Is Live
Nation Inc.'s well-publicized foray into recorded music dead?
If not, it's on life-support, given
the imminent departure of Live Nation's chairman, Michael Cohl. According to
The Wall Street Journal, the world's largest concert promoter is negotiating
the end to Cohl's short reign on the board. He became chairman last year after
Live Nation acquired his Canadian promotion concern, Concert Productions
International Inc. for $133 million, mostly in stock.
Cohl has been in an open feud for
weeks with Live Nation's main Michael, the company's CEO and superego, Michael
Rapino. The source of the fight is something called "360." It's a favorite
buzzword these days in the music industry, and a concept Cohl wanted to
accelerate, but one about which Rapino had serious reservations. Three sixty
(as in, the whole pie) basically means I'll guarantee you, the artist, some
cash up front and then I own your body, soul and t-shirt sales. This sounds
exactly like the arrangement record labels insisted on making in their
half-century of being lords of the realm, only it now includes a significant
cut of concert revenue. Live music is the one part of the industry that's doing
well. It's also the one part of the industry that many artists continue to
control and occasionally make some money on.
For Live Nation, however, 360 meant
breaking into CDs, not hedging its bets against the precipitous decline of
recorded music.
Three sixty makes sense for major
labels if they want to lock in the few profitable acts they have. Only the
trend is exactly in the opposite direction: More successful artists are
finishing out their contracts and going independent. (Radiohead is the latest
example.) Musicians have finally figured out that they could make far greater
sums selling far less albums on their own than agreeing to the majors' typical
sharecropping arrangements. Giving up tour revenue (and t-shirt sales) on top
of bad record deals is suicidal.
Unless, that is, you're an
over-the-hill artist and some company decides to give you an obscene amount of
money upfront to insure even mediocre record sales or hip replacements won't
slow down the growth of your bank account. Live Nation's first two 360 deals
were stunners: Madonna is guaranteed $120 million over the next decade and
Jay-Z gets a reported $150 million, including advances of $100 million. In
return, Live Nation gets to distribute CDs, takes a bigger percentage of
concert revenue, promotions and -- as Rapino attempted to sell a dubious
investing community on the arrangement, he stressed, we kid you not -- t-shirts.
While we're far too old to predict the lifespan of a rapper like Jay-Z, it's
hard to envision the kind of longevity Live Nation needs to recap its
investment. And Madonna? Her glory days in pop music are decades gone. No matter
how well her tours may still sell, new recordings are immaterial. Besides, what
Live Nation doesn't get in its deals is a share of back catalogues and
publishing rights, which happens to be the only saving grace for the major
labels these days.
So, to recap, Live Nation wanted to
parlay its dominant position in money-making tours and its aggressive attempts
through acquisitions to lock up concert promotions for a share in the
money-losing record industry. Sounds like a winner. We can't understand why Rapino
has any doubts. -- Matt Miller
See Wall Street Journal story
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