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More Companies Sponsor Performers to Boost Brands and Music Industry

The Wall Street Journal, March 15, 2016

By Hannah Karp

This week Gwen Stefani will be in Tokyo to play a rare concert without her band, No Doubt, for one of the most privileged new fan clubs: MasterCard holders.

"I never intended to do more solo music, but when [MasterCard] came to me, I got so inspired," Ms. Stefani said in an interview. The Grammy-winning signer is set to release a 12-track solo album, "This is What the Truth Feels Like," two days after the Wednesday performance as she stays in Tokyo to mingle with more MasterCard customers at fashion-week events.

Since 2014, MasterCard has helped foot the bill for much of Ms. Stefani's expenses including concert production, travel costs and marketing, and has paid for personal appearances and the like. The company declined to reveal the total amount spent.

Record-sale royalties previously buoyed big artists' income between album cycles. But with CD and download sales in a long decline and streaming just starting to take off, even stars such as Ms. Stefani welcome supplemental income. MasterCard provided Ms. Stefani with financial support until Vivendi SA's Interscope Records gave her an advance to begin recording the new album.

Without the MasterCard deal, Ms. Stefani said it would have been more difficult to continue to pursue a solo career, and she might have toured more with No Doubt, best known for its decades-old hits.

MasterCard is one of a growing number of companies that poured a combined $1.4 billion into the music industry last year to connect with a broadening swath of young consumers during what tends to be a particularly emotional pastime: listening to tunes.

By contrast, brands spent $1.1 billion in 2011 on music sponsorship, according to consulting firm IEG, making it one of the fastest-growing sponsorship categories.

Spurring corporate sponsor interest is a boom in music listening, which expanded 15% last year in the U.S., according to Nielsen Music, due in large part to the proliferation of smartphones, which make it convenient for users to stream music, often for free, rather than buying it.

Beer and energy-drink companies have been sponsoring live-music events for decades. Now many others industries are getting in on the act.

At the South By Southwest festival in Austin, Texas, this month Marriott International Inc. is allowing dozens of artists from Vivendi SA's Universal Music Group to "take over" a local hotel with performances, inviting its rewards- club members to attend.

Swedish fashion chain Hennes & Mauritz AB--better known as H&M--has launched a "Coachella" collection for the second straight year that it will sell at Anschutz Entertainment Group's desert music festival in April.

Many of these brands are hoping that music will help connect them with younger people, who increasingly are hard to reach as social media and other forms of digital entertainment fragment their attention.

Music's allure as a marketing tool, however, is growing for other reasons as well. Major concert promoters are offering corporate sponsors exposure to a growing global fan base as they snap up smaller promoters, expand internationally and live-stream more of their shows and festivals.

Live Nation Entertainment Inc. saw its sponsorship and advertising revenue jump 11% last year to $334 million, after it increased 5% in 2014. AEG said its sponsorship is up 11% this quarter over the same period a year ago.

Meanwhile, the recorded-music industry--struggling to offset declining CD and download sales--is so eager for sponsorships that it is giving corporate sponsor's much more creative freedom than other industries, said Jim Andrews, senior vice president of IEG.

Universal Music Group, for example, a year ago hired Mike Tunnicliffe to launch what he calls a "mini-agency" that helps brands devise marketing strategies and provides various artists to participate in their sometimes yearlong campaigns.

The cost per campaign has ranged from $100,000 to $5 million, and generally includes a mix of established and newer artists because "brands really like to enable discovery" for their customers, Mr. Tunnicliffe said.

MasterCard tracks its 1.6 billion customers' purchases as they occur so it can see exactly how much its music initiatives move the needle, though it wouldn't share specific purchasing data.

Raja Rajamannar, MasterCard's chief marketing officer, was ranked No. 66 on Billboard's Power 100 list this year, moving up three spots from 2015 as the company spent about $15 million to $25 million on music, according to the music- industry magazine's estimate.

"We are gaining market share, our brand is growing very strong as a result," said Mr. Rajamannar.

MasterCard's brand was worth $5.5 billion last year, up 17% in value from the year before, according to the annual rankings of Omnicom Group's Interbrand consultancy.

Ms. Stefani, who has grabbed headlines in the past year for her relationship with fellow coach Blake Shelton on NBC's "The Voice," said she agreed to work with MasterCard because it is "so big and reaches so many people." The company's offer inspired her to start writing music again, she said, helping extend her career further than she had thought possible.

"Are you kidding me? This is a joke--to be on [top-40 station] KIIS-FM at my age," Ms. Stefani said.