Every Little Helps With Live Nation

Illustration: Aaron Taylor

At this exact moment Madonna is about to wow fans in Berlin with her Sticky and Sweet tour, a tour that will no doubt make a shed load of money and make her new partners Live Nation very happy if not relieved. Madonna herself will have every reason to be smug sitting on a new record deal from the very generous pockets of Live Nation, the events company based in California. At a reported $120 million it is a vast sum to pay to someone in an industry shaken to the core by illegal downloading and where artists like Prince give away albums in daily papers. However to call it a record deal would sell the term short for this is no normal four album advance contract. Commonly known as a ‘360 Degree Contract’ in the music industry, Live Nation gets a percentage of all the other ancillary revenue by the artist from t-shirt sales to Tour revenue. The deal also locks the artists involved to Live Nation’s ticketing service, which in the future will probably be the only place one can buy a ticket to their future tours.

Live Nation haven’t been coy about their unorthodox approach, one which has yet to be financially proven. Like a Russian oligarch at an art auction they have waved virtual blank cheques at some of the largest artists in music today with almost adventitious haste. Jay Z signed on the dotted line a deal worth $150 million, Shakira and Nickelback for around half that, while our very own U2 signed a few months back on an undisclosed deal reputedly worth more than $300 million over 12 years. Such vast sums thrown at already insanely wealthy established artists has made many sit up and openly question the financial viability of it all. If in the last financial year Live Nation lost close to $12 million dollars,how can it justify such sums? The music industry is a frustratingly low margin business. However Live Nation sees a future quite different to today. To concentrate on one aspect of the industry they feel is dangerous and in the digital age may lead to financial ruin. Where bands have become adept at using the internet and social networking, learning the ropes on their own on how to promote themselves the days of EMI and Warner as we see them today could be over very soon.

Live Nation anticipates synergies in combining the revenues of merchandising, music publishing and sponsorship. Linking them all into its already established ticketing business these Young Turks plan to transform the music business. They also firmly believe that by signing up the largest artists in the world today now in such deals before anyone else they will reap the profits from the whirlwind of change they themselves have created. While many in the music business stare in bemusement or grumble that it will all fail, many artists are very happy with their new deals. Is this a result of these artists simply inebriated by all this new money? Have they been foolishly swayed by the smell of crisp dollar notes without thinking? Probably not for many of them are experienced, proven and successful businessmen and women in their own right. Jay Z has businesses ranging from his own record label to clothing worth hundreds of millions of dollars while U2 have been savvy (or greedy depending on your own personal opinion) enough to move their holding company to the Netherlands to avail of lower taxes. U2 on the signing of their deal with Live Nation released a statement saying “The opportunity to integrate U2 and Live Nation’s vision of the future is a great extension to our established business”.

Established is an apt term for these Live Nation deals. The company have stuck to well established artists, who have proven adept at making money through touring and merchandising and not just record sales. Live Nation will not get involved in the business of finding new artists - which at times can be painful and loss making. With the live music industry booming (Shakira’s “Oral Fixation” tour alone made over $100 million) and sponsorship a well known means of pocketing a lot of money, garnering a sizeable percentage of this cash in the future will hopefully in the eyes of Live Nation make their mouth wateringly big deals make a hefty return. Newer artists may feel a bit left out by the new 360 Degree contracts; with their own record companies being sapped of their cash cows their position could look a little more worrisome. With Live Nation unwilling to invest in new and emerging artists and their own record companies seeing their revenues reduced investment may dry up. This is an unfortunate situation for the music industry overall but one which through technology many bands are adapting to through use of communication technologies.

While Live Nation has to be commended by taking a bold step, diving into the fires of the musical revolution and stealing the family jewels it will have to wait a long time for their deals to bear fruit. There is also the fear that the live music industry will implode and become just a victim of fashion. Ticket sales, already insanely high could become too much for a world already tightening the belts and bracing for recession. Merchandising and sponsorship could easily go the same way too. In the end Live Nation could be left with the old publishing revenue that todays record companies rely heavily on and debts to rival Third World Nations. Will Bono help them then? Lets see in 10 years time….