In an earlier post, I discussed the rise of Live Nation, the world's largest concert promoter, as CEO Michael Rapino claimed his company would explore other areas of the music business. In the last week, Live Nation's artist development department Artist Nation, has decided to sign a deal with U2, arguably one of the world's most popular rock bands, in addition to their preexisting contract with Madonna. On top of those two, the company is soon sealing the deal with Def Jam CEO and rap superstar Jay-Z. These three contracts would give Live Nation top artists in rap, rock and pop music genres. All three of these contracts are of a new breed called the 360 degree deal. In such a deal, the artist shares revenue not only from recorded music but also touring, merchandise, and other business ventures. Jeff Leeds of The New York Times says, "Like many innovations, these deals were born of desperation". Record labels take a deeper look at the types of ancillary income and have figured out a way to get some of the money for themselves. Many artists make the bulk of their income from these ancillary sources such as touring and merchandise which would make a 360 deal appear rather unappealing. On the other hand, for mega superstars such as those signed to Live Nation, the total revenue is already extremely high that sharing some with the company is not viewed as detrimental. In defense of the company presenting the artist with a 360 deal, it allows the label to take a different approach to selling an artist, as the current model is slowly floundering. This type of deal reassures the company that there will be income from a variety of avenues so immediately producing a hit record will not be an artist's only chance at success. Also, by moving away from the stress of making mega hits, the company can spend more time developing the artist which is something that has been absent from record labels for quite some time. The 360 deal has the potential to save the music industry if it is used properly.In Live Nation's case, the three artists they have made deals with are already superstars with extremely large and extremely loyal fan bases thus rendering artist development unnecessary. Live Nation's deals require sharing of profits from touring, merchandise, fan club memberships, DVDs, website sales, recorded music and even sponsorship agreements. In return, the company offers the artist a large signing bonus as well as large advances for future albums. Also, the company offers the artist stock options as part of the compensation. This leads to the artist feeling as if they have more of a partnership with the company and will allow the artist to feel more comfortable in a ten to twelve year contract. Though the company shrugs off skepticism of overpaying for its artists, some believe the company could lose money. Naysayers feel that Live Nation will need to overly exploit all possible revenue streams in order to turn a profit. On the other hand, Live Nation could be offering lavish advances and bonuses to the first few deals and change their tactics later in the game. Live Nation has got to create a buzz around Artist Nation before they can start signing anyone other than superstars and in the United States, superstars do not come cheap.
Live Nation's ambitious CEO, Michael Rapino has big ideas for Artist Nation and has come to believe that his company has more expertise in the newly important areas which will be the new revenue streams for music. "I am the biggest enemy of record labels," he has said recently. As Live Nation is a world wide concert promoter owning and/or operating hundreds of venues, arenas and festival sites, the company has preexisting
relationships with many corporate sponsors. Live Nation's current sponsors make it easier for the company to find sponsors for their individual artists and perhaps lead to contracts forbidding sponsors from working with other labels or concert promoters. Also, being a concert promoter appears more attractive to artists who understand the importance of touring. Madonna said recently "the paradigm in the music business has shifted and as an artist and a business woman, I have to move with that shift". U2 claims, "We want a closer more direct relationship between the band and its audience and Live Nation has pledged to help us with that". Jay Z has been in and out of various areas of the music business ranging from artist to talent scout to label CEO and has only now found solace in Live Nation's stress on touring as a means of revenue. Jay Z told the NY Times, "In a way I want to operate like an indie band. Play the music on tour instead of relying on radio" He hopes the company can help him do just that. With requests from potential clients for a fresh look at the music business stressing live music and the relationship between performer and audience, who better to lend a helping hand (and seemingly endless amount of money) than the world's largest concert promoter?Signing three superstars from three vitally important popular music genres to 360 deals sure seems like a fantastic idea. Live Nation will control parts of the whole from all sorts of revenue streams from a variety of artists who will likely generate income from all kinds of avenues. Though ten to twelve years is a long time to wait, it will be interesting to see if these superstars are worth their hundred million dollar price tags. Live Nation continues to be at the verge of the great paradigm shift happening in the music industry and if the 360 deal is the savior or the swan song of the industry, Live Nation will be first to salute or shun the new contract.
1 comment:
I guess I was a little confused why Live Nation is just now signing top artists such as U2 and Madonna if they are the world’s largest concert promoter. Or are they just now getting 360 deals?
Is there some reason that an artist would choose to sign a 360 degree deal in spite of the fact that they have to share more of their revenue? What makes this type of deal worthwhile for the artist? Ah, I see you go on to talk about this later. Do you believe this is a mutually beneficial type of deal?
It was interesting to read about how the “current model is slowly floundering” and how artists are looking for new ways to secure a greater income. However, maybe you could briefly tell us what the current model is and how it is so different from the 360 deal. Would a 360 degree deal be more beneficial for someone who is a big star like Jay-Z or someone who has less of a chance of success?
Thought you might play around with changing the Live Nation graphic just because I think it was used in your previous post, but that’s completely up to you. This post was very informative, especially for someone who is not as familiar with the way the music industry works. I do sort of wish that your opinion had been more apparent throughout the post, but overall I like the aesthetics and topic of your page, and am interested to see what else you will write about for our last few posts.
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