U2 Goes iPod

Yesterday, at Apple's special press event in San Jose, California, Irish rock band U2 unveiled its much-rumored, custom iPod, as well as its co-branding and content-bundling deal with Apple Computer. Today, the event is the talk of the town in Hollywood media circles.

This high profile joint venture between the band and the technology firm is music to the ears of many marketers who believe that co-branding is an increasingly valuable tool in their promotional arsenal online and off. 

The deal was kept hush-hush to add to its anticipation. Monday, a call to Pamela Bennett, Apple’s PR executive in charge of iPod and Portables, could not confirm Tuesday’s announcement in advance. “I don’t know when I’ll have more info,” Bennett told me. She did affirm an invite was sent out to the press. According to one online Web report, the invitation stated: "Steve Jobs, Bono and The Edge invite you to a special event." Both Bono and The Edge, along with their band's song “Vertigo,” are featured in an Apple commercial currently airing nationally in the U.S. A quick check on eBay.com shows that at least one seller is already hawking the U2 iPod, dubbed the “Bono-pod” by fans in an online auction set to close in two days. That seller does note that the U2 iPod is not set for delivery until late November.

What’s fascinating about the U2 iPod deal is that the custom devices are part of a larger agreement between the band and Apple. According to Forbes.com reports, Apple will have exclusive rights to sell all songs from the new album Vertigo online through its iTunes Music Store for at least the first few weeks following the release. Forbes reporter Matthew Miller explains that U2 and Interscope will split a standard royalty for each song downloaded (about 0.60 per download) plus an upfront licensing fee. In return, the band shot that Vertigo commercial, which is now in heavy rotation on television. No surprise that Vertigo is also topping iTunes' download charts since its launch three weeks ago. It’s the kind of deal that hits all the right notes for Hollywood music and video producers who yearn for new content revenue streams in a landscape where piracy and illegal downloading dominate headlines all too often.

What device manufacturer wouldn’t love to introduce a brand-extension with the advance fanfare this Apple/U2 deal is making? For Interscope’s CD promo budget the co-bundling deal combined with free national commercials, an advance online window and seemingly unlimited PR may just add up to the ultimate media multiplier.

But it takes more than two to tango in the new media marketplace. On Monday, SiliconValley.com, a trade pub, reported that tech companies' love affair with U2 is about to expand into a “ménage a Trios” as Intel is about to jump on board with a $20 million sponsorship deal with U2 -- supposedly beating out international package delivery company DSL for the band’s top underwriting slot. Reports say that the Intel sponsorship is just part of that firm’s effort to extend its “Intel Inside” brand into consumer electronics markets. To outsiders, the co-branding and co-bundling efforts demonstrate that consumer electronics are key to Silicon Valley’s future. 

What do these firms get for those big bucks? A lot, according to insiders who know that U2 can be a valuable ally to Intel’s brand building as well as a critical part of the health of Apple Computer. (Some say it may only be a matter of time before Apple drops the word “computer” from its lexicon because of the popularity of its other devices.) During Apple’s fiscal fourth quarter, iPods accounted for $537 million in revenue or 23 percent of the company’s $2.35 billion in sales. While iPod revenue grew 344 percent over the same period a year ago, sales of Apple’s iMac computer line fell 23 percent to $216 million. At the same time, Apple’s experience at the forefront of the handheld revolution may just be a bellwether for other computer manufacturer’s who aren’t listening to music and video fans who demand media-to-go. 

For the past month, fans and analysts like Gene Munster of Piper Jeffrey forecasted that Apple would show off either a new color-screen 60-gigabyte iPod or an iPod Mini that can hold more than the current model’s 1,000 songs. Bloggers prayed that Apple would see the light and unveil the Holy Grail -- a much-anticipated addition of video to the mix. “What’s made the iPod a home run is the music,” Munster has been quoted as saying. By spring ’05 other device leaders including HP, Creative Labs and Archos are expected to be pushing video-anywhere. One wonders if Apple has the right stuff to continue to lead the parade.

Co-branding deals like these can be an asset in nearly all aspects of marketing from creating initial awareness to building loyalty. And when you combine deals like these anticipated from two industry powerhouses with content bundling, you may just power 21st Century revenue streams that few studios and labels could anticipate during the Napster fray of the 90s.

Tomorrow: The pros and cons of this type of co-branded deal.

Author Joyce Schwarz is a marketing, branding and sponsorship consultant whose firm JCOM is located in Marina Del Rey, California. She’s been covering media in Hollywood and Silicon Valley since 1990.