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Why An Artist Like Jay-Z Would Partner with Samsung

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It’s no wonder that Jay-Z signed a partnership deal with the electronics giant Samsung that’s rumored to be worth $20 million. The Korean company spends an incredible amount on advertising every year.

Samsung Electronics’ advertising spending in 2012 was $4.6 billion, an amount higher than that of Pepsi ($3.7 billion), Coca-Cola ($3.3 billion) and Apple ($1 billion). How big is that $4.6 billion figure? It isn’t far off Universal Music Group’s 2012 revenue ($6 billion) and dwarfs the annual A&R spending of record labels globally ($2.7 billion). In other words, no music company has the resources to do what Samsung can do.

Jay-Z and Samsung created an album release plan that leverages the size and scope of the company. His “Magna Carta Holy Grail” album will be available for free download on July 4 to the first 1 million Samsung Galaxy S III, Galaxy S 4 and Galaxy Note II users. With about 70 million smartphones in the global market in the fourth quarter of last year, and with a massive advertising presence to create awareness, Samsung is a large and effective distribution network for the artists it partners with.

Let’s be clear about Samsung’s music spending: the company’s advertising spending goes toward many things other than smartphones. The company also sells such products as televisions, semiconductors, digital cameras and printers. And because Samsung’s advertising spending goes toward products other the smartphones, it’s easy to deduce that music probably may not get much of that huge advertising budget.

Coca-Cola and Pepsi spend a great deal of money on music. As Billboard’s Andrew Hampp noted in his 2012 cover story ”The Cola Wars,” Coca-Cola and Pepsi spend $240 million and $330 million annually on entertainment and sports, according to research firm IEC.

But Samsung certainly has the capacity to spend a great deal on music. And there will be more money available for music as Samsung’s revenue grows. Total marketing spending — advertising is just one component — has risen as Samsung’s smartphone sales have exploded in recent years. Marketing expenses were 6.5% of revenue in 2012, up from 5.9% and 5.7% in 2010 and 2011, respectively.

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