Grammy Winners Can Expect Serious Sales Boost

The traditional record label-based-music industry may be dying a slow painful death, but its showcase evening, the Grammy Awards, still make a business difference in actual "album" sales.

Jan 27, 2014 at 2:01PM

While the traditional big label-based music industry has collapsed, the Grammy Awards remain a show that not only celebrates music, but causes people to buy it. And though overall album sales in 2013 fell to 415.3 million, a 7.7% drop from the year before, according to a report from Nielsen Entertainment and Billboard,  the big winners of the industry's biggest awards show are the major record labels (Sony (NYSE:SNE), Universal Music Group, owned by Vivendi, and the privately held Warner Music Group).

The other major beneficiary of the show's ability to sell music is Apple's (NASDAQ:AAPL) iTunes. Last year, Billboard tracked iTunes sales during the 2013 Grammy show and the performers and major nominees spiked in sales.  And digital sales have, for the past few years, risen both the week before the show and the week after. According to Billboard, in 2012 "digital sales of Adele's "21" increased 52,000 units the week of the Grammys and another 88,000 units the following week. [In 2011] Mumford and Sons' "Sigh No More" increased 133% to 80,000 digital units the week after."

Less awards, more impact

The Grammys, unlike many awards shows, are dominated by performances, not awards and speeches. According to an NPR article, A Brief History of the Grammy Sales Bump, "the Grammy telecast is programmed as a variety show and shamelessly fine-tuned to spur consumer music purchases." And though it's often hard to predict which musicians will benefit from the Grammy bump, as it's not always the winner of the biggest awards, a Grammy can lead to a giant sales increase.

In some cases, the Grammys can actually vault a well-liked, but light-selling artist into fame and increased sales. That happened in 1990, when Bonnie Raitt's "Nick of Time," won Album of the Year. That victory launched the record (there was actually a record in 1990) to No. 1 on the Billboard charts. That recognition turned Raitt -- for at least a few years -- from a niche artist into a mainstream performer.

Does it still work?

Raitt's triumph in 1990 was a virtual lifetime ago in the music industry, but, the Grammy sales bump was in effect after (and during) the 2013 awards as well. In the week after the show, Mumford & Sons' "Babel" (which won Album of the Year on a night the group performed), sold 185,000 copies, up 242%, and returned to No. 1 in Billboard for the first time since October, according to Nielsen SoundScan.

The gains were not limited to Mumford & Sons -- a number of other winners and performers saw large sales gains. These included "2013 Grammy Nominees," a compilation that sold 88,000 units, a 136% gain, and Bruno Mars, whose "Unorthodox Jukebox" moved 72,000 units, 112% more than the previous week.

And while these numbers are large, they are nothing compared to Adele's sales spike in 2012 when "21" sold 730,000 records after she won six Grammys.

After the sales numbers were released, Keith Caulfield, Billboard's associate director of charts/retail, told USA Today that while the effect was spread across multiple acts, "You can't look at the chart without seeing Grammy impact all over the place, everyone from Bruno Mars and Taylor Swift to The Lumineers and fun., but even Alabama Shakes and Ed Sheeran."

Caulfield went on to explain that the show, because it has so many music fans watching, which rarely happens in today's fractured TV universe, can help an artist break onto the scene. "The [2013] show was an important moment for Miguel, who is a significant R&B star but a lot of people are late arriving to the Miguel party. Kudos to the Grammys for giving exposure and new life to some careers that needed it."

And this year's winners are...

Until the sales numbers are released, it's impossible to know which artists (and labels) will benefit from the 2014 Grammy Awards, but, it seems likely that Daft Punk, who took Album of the Year for "Random Access Memories," Record of the Year for "Get Lucky," and  Pop/Duo Group Performance, also for "Get Lucky," will sell some records. The group also performed -- exposing their catchy hit to an older audience -- which should be good news for label Columbia (part of Sony).

The other big winners of the night were Lorde, who performed her hit "Royals," which won Song of the Year and Best Pop Solo Performance, and Macklemore and Ryan Lewis, who won Best New Artist. The duo also delivered what will likely be the most talked about performance of the night as they played their gay rights anthem "Same Love" with Madonna while gay couples were married on stage by Queen Latifah. Lorde is signed to Universal, while Macklemore and Ryan Lewis released their album without the help of a label, though it is now distributed by Warner Brothers.

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Fool contributor Daniel Kline has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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