Universal Casts Its Vote on American Idol

American Idol has been the nation's most popular prime-time TV program for seven years running. As the aging franchise prepares to begin its 10th season on Jan. 19 in a crowded field of reality competition shows, Idol is getting a little help from a music industry friend: Universal Music Group. After replacing Sony (SNE) as the singing competition's record-label partner in August, the world's biggest music company is intent on expanding its role beyond producing albums by finalists. The two new judges on the show are Universal artists Jennifer Lopez and Steven Tyler. Jimmy Iovine, founder of Universal's Interscope Records and the man credited with discovering big acts like Eminem, will coach contestants.

"It's a show that needs work, we all know that, but the concept is great," says Iovine. "This is about making the music better and making these kids really grow as artists."

The moves are part of an effort to restore Idol's waning musical clout, promote the acts, and drive sales. Lee DeWyze, last season's champion, has sold 132,000 copies of his first album, a fraction of the 7 million logged by Carrie Underwood, winner of Idol season four, according to data from Nielsen SoundScan. After a 9 percent drop in 18- to 49-year-old viewers last season, and the departure of judge Simon Cowell to start a U.S. version of global music competition show The X Factor, News Corp.'s (NWS) Fox and Idol producer FremantleMedia, owned by CKx (CKXE), are placing a higher priority on the show's music.

Since its debut, Idol has become a force behind U.S. music sales and has created stars including Underwood and Kelly Clarkson. "It's still the most amazing marketing juggernaut in music history," says Lava Records President Jason Flom, former head of Atlantic Records, Virgin Records, and Capitol Music Group. "You'd have to go back to Ed Sullivan and the power of early television to find anything close to its influence."

Lucian Grainge, the new chief executive of Universal Music, pushed to win the Idol contract to expand Universal's presence in product licensing, merchandising, and talent management. The label aims to boost sales of Idol albums by releasing CDs by the winners and runners-up two to three months after the show ends, half the time it previously took. Individual performances from the show will be sold on Apple's (AAPL) iTunes and other digital outlets soon after an episode airs, Iovine says. Universal's Bravado merchandising group is also in talks with Idol's producers to license products such as T-shirts, according to a person with knowledge of the discussions. Grainge declined to comment.

Universal will encourage contestants to sing songs by its recording artists, who include Lady Gaga, Bon Jovi, and Justin Beiber. That could renew interest in them similar to how Fox's hit series Glee has rekindled interest in bands including Journey, whose Greatest Hits album has ranked among top-sellers on iTunes since its song Don't Stop Believin' was performed by the program's youthful cast.

Idol contestants will work with Iovine and a cadre of top Interscope music producers including Timbaland, Ron Fair, Rodney Jerkins, and Alex Da Kid for three days each week they participate in the show. Iovine says he will also help with song choices and arrangements. He's ditching episodes in which all the contestants perform selections from a single artist or genre. "It's going to be more original," Iovine says. "I don't want them to be karaoke singers."

As Idol tests its new look, the show will face plenty of new reality series competitors. Elisabeth Murdoch's Shine Group/Reveille is producing Live to Dance, a new CBS series starring former Idol judge Paula Abdul. Murdoch's dad, Rupert, controls Fox.

Universal's tie-up is no slam dunk. U.S. album sales fell by 13 percent in 2010, the ninth drop in 10 years, according to Nielsen SoundScan. Total music sales, including digital tracks, music videos, and other categories, fell 2.4 percent. Grainge, meanwhile, is working to cut costs and shed jobs at Universal Music, a unit of France's Vivendi. Including merger-related write-offs, Universal Music showed a 2009 loss of 325 million euros ($427 million) before interest and income taxes, according to Vivendi's 2009 annual report.

Still, Idol, with a total audience that averaged more than 24 million viewers a night last year, gives Universal an unparalleled opportunity to break new acts, says Lava Records' Flom, who has signed artists including Twisted Sister and Tori Amos. "Idol has Super Bowl ratings every week," he said. "What else could possibly compare to that?"

The bottom line: Universal Music Group hopes to ride the coattails of TV ratings champ American Idol in a bid to grab new acts and music sales.

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