Week of June 1, 2009

Coke Adds...Value

Friday, June 5, 2009

Coca Cola recently made a major announcement regarding a new strategy on advertising. The soft drink giant, which spends $3 billion globally on advertising, has announced a plan to use value-based compensation for their advertising agencies. This means that a performance-based system where agencies will be able to earn up to 30% profit if all goals are met. If none are met, the agency would merely be compensated for its actual out-of-pocket expenses. The traditional model has been for agencies to be compensated for the amount of time put into creating a campaign.

Coke began experimenting with this new model in 5 territories over the last 3years: Australia, China, Germany, the U.K. and the Philippines. Coke says that the move is not one designed to cut costs in the fact of the global downturn, pointing out that the testing predated the economic crisis. Values-based compensation models have been talked about a lot in the ad industry over the last few years, but other than Proctor and Gamble using it for a few of their brands, this is the biggest move by any major advertiser.

The Hits Are The Hits

Thursday, June 4, 2009

BULLETIN: The hits are popular everywhere. According to a UK analysis of P2P song sharing by PRS for Music, the most popularly traded songs are....the most popular songs. Their analysis showed that 5% of available songs make up 80% of the traffic in illegally traded music. The authors of the study, using data from BigChampagne stated flatly that "BigChampagne had never seen a big hit on the pirate networks that was not also a top seller in the licensed world."

Another interesting finding from this study is that legal download and streaming sites, listeners usually know exactly what they want and go after it. However, users on the P2P sites are more likely to occasionally take a flyer and try something different. As the study put it, "If the sellers sell it, it might never be bought; but if the swappers offer it, at least one person will likely take it."

Video Game Sales Drop Again

Wednesday, June 3, 2009

US video game sales dropped again in April, falling 17% to $1.03 billion. This was the second consecutive monthly drop according to the research firm NPD Group, with much of the drop due to software decreases. Software sales were down 23% from the same period in 2008, for a total of $510.7 million. Nintendo owned 6 of the top 10 slots in games sales in April. Overall, the top 5 games for the month were:

• Wii Fit - 471,000 units
• Pokemon Platinum - 433,000
• The Godfather II - 246,000
• Mario Kart - 210,000
• Wii Play - 170,000

Sales Nintendo's Wii system dropped 50%, which helped drive hardware sales down 8% for the month, to $391.6 million. Nintendo's new DSi handheld led hardware sales with 1.04 million units.

Cell Phone Only Households now 15%

Tuesday, June 2, 2009

The Center for Disease Control's National Center for Health Statistics has the official US Government word on cell phone only households. According to the CDC, just over 20% of all households are now without a landline. Also, the agency reports that over 14% of households with a landline rarely answer it, meaning that over a 1/3 of all households (34.7%) are reachable just via mobile phone. Digging deeper, data shows that minorities and (especially) those under 30 are even more likely to go without a landline.

The accelerating pace of the switch to mobile-only adds even more pressure on research and ratings firms to add cell phone only people to their samples. Arbitron, for radio, has been late to the game, only recently agreeing to add cell phone only component to its diary markets. They have started to survey cell phone only households in the current (spring 2009) survey, with a quota of 10%. Arbitron has been using these households in the PPM sample (in all markets) since the launch. Arbitron recently promised to up the percentage of cell phone onlies in their PPM sample to 15% by the end of the year.

Sirius XM to Launch iPhone App

Monday, June 1, 2009

According to the Wall Street Journal, Sirius XM is set to paunch a new iPhone app in the next few weeks, which will take the subscription-based radio service even further from its "satellite" roots. The service's well-chronicled financial problems have been exacerbated by the dramatic fall-off in new car sales over the last year. Car sales have always been the engine of Sirius XM's growth.

The iPhone app will give Sirius XM a new delivery system over the Internet. As we've discussed here previously, music and radio-based apps, from services such as Pandora and Slacker, consistently rank among the top 5 most popular smartphone apps. It remains to be seen whether Sirius' app will help it attract new subscribers, or merely help with the retention of existing customers.