Madonna's new music deal a sign of the times

Madonna’s landmark deal with concert promoter Live Nation marks the latest move by the music industry to find new ways to profit from artists as CD sales slip and the internet changes the way music is delivered.

The deal, officially announced on Tuesday in a joint statement by Live Nation and the Material Girl, gives the company an all-encompassing stake in her music.

Financial terms were not disclosed. But the 10-year deal is worth about $120-million, a person who spoke on condition of anonymity because of the confidential nature of the matter previously told The Associated Press.

For Live Nation, the signing of Madonna is part of a push to forge similar deals with a range of artists, from superstars to emerging talent, under its new Artist Nation division.

“Madonna is the first step to making Live Nation into the next-generation music company,” Live Nation CEO Michael Rapino said during an investor conference call. “We believe it should help attract additional artists.”

The strategy has been adopted by other recording companies.
Britain’s EMI Group signed a similar all-encompassing rights deal with Robbie Williams in 2002.

New paradigm

Madonna made her move after her long-time record company, Warner Music Group, refused to match the terms of the Live Nation offer.

Madonna said in the statement that she was drawn to the deal with Live Nation because of the changes the music business has undergone in recent years.

“The paradigm in the music business has shifted, and as an artist and a businesswoman, I have to move with that shift,” Madonna said. “For the first time in my career, the way that my music can reach my fans is unlimited. I’ve never wanted to think in a limited way and with this new partnership, the possibilities are endless.”

The singer still owes Warner Bros Records another studio album and a greatest-hits album.

In its own statement, Warner Music congratulated Madonna.

“She is one of the most remarkable artists of our time,” the company said, reminding her fans that Warner Music will still issue her next album and owns her catalogue of recordings from the past 25 years.

The deal with Live Nation encompasses future music and music-related businesses, including the Madonna brand, albums, touring, merchandising, fan club and website, DVDs, music-related television and film projects, and associated sponsorship agreements, the company said.

Under terms of the deal, Madonna (49) will receive a signing bonus of about $18-million and a roughly $17-million advance for each of three albums, the person said. A portion of the compensation will involve stock, the person added.

Madonna could also benefit significantly from the touring component of the agreement, which gives Live Nation the exclusive right to promote her tours, the person said.

The company said it could release its first Madonna album in two to three years and stage a tour within two years.

Mixed reaction

The deal has received mixed reactions on Wall Street, with some analysts questioning whether Live Nation can squeeze out a significant profit. Shares of Live Nation rose by three cents to $21,45 on Tuesday.

Rapino said he doesn’t understand Wall Street’s scepticism. “I’m amazed that our stock hasn’t jumped considerably in that we’re absolutely delivering what we talked about for two years,” he said, referring to Live Nation’s efforts to grab a bigger slice of the music business beyond touring.

The Material Girl’s age has also led some to suggest she may not be as bankable she was in the past.

Arthur Fogel, the head of global touring at Live Nation who has produced Madonna’s past three tours, shrugged off the criticism, blaming “ageism” for doubts about her ability to sell CDs and fill arenas.

“Madonna is an incredibly talented and vital artist and will continue to be,” Fogel said. “Clearly, we would not have done this deal if we didn’t have a great expectation of great returns.”

Madonna’s last tour generated nearly $200-million globally, and her last album, Confessions on a Dance Floor, sold nearly eight million copies worldwide, Live Nation said.

Still, artists generally get 90% of ticket sales from tours, with promoters taking the rest. Album sales, meanwhile, have been in decline for most of the decade and digital sales, while growing, remain a fraction of recorded music sales.

Madonna would have to stage several successful tours, release a few albums and pull in significant other revenue for Live Nation to recover the money it must pay the singer.

Michael Cohl, who is heading the Artist Nation division, noted that in the 1980s some people thought the Rolling Stones were too old to keep drawing big crowds, yet their concerts during the past two decades have grossed more than $2-billion.

“I produced shows for Frank Sinatra when he was 86 years old, and he was still selling out [shows],” Cohl said during the conference call. “With an artist like Madonna the possibilities are endless and the economics are straightforward and reassuring.”

Cohl suggested that Madonna could tour four times during the 10-year deal, potentially generating $800-million in revenue globally. Sales from the minimum of three albums included in the agreement and other sources such as DVD sales could push revenues even higher, he said.

“We believe we’ll be able to achieve a sound return for shareholders from these rights,” Cohl said.—Sapa-AP

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