RICH PICKINGS: Money talks
It's been a long way to the top for Australian hard rock band AC/DC. But their success is no accident, a testament to a carefully managed brand and marketing plan as much as its enduring sound.
Legendary hard rock band AC/DC has always been a mainstay of BRW’s list. In 2007-08 the band’s gross earnings (before tax or agents fees) were $12 million – a remarkable amount given AC/DC hasn’t released an album in eight years or performed on stage for five.
The story of AC/DC is not so much the story of a great musical group but the creation of a business empire. It is the story of how a group of musicians used their image as outlaws to create a long-lasting brand, an army of loyal customers and a vast amount of money.
The first secret to the group’s success is the incredible sales of their back catalogue. The band has sold around 200 million albums worldwide since their first recording was released in 1975, including more than 70 million in the US, where their seminal album Back in Black has sold more than 42 million copies alone.
The back catalogue has been carefully managed to ensure maximum profitability. Unlike most 35-year-old bands, the company has not released a ‘best of album’, which can often stunt sales of past albums.
AC/DC has also refused to put its songs on Apple’s iTunes stores, instead selling its music online through Verizon’s music store. But the catch is that fans can only purchase full albums, not singles.
These strategies have prevented fans cherry-picking their favourite AC/DC tracks – if you want the big hits, you have to buy multiple albums.
Want proof that the strategy works? Last week, AC/DC became the first ever band to have six albums in the top 50 Australian albums chart at the same time – despite not having released an album since 2000. Indeed, it was the 1975 album TNT which ranked highest, grabbing the 20th spot on the charts thanks to this Father’s Day-inspired buying frenzy.
In recent years, the band has also turned to the DVD medium to keep revenue flowing. Two DVD compilations of old concert footage, video clips and TV performances have been released in the last five years. These releases have been promoted to fans as historical documents of the band’s career, but this is just more brilliant branding from AC/DC’s management – essentially these products are just a great way to monetise old bits of film that were rotting away in archives.
The second plank to AC/DC’s strategy is a steady stream of canny licensing deals, which have seen the AC/DC’s logo put on and everything from beach towels and jewellery to figurines and pyjamas.
Exactly how wealthy the band has become over the years is not easy to measure, partly because the members are based overseas. But two years ago, Dutch publication Quote put Netherlands-based guitarist and songwriter Angus Young on its list of the 500 richest residents of the Netherlands with a fortune of €75 (around $145 million). Not bad for a 53-year-old guitar hero who still wears a school uniform on stage.
And Angus’ fortune is about to get a lot bigger with the release of the band’s new album, Black Ice, on October 20.
The release is somewhat controversial in the US, because AC/DC has signed an agreement means that the album will only be sold by Wal-Mart. But while the decision is hardly like to impress heavy metal lovers, it does make sense from a business point of view.
As digital music sales soar, CD sales are plunging in the US to the point where big retailers and department stores are cutting back floor space for CDs, or not bothering to sell them at all. Singing an exclusive deal with a retailer like Wal-Mart is one of the few ways for AC/DC to absolutely guarantee its record will be sold in every American city and town.
The strategy is also proven. Last year country rock legends The Eagles sold their Long Road Out of Eden album exclusively through Wal-Mart and flogged almost three million copies, making it the third biggest seller of 2007.
But the real dough will start to roll in when AC/DC launches its world tour later this year. The last full tour in 2000-01 included 139 shows and made $US28 million in gross box office receipts.
For those about to earn, we salute you.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free