Let's Make A Deal!

By: Keith Murphy (Vibe Magazine; pg. 42; May 2008)

Riding high on the success of this spring's Jay-Z and Mary J. Blige tour, LIVE NATION is officially bum rushing the recording industry. And the stakes are higher than ever.

What is it?
Established by Bronx, NY - raised media entrepreneur Robert F.X. Sillerman in 1997, Live Nation is a $3 billion concert promotions giant that has handled tours for such acts as The Police, Genesis, and Mary J. Blige & Jay-Z. The company is currently rolling the dice on its Artist Nation Division, an outlet that serves as a one-stop recording/merchandising/touring entity for acts looking for an alternative to traditional record deals.

Who's Running Things?
CEO Michael Rapino, 42, who oversaw Live Nation's reported $120 million, 10-year deal with Madonna last October, Artist Nation's first deal.

How does it work?
While there has been an increase in so-called "360" record deals between artists and traditional record labels, Live Nation's partnership with Madonna is new territory. In the pact, Live Nation gets the rights to percentages of all of Madonna's business ventures---including upcoming albums, DVD's, tours, merchandising, TV Shows, Websites and films. In return, the veteran performer reportedly receives company stock and $17.5 million in up-front payments on $50-$60 million for three albums.

How Will it Affect You?
It is unlikely that consumers will see an increase in CD prices under big-time 360 deals since retailers have already been pressuring labels for the past two years to drop CD prices in order to compete with the $9.99 albums offered by iTunes Music Store and Wal-Mart. Instead, price increases most likely will be seen in merchandise and concert tickets. For The Police's record-breaking 2007-2008 reunion tour, which Live Nation handled, ticket prices bubbled to $114 on average while tickets for the Jay-Z and Mary J. Blige outing are averaging a hefty $127. With the concert industry going through a revenue decline (Live Nation itself lost revenue in 2005 and 2006 and took in just $9.9 million in the second quarter of 2007) and historically dependable revenue streams drying up for artists, such numbers will continue to go up.

What's the Big Picture?
On the surface, 360 deals make sense for established superstar acts that no longer need a record label for administrative and promotional support. The news of Live Nation's concert tour promotions rival AEG structuring an imminent partnership with Ticketmaster and parent company Cablevision adds even more intrigue. But while there have been rumors of acts like U2 jumping on the 360 bandwagon, the Madonna deal is still seen as a huge gamble.

Violator Management head Chris Lighty says, "360 deals are the next natural phase in the business." But Lighty dismisses speculation about his client 50 Cent eyeing a Live Nation deal in the near future. "I don't think the Madonna deal signals a colossal change in the industry. There are only a handful of artists who can combine worldwide touring, record sales and merchandising." Who's got next?