“Panos’ Brew” is Sonicbids founder/CEO Panos Panay’s weekly (or more) post about whatever happens to be on his mind. Look for musings and observations on entrepreneurship, the state of the music business, his experiences with members, interesting things he’s seen in his travels, or just about anything else.
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Last week Live Nation announced that it did another so called “360” deal, this time with the band Nickleback. (Nickleback is for all intents and purposes the musical equivalent of a McDonald’s Value Meal: cheap, bland, one-size fits all and unhealthy but some will tolerate it if desperate).
According to Live Nation the deal “will enable us to fully capitalize on our vertically integrated platform” and “structured to increase our revenue and cash flow potential significantly, while reducing our risk profile… this investment is cross collateralized… ” and on and on. I don’t know about you, but I have a hard time imagining John Hammond, the legendary A&R man from the 50s, 60s and 70s, joyfully making that statement after signing Bob Dylan or Bruce Springsteen to Columbia Records back in the day. Ahh, times they are a-changin’.
For those of you who have not heard the term “360 Deal” it basically means that an artist (though I hesitate to use the term to describe Nickleback) gets one big advance check from a company like Live Nation, which in exchange gets rights to that artist’s record sales, touring income, merchandise sales, publishing, etc. In the past nine months or so, Live Nation has spent over half-a-billion dollars making these types of deals with Madonna, U2, Jay Z, the Jonas Brothers, Shakira, etc.
If you read most of the press articles out there, they’ll have you believe that these deals are the savior of the modern music business and that companies like Live Nation are pointing the way to a brave new future. Moses and Abraham Lincoln all rolled into one. Wall Street’s response to all these cheerful pronouncements? Since Live Nation started doing these deals, its stock price is down about 53% compared to an 18% drop of the Dow Jones average during the same period.
I’ll let the financial analysts tell you why they think Live Nation is worth less than half it was last October but my problem with these deals boils down to this:
First, there’s nothing original about them. Berry Gordy did these deals with Motown 45 years ago. Groups like the Supremes, the Temptations and the Jackson 5 were literally owned by Motown. Record sales, touring, TV appearances, likeness, TV rights etc. The whole thing. It was good while it lasted and then the artists decided that they did not like to be told what to wear, how to walk or what kind of music they should perform and how often. No one likes to be “owned”.
They don’t benefit the artist. Let’s face it, there is not a single company out there that can be equally adept at selling records, selling tickets, producing tours, moving merchandise sales, running websites, administering publishing rights, managing fan clubs, monitoring airplay, signing sync-licensing deals, exploiting image rights, running PR campaigns, managing social media sites, monitoring blogs, etc. That control should remain with the artist and his/her team who outsource all these activities to a host of other entities who are specialists. Specialization not concentration is the future.
They don’t benefit the music-loving public. When you take big bets with advances, your first and primary motive is to recoup – quickly. Time and again, when money is the only motivation, art, and by extent the public, suffers. Just check out any Marlon Brando movie that was done just for the money. Or, any Elvis Presley post-army service movie for that matter. Or most reunion tours. There’s no spark, no passion, no oomph. For art to flourish, there always needs to be a patron, but the artist needs to control the timeframe and the creation.
They don’t benefit the dealmaker. I personally fail to see how blowing the equivalent of a small nation’s GDP on a bunch of stars way past their earning prime makes any sense. I mean, how many more records and tours does Madonna have in her? Even for younger groups, the deals only make sense if they are able to reach a mass audience. But as all trends show, the future of the music business is not mass, it’s niche.
They are not the future. One just needs to take a look at two trends to realize that the future of music is not in mass-reaching artists and bloated big budget marketing: record sales of major label releases are going down each year; and the average age of artists that consistently sell large seat venues is going up. The future belongs to the niche.
As I mentioned many times before, the future of the music business is not in the mass-reaching elite that dominated the industry for so many years, but in the niche-reaching artistic middle class that controls both the means of production and distribution and marketing. These middle class artists will outsource all non-essential activities not to one firm but to a host of specialists.
Panos
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