With record music increasingly being given away from free and 360 deals becoming the norm, is copyright enforcement critical to the survival for the recorded music business? Live music promoters are the only companies offering large advances for 360 type deals with artists, so is the 360 model the way of the future? Who are the winners and losers in these deals?
One only has to see the recent deals Live Nation has concluded with Madonna, U2 and Jay-Z, to realize that despite rampant piracy new business models are emerging, which sidestep declining recorded music sales. The fact Live Nation can afford to pay out such massive advances in my mind solidifies that Live Nation see more revenue opportunities in touring and merchandise and sponsorship than recorded music. I could be wrong but in real terms the aforementioned revenue streams will probably outstrip recorded music revenue at a rate of more than 10:1.
Does this now signal the end of a requirement for copyright enforcement of recorded music? Clearly Live Nation may use recorded music as a promotional premium to sell concert tickets, merchandise and sponsorship where the real profit center lies. Will we see similar promotional tie-ups al la Prince from Live Nation? Who knows, but what it does signal is a dramatic shift in the dynamics of who can and who is willing to release artist’s recorded music.
The fact live music promoters are now moving into recorded music territory and that record labels are moving into touring and merchandising signifies a new emerging music business. Will copyright enforcement for recorded music be important for the survival of the music business if it is decreasingly reliant on recorded music to make money? For me the jury is still out on this one.
I would state that ensuring artists get paid for all associated uses of their recorded music, copyright enforcement is critical. However, trademarks and maybe even patents will begin to play a more significant role than has previously been the case. This comes back to a previous article of mine regarding the securitization of recorded music part 1. If previously securitization of recorded music was not viable from investor standpoints, then will these new 360 models change this?
If a promoter takes on the 360 business model with artists, the whole brand of the artist becomes securitize as it is not just reliant on one of many income streams as has traditionally been the case. The same may be stated for record labels actively pursuing 360 deals with their artists. However, who is in a stronger position to adequately represent the best interests of artists in 360 deals, labels or live music promoters?
The Live/Touring side of the music business has been thriving in comparison to the recorded music industry. Subsequently live music promoters have been able to offer gigantic advances to established artists that labels occasionally used to offer. This means that they will have to work extremely hard to recoup these large advances. However, as labels can clearly not afford such astronomical deals, it will be the established artists, which move onto working with live promoters in 360 deal structures. Record labels will be increasingly left with new emerging artists whom they have 360 deals in place to work with.
Both labels and promoters will and are actively pursuing 360 deals in all new signing. However, the fact that promoters already own venues and merchandise infrastructure, this touring business dominance will play heavily in their favor when it comes to recouping. Promoters have enormous economy of scale benefits in comparison to record labels for keeping a lid on live touring costs. It is well documented that touring is expensive yet essentially to build viable long-term careers for artists.
In any 360 deal the artists is the loser, especially in the new and emerging artist segment, and in the megastar league in terms of control. Previously artist income, which was untouchable by labels or recorded music owners (touring, merchandise, publishing, mechanical and public performance), now becomes an open revenue source. One needs to think about how this will affect viable income for artists and possible conflicts on interest arise when the same entity owns every revenue generating aspect of your artistic output.
Obviously, labels and live promoters are the winners in the 360 deal model, as they own every viable revenue stream an artists has. Questions need to be raised will this enable them to exert undue influence in artists creativity and a serious examination of potential conflicts of interests also need to be undertaken. It is early days, yet every stakeholder in the music industry value chain needs to examine the pros, cons and potential pitfalls of 360 deals, as well as any benefits.
The level of advances offered by Live Nation to the aforementioned artists clearly depicts Live Promoters as the driving force behind 360 deals. It is my view that they are also in the strongest position to leverage megastars away from traditional record labels, and let’s face it the profit in this business has always derived from those megastars, whether they be indie or major label. With established artists leaving their labels even before Live Nation began enticing them away to its roster, will record labels be able to rely on large artists staying with them throughout their career?