- About 16 months ago, Mr. Arnold, a co-founder and former chief executive of the WebMD Corporation, was visiting Los Angeles when a colleague showed him a lid for a 34-ounce plastic soda cup. Tucked inside a transparent pocket were several coupons offered to customers at a convenience store. Mr. Arnold said he was dumbfounded.
“I said, ‘Forget the coupons. What if this was entertainment? What if it was music on CD’s or movies on DVD’s or games?’ ” Mr. Arnold said. “I thought, ‘If this was entertainment, this could be a blowout.’ ”
By early 2003, Mr. Arnold had formed LidRock to make and distribute the tops. He purchased the exclusive rights to 19 patents which, he said, guaranteed that LidRock solely owned the rights to place whatever it wants in the lids. Then, Mr. Arnold swept into music industry boardrooms in New York and Los Angeles with a proposition: promote new and established artists by putting promotional three- and five-inch CD’s in soda lids to be sold in movies, fast-food chains and sporting events.
Remarkably, the industry, which cannot ordinarily agree on anything, took up Mr. Arnold’s offer. Arista, Virgin Records, Universal Music, Def Jam and EMI Publishing are among the companies that have joined in the venture. By the end of 2004, said Mr. Arnold, 50 million soda lids with CD’s featuring artists like Avril Lavigne, Pharrell Williams and Britney Spears will be shipped across the nation to movie theaters, fast-food chains, Nascar races and theme parks.
“It’s an absolutely fantastic form of alternative distribution in the future,” said Larry Mestel, executive vice president and general manager for Arista Records. “Most people tend to buy records the traditional way – at stores or online. Why not reach consumers where they’re spending money?”
Record executives do not view LidRock as a panacea for the difficulties – like the illegal sharing of music online – that beset the industry. Already some artists have declined to have their songs placed in lids, and there are questions over pricing. The majority of artists involved receive some compensation, but each deal is structured differently, according to LidRock. Drinks sold with the lids generally sell for an extra dollar or two, but the price is still more or less arbitrary. Beyond this, there is the indefinable mood and taste of the teenage consumer who may – or may not – find LidRock a passing fad.
But record industry executives plainly view it as more than the promotional tool.
“When Jeff explained this to me, I really embraced it, and I’m a difficult guy to please,” said Robert H. Flax, president of EMI Publishing, the world’s largest music publisher. “What’s exciting is you could be tapping into a new base of music buyers at movie theaters, at ballgames, at malls. Why not, if priced properly, buy this unique, cool-looking lid? This could be a legitimate vehicle for selling records.”
….LidRock, a privately held company, said it would start earning a profit this year on $50 million in revenue. According to the current business plan, the retail venue, such as the film or fast-food chain, pays LidRock 80 cents for each lid. LidRock uses the money for the manufacturing and content costs of the lid – that is, payments to make the lid as well as payouts to record companies. There are added revenue opportunities because the lid may also contain details about concert tours and information on purchasing the CD’s and DVD’s of the artists involved.
….At the moment, LidRock’s biggest customers include the Regal CineMedia Corporation, which is the largest movie chain in the nation with more than 6,100 screens. There, CD’s as well as DVD’s from such performers as Jessica Simpson, Ashanti and Elvis Presley are distributed at no additional cost to customers who buy large-size drinks. Sample video games have also been placed on the lids by Electronic Arts Inc., the gaming company.
“We know our consumers love the product,” said Cliff Marks, president for marketing and sales at Regal CineMedia. Joining Regal this year in LidRock is the Loews Cineplex Entertainment chain, with 1,300 screens. [NY Times]
It’s brilliant, even holistic. I salute thee, Jeffrey T. Arnold!