Live Nation : 360 Deals

Media companies are now taking over for some of the biggest artists in the music business, in new ways that amount to near ownership of the artists and their images. Live nation, a company that was previously owned by Clear Channel Communications, has signed major stars in the last two months, including Madonna, U2, and Jay Z. Just as Clear Channel Communications was bent on world domination of radio content, Live Nation seems determined to take over the rest of the information, appearances, and merchandise that fans and music consumers can get from and on the biggest stars in the business. Live Nation is engaging in what are called "360 degree deals" which essentially means that Live Nation takes control of negotiating everything from the concert venues where artists will appear, to what negotiating everything from the concert venues where artists will appear, to what television shows their music will appear on, to what types of products will bear on artist's name. It seems somewhat odd that some of the nation's biggest superstars, who spent so much time carefully crafting their images, and engaging in brilliant efforts at marketing themselves, would turn over the reins to a company that is concerned only with earning money from those images. What is unclear is what impact such deals will have on up-and-coming artists. For now, the focus is on whether or not the deals that these industry giants have signed, and whether they are worth it to Live Nation. Larry Bills of Bizmology argues that the deals are smart for Live Nation, while Peter Kafka of Silicon Alley Insider says that the Madonna deal in particular is a money-losing proposition for Live Nation, I offer my interpretations of Bills and Kafka's articles below and also on the author's blogs.

Live Nation is Singing a Bold Tune in the Music Biz:
Comment:
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 you think 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.

Live Nation's 120 million Bet: Breaking Down Madonna Deal
Comment:
Thank you for your comments in this issue. You take a straightforward approach to the Madonna deal with Live Nation, questioning is that is potentially a money-loser, as Madonna makes a great deal of money up front, and has minimal obligations under the contract. One imagines that Live Nation has constructed a deal that requires such things, but you point out that even so, albums will still lose money under the terms of the deal. Live Nation could still attempt to make money by landing Madonna songs on every single television show and movie that is produced in the next decade, and by selling Madonna perfume, but the money involved there is not likely to be enough to cover the money that Live Nation paid up front already. What seems to me to be the real impetus behind Live Nation signing deal with Madonna, though, is the ability to sucker new artists into similar deals (but which terms much more favorable to Live Nation) by telling up-and-comers that all the big name stars are in 360 deals contracts. Madonna is essentially immune from Live Nation's efforts at control, but young talent, eager for a shot at the big time, may be too willing to jump at the chance to turn over a huge chunk of their tour money to Live Nation, just to open up for a much bigger, more established band. Live Nation may simply be taking a bath on the Madonna deal to, as you point out, try to snow investors, and gain more control over the music business.