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Are 360 Deals Now Dead In The Water?

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With rumours of Live Nation looking to license back the artists they recently signed to major labels are 360 deals dead? A conglomerate pays mega millions to artists like Jay-Z, Shakira and Nickelback to own all aspects of their income streams and then decides it wants to outsource the job of releasing the records. How do the artists feel about that? Live Nation paid extremely high fees to these artists and now does not want to build any infrastructure. Is this a case of realising the original deals were uneconomical and now it cannot afford to build appropriate structures internally to adequately exploit the rights purchased?

There have been extreme rifts in the Live Nation boardroom with the recently set up Artist Nation executives being fired by Rapino as well as the resignation of the Chairman Michael Cohl from Live Nation. Sounds like a company with serious identity problems or at the very least serious boardroom conflict…

What are the implications of the likely move with Live Nation divesting its interests in 360 deals for artists, for labels and the wider industry? Well after paying exorbitant fees for aging artists recording rights, if Live Nation were to license back recording rights to labels, Live Nation would only get a licensing royalty of 25 – 35%. They would also still be responsible for paying the artists royalty which at this superstar level would come close to the actual licensing royalty that Live nation would receive from labels it outsourced the releases to. Good or bad economic sense? I will leave you all to decide.

The real question is weather major labels will want to have these mega artist’s back, whose selling power on the recorded music side of the business is on the wane? Record labels are probably thinking Live Nation did them a favour in taking them off their hands. What would be the sense in taking back artists who cost your label expensive marketing costs with a diminishing return on sales? Personally I think any label would be crazy to even consider such a scenario. Furthermore why should they bail out Live Nation especially since both sides realise the only money is in live concerts and associated merchandising and Live Nation no doubt would not want to relinquish those rights.

On the flip side, does Live Nation’s desire to divest its interests in recorded music present an opportunity for labels? It may do as labels will obviously not pay high advances to get the licensing rights Live Nation has borne that cost and labels know sales will be lower than previous releases. The benefits would include; label association with that artist with lower risk due to no overpriced advance to recoup. If Live Nation believes labels will pay high advances for the licensing rights it is living in fairyland. So perhaps in this respect labels will pick up some bargain basement deals.

Where are the artists in any of these equations? What do U2, Madonna et al think about Rapino’s decision to not build internal infrastructure to release recently signed artist’s record deals? Personally, I think these artists will be happy to take and spend their already outrageously large pay cheques from Live Nation and not give a damm as they either way they win. But would Madonna be happy to have warner music involved in her albums she signed to Live Nation? If not and they are the only label willing to license her records back from Live Nation, will Madonna have a get out clause?

However what are the ramifications for the wider artist community? Does this place a damper on the ability of labels to insist artists sign 360 deals? Can artists now demand labels requiring 360 deals need to have the internal infrastructure to adequately exploit artists rights tied up in these deals? Is this a sign of the death knell for the 360 deal? As it was Live Nation driving the 360-deal scenario to which labels followed suit in pursuing 360 deals with all new signings. Or is it just a recalibration of the fact that the fees Live Nation negotiated with aging past it artists are actually non-viable in terms of ROI and recorded music?

 

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