(By Chris Baker)

“This is not the first example of this sort of thing,” says music industry analyst Mark Mulligan. “There was the U2 iPod with the digital box set from the iTunes store and the Maroon 5 album preinstalled on s Nokia smartphone.” But the scale of this purchase is unprecedented, and the way it’s distributed may effect how it’s counted. “If it’s an opt in method, that’s quite a different dynamic than if it’s pushed out to a certain install base,“

Jay-Z’s new album Magna Carta Holy Grail isn’t out until July, but it may already be a best-seller, depending on what exactly counts as an album purchase these days.

It all started with a three-minute ad that ran during Sunday’s NBA finals game. Documentary-style footage showed the hip hop impresario at work on the portentously titled album, and it featured cameos from superstar producers like Rick Rubin and Pharrell Williams. Jay-Z discussed the recording process and declared that, “The Internet is like the Wild Wild West. We need to write the new rules.”

It soon became clear what he meant. The ad was sponsored by Samsung Mobile, and it concluded with a link to a site that announced a million copies of the album would be given away in the form of a “customized mobile app” to owners of certain models of Samsung Galaxy smartphones. These free copies of the album would be available on July 4, three days before the official release. The Wall Street Journal reports that Samsung paid $5 a piece for these albums.

So did Samsung’s $5 million bulk purchase singlehandly put Magna Carta Holy Grailatop of the charts? Does it actually count the same as a million individual purchases would count? The artist himself wondered aloud about this conundrum on Twitter:

If 1 Million records gets SOLD and billboard doesnt report it, did it happen? Ha. #newrules #magnacartaholygrail Platinum!!! VII IV XIII

The question may ultimately be moot, since the album is certain to sell what music industry analysts refer to as a “metric ass ton” of copies even without Samsung’s giveaway. But in our quest to go beyond the interested parties in this debate, we talked with the RIAA, who pointed Fast Company to its criteria for certifying Gold and Platinum records. To be considered an official sale, retailers must buy copies of an album at a rate of at least one-third of the suggested retail price. The $5 rate probably meets that price criteria, and if “retailer” includes Rhapsody and iTunes as well as Target and Best Buy, then it would likely include Samsung as well. It seems that Samsung’s pre-release purchase may meet the RIAA’s criterion, but it’s still not strictly accurate to say that Magna Carta Holy Grail has “already gone platinum,” because an album isn’t eligible for official certification until 30 days after its July release date. (But will that be the July 7 date when the album is released wide, or the July 4 date when Samsung users can get it? Hmmm . . . )

Does the bulk purchase count towards Magna Carta Holy Grail‘s position on the Billboard charts?

Those charts are based on sales tracking by Nielsen SoundScan. Nielsen’s official policy is that they don’t factor in bulk sales, although big box retailers are sometimes allowed to purchase records in bulk with the understanding that they’ll turn around and sell them to their customers. Industry analysts I spoke with suspect that they’re still grappling with the dilemma posed by the Samsung purchase.

“This is not the first example of this sort of thing,” says music industry analyst Mark Mulligan. “There was the U2 iPod with the digital box set from the iTunes store and the Maroon 5 album preinstalled on s Nokia smartphone.” But the scale of this purchase is unprecedented, and the way it’s distributed may effect how it’s counted. “If it’s an opt in method, that’s quite a different dynamic than if it’s pushed out to a certain install base,” says Mulligan.

The enormous sales volume required to hit the music charts means there’s little financial upside in attempting to manipulate the charts through bulk purchasing. But the practice is commonplace in the book industry. Authors or publishers can and do hire marketing firms to make strategic bulk purchases that ensure chart placement; just a few thousand purchases from the right outlets can do the trick. Nielsen sales tracker BookScan’s official policy is not to count such bulk purchases, but it’s hard for them to police it. Some publishers openly endorse this practice as a legit marketing tactic.

Finally, on Friday, Billboard Editor in Chief Bill Werde addressed the issue directly. Sort of. Admitting that the album will likely lead to Jay-Z’s 13th No. 1 on the Billboard album charts, Werde added, “The passionate and articulate argument by Jay’s team that something was for sale and Samsung bought it also doesn’t mesh with precedent.”Werde continued:

Had Jay-Z and Samsung charged $3.49–our minimum pricing threshold for a new release to count on our charts–for either the app or the album, the U.S. sales would have registered. And ultimately, that’s the rub: The ever-visionary Jay-Z pulled the nifty coup of getting paid as if he had a platinum album before one fan bought a single copy. (He may have done even better than that–artists generally get paid a royalty percentage of wholesale. If Jay keeps every penny of Samsung’s $5 purchase price, he’d be more than doubling the typical superstar rate.) But in the context of this promotion, nothing is actually for sale.

Samsung isn’t doing anything clandestine on behalf of Jay-Z, but the music industry may be far more resistant to anything that smacks of chart rigging than the book industry has been. “Book sales charts tell you how an individual title or author is doing,” says Mulligan. “But music charts are viewed differently; they tell you how well the whole record label is doing. Music executives are compensated according to market share and chart position.”

The charts have traditionally been a terrific marketing tool, a guaranteed source of airplay and consumer attention. But if the goal of marketing an album is to generate sales, wouldn’t many artists be just as happy with a straight promotional like this, even if it meant lower chart placement?

(Source: Fastcompany)

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