When branding deals turn toxic: What now for Universal and Volkswagen?

Last month, Volkswagen was one of the most popular – and respected – automobile brands in the world.

In terms of outright sales, it was the No.1 car-maker on the planet.

What a difference a lie makes.

The strength of the VW brand is now being repeatedly eroded by the world’s media, thanks to one of the most damaging corporate scandals in recent history.

Last week, VW was busted for rigging its emissions test results.

Over 11m vehicles are thought to have been erroneously passed as environmentally sound by the German company, which now faces up to US $18bn in potential fines.

Volkswagen’s CEO, Martin Winterkorn, was forced out last Wednesday (September 23), but the reputational destruction was already underway.

VW’s lie is thought to have caused almost 1m tonnes of additional pollution to be pumped into the atmosphere.

Public trust in its brand appears to be at an all-time low.

“Which artists are going to want to stand in front of a volkswagen logo now?”

MBW Source

In the background of this wrongdoing, watching events unfold very closely, is Universal Music Group.

MBW understands that UMG signed a global, multi-year brand partnership with Volkswagen in spring this year.

The major music company has effectively agreed to act as VW’s in-house music agency, finding suitable UMG artists and tracks to front marketing campaigns long into the future.

But the VW that Universal signed up to work with a few months ago is not the VW it finds itself in bed with now.

One source close to the UMG/VW deal tells MBW that in terms of VW’s reputation – and any extended artist association – the episode has become something of a “horror story”.

“There are obviously some issues,” they add. “Which artists are going to want to stand in front of a Volkswagen logo now?”

Good question.

This is a prime example of how branding deals – built on the tacit agreement that the popularity of artists can be leveraged to assist a company’s sales – can quickly become compromised.

The UMG branding deal with VW was hard fought, taking months to reach a conclusion.

The first of fruit of the partnership, Volkwagen Garage Sound, is branded concert series in Germany, due to be fronted by prominent UMG artists.

VGS kicked off in Frankfurt on September 14, acting as an opening party for the city’s Auto Show.

Jessie J played alongside Felix Jaehn at Frankfurt’s Gibson Club. Both performed in front of a huge Volkswagen Garage Sound logo.

This took place less than a fortnight before VW’s respectability would come crashing down.

Jessie J’s image still appears on the Volkswagen Garage Sound branding (pictured) on the campaign’s Facebook page, which has attracted over 18,000 Likes.

There has yet been no update on the next planned concert in the Volkswagen Garage Sound series – or if one will materialise.

No doubt a strong element of Universal’s pitch to win the Volkswagen Garage Sound account was the work of UMG’s in-house brand and sync agency, Globe, on a previous VW campaign.

The ‘Play The Road: Driving Music Reinvented’ project first appeared in November 2013.

It featured dance music legends Underworld spending time on a racetrack to test out a VW-made app that actually adjusted music in real-time based on your driving style.

The basis of the audio was created by Underworld, who Globe said were “an easy pick due to their passionate sound“.

Explaining his keenness to be involved with the project, Underworld’s Karl Hyde commented: “Driving with music has probably been the most important thing in my musical education.”

What he doesn’t mention in the video above, naturally, is the tricky subject of payment.

Yet we all know that Hyde, Jessie J and, most certainly, Universal haven’t teamed up with VW out of the kindness of their hearts.

Sync/brand licensing makes up around 17% of Universal’s total income, which will amount to around €700m this year alone.

The conundrum for Universal now is whether to dump the toxic Volkswagen account and lose a serious chunk of income, or stick with it and help the beleaguered vehicle maker claw back some repute amongst customers.

To do that, it will have to work very hard to convince artists – and their managers – that a public association with a disagreeable brand is a good idea.

MBW understands that discussions are taking place today within the major to decide upon a strategy.

Of course, Universal could never have predicted that Volkswagen’s stellar reputation was going to be shattered by an initially unassuming, highly-technical report from a US engineer (whose last name, poetically enough, is German).

But its experience will be a red flag for any label willing to sign a deal promising that artists will endorse a brand long into the future – especially if those artists haven’t yet been consulted.

Not that UMG’s rivals should be feeling too smug.

Nick Molden, an emissions expert who has tested 90% of car models on the road today in the UK, says it’s very possible that more emissions scandals will now hit the automobile industry.

His words will send a chill up the spine of any professional responsible for banking artists’ reputations on the prestige of corporate giants.

“If widespread illegality is found among car manufacturers in Europe, then all bets are off,” Molden told The Independent.

“There will be such carnage.”Music Business Worldwide

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