched on that track are the Sun, the Observer, the Star, the Mail on Sunday and the Evening Standard. The Sunday Times gives away a monthly CD-ROM containing games, music, film trailers etc.

UK music retailers don’t take kindly that what they sell, others give away. In one September week the Music Manager’s Forum (MMF) said it sold 2.6 million units, but at that weekend eight newspapers between them gave away 10.5 million CDs with a market value of EUR 150 million.

“In any other industry giving away more than you are selling would be called financial suicide,” the MMF said in an open letter to the industry.

On the other side of the coin, the free CDs are not free to the newspapers supplying them. They pay hefty license fees to the artists and record labels for their content, and since sales have been down so dramatically the past four years this is as good a way as any to earn some of that money back. Even so, EMI has withdrawn from the covermount business.

There is little evidence that a free CD results in permanent circulation increases, but the circulation spike on the day of the giveaway can be astounding. A Beach Boys CD given away by the Mail on Sunday is said to have garnered the newspaper an additional 450,000 sales. The newspaper has not said what it the CD cost it, including royalties,  packaging etc.,  but it is a common rule of thumb that such promotions probably cost around €375,000  -- a drop in the ocean for a newspaper that sold close to 3 million copies that weekend.