I never thought I’d have anything good to say about a company that until recently was a cog in the machine of Clear Channel Communications, the radio monster that’s partly responsible for the popularity of so much bad music. So color me surprised that I find myself praising the wisdom of concert promoter Live Nation’s recent deals with U2 and Madonna, which could represent, if executed properly, an industry-wide shift in the music business model.
Last year, Live Nation (spun off from Clear Channel in 2005) inked a groundbreaking “360″ deal with Madonna under which the company takes over all facets of the Material Girl’s career. She gets about $120 million, and for the next 10 years Live Nation gets the recording rights to her next three albums, will handle all merchandise sales and the licensing of her name, and will promote her tours. Madonna’s old label, Warner Bros. Records, gets the right to weep over losing its contract with one of the world’s biggest stars.
If anyone thought the deal was a one-time fluke for Live Nation, that notion was buried this week when they signed a similar 12-year contract with U2 to take over the Irish rockers’ touring, merchandising, and digital branding rights. The U2 pact doesn’t include recording rights, which still live with label Universal Music Group, but as anyone who’s been paying attention to the music business can attest, sales of actual music are down and it’s increasingly the ancillary revenue streams that are pulling in the big bucks. (It’s like a bad divorce settlement: Universal Music got the house but Live Nation walked away with all the furniture.)
Live Nation is smart enough to realize that focusing solely on promoting concerts, or solely producing music in the case of the recording industry, is a one way ticket to bankruptcy. You simply can’t survive with a single revenue stream in today’s diversified markets. In the digital era, success will be defined by the ability to lump music sales together with $35 concert tees and $300 concert tickets, online advertising and merchandise sales on band websites, and licensing band names and images.
Live Nation appears to be a company that gets it and their continued willingness to take risks and sign big bands will serve them well. (Update: Shortly after posting this blog, news broke that Live Nation is on the verge of inking another similar deal with rapper Jay-Z, this time for $150 million.) Conversely, if the traditional music industry wants to stay relevant it would do well to wake up and smell the coffee by diversifying its business line into Live Nation’s core territory. It can’t sit on the sidelines and do nothing as it did with its refusal to embrace online music sales in the late ’90s, a blunder the industry continues to pay for. Only by dancing to a new tune can the music business shuffle out of its current mess.
Comments
pas Says:
April 14th, 2008 at 5:39 pm
First of all, you have provided some strong analysis of the recording industry, including your explanation that a company in the music industry cannot survive off a single revenue stream. That is, simply promoting concerts or selling CDs is not something that will keep a company afloat anymore. So, from that perspective, your praise of Live Nation makes sense. However, you commented that Clear Channel’s dominance in the radio field has led to the promotion of a lot of bad music. No arguments from me there. But what does not make a lot of sense is why one instance Bills thinks that heavy-handed corporate control of an allegedly artistic pursuit or medium is bad, but in the other it is acceptable. Granted, Madonna, U2, and Jay Z have already established themselves and have the clout to retain creative control. But what about new artists that might be pushed into a 360 model, only to find themselves cranking out product to serve the needs of Live Nation? How is that going to lead to anything other than more bland music and manufactured “artists”? Your interest in the business end of it and your contention that 360 deals are the way of the future is a valid argument to make, in terms of the need for the music industry to make money in the current market. However, one imagines that if Madonna, U2, or Jay Z had been operating under 360 degree deals from the start, rather than from a position of power, they would hardly have the power and recognition that they currently enjoy. Rather, they would be like the one-hit-wonders that you complained about in a market where the bottom line is first, and artistic development second.
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