At a time when lagging CD sales and music piracy have made the album a mere accessory to touring, merchandising and licensing, it's no wonder that ailing record labels like Warner Music Group have been exploring ways to get a piece of that much more lucrative side of the business. So just imagine how they must feel now that Live Nation, the world's largest concert promoter, is close to stealing away pop music icon Madonna for a cool $120 million in cash and stock.
The 10-year deal, first reported by the Wall Street Journal, would include the rights to sell three studio albums, promote Madonna's concerts and sell licensing name rights and merchandise, meaning a company that has never represented an artist before would suddenly be overall talent agent to one of the world's biggest music acts. If it is consummated and both Warner Music and Live Nation refused requests to comment on the deal it would be just the latest example of the increasingly prevalent so-called 360-degree deals that have concert promoters, record labels, ticketing agencies and management firms all invading each other's turf.
The hefty potential payout comes on the heels of a similarly bold move by Live Nation over the summer. In August, the king of concerts decided not to renew the contract that gave Ticketmaster exclusive ticketing distribution for most of Live Nation's 29,000 annual events, a loss that will rob the ticketing giant of about 20% of its sales. Instead, Live Nation is pumping up its own in-house ticket distribution arm, already the third largest in the world, which gives it a direct link to the music fans attending its shows. Not to be outdone, Ticketmaster significantly increased its stake in Front Line Management, an agency that represents such acts as Christina Aguilera, Jimmy Buffett and Aerosmith, when rumors swirled that Live Nation wouldn't renew its contract. Warner, for its part, has been looking around for partners, potentially hooking up with none other than IAC/ InterActive Corp, Ticketmaster's parent, as a way to counter Live Nation's proposal to manage all of Madonna's concerts and album releases. And earlier this summer Warner Music formed a joint venture with Violator Management, a firm that negotiates roles for rappers in films, advertisements, video games and TV programs.
The wave of consolidation in the industry may make sense for the suits, but it's not clear that it benefits the artists. Some acts like Radiohead and Prince have recently bypassed labels and the tremendous cut of profits they typically take altogether. Last week Radiohead released its new album, "In Rainbows," online with a "pay what you want" model. Similarly, Prince gave away 3 million shrink-wrapped copies of his new album last year in London's Sunday Mail newspaper.
"I wouldn't bundle all these rights into one cross-collateralized company," argues Randy Phillips, who manages Lionel Richie and is President and CEO of AEG Live, the second largest concert promoter after Live Nation. Phillips says Warner Music contacted him a few months ago to be a potential partner when they were worried about Madonna being stolen away, though the two didn't ultimately make a deal. "I think an artist can fare better with direct relationships. It takes different skill sets to maximize revenue in the different areas and the artist cheats herself by trying to put it all together."
Others see it differently. "It benefits the artist by having one company do it all because the agendas are aligned," says Jon Cohen, co-president of Cornerstone Promotion, which does music marketing. Regardless, most everybody agrees this particular deal would be a no-brainer for Madonna. "She is 49 years old and this is enormous risk mitigation," says Jim McCarthy, CEO of Goldstar Events, a ticketing distributor.
Despite all the speculation, the deal is not even finalized. "I wouldn't totally count out Warner Music in terms of keeping her," says Phillips.