Is there any longer-standing music business tradition than promoters, record companies or crooked managers taking advantage the talent? From radio payola to Lou Pearlman, writers and musicians getting a raw deal is a timeless feature of the landscape. But are the tables starting to turn?
U2 appears to be holding all the cards in its agreement with concert promoter Live Nation, where the company is on the hook to pay the band $25 million in a sweetheart stock deal it made to sign the artists as part of a 12-year contract in back in March. (Live Nation pays hundreds of millions of dollars to superstars like U2, Madonna and Jay-Z in exchange for multi-year contracts for revenue from performance and other areas like digital and merchandise sales.)
U2 moved to sell its shares, which means Live Nation will be forced to pay out $19 million to make up a deficit created by its falling share price, according to SEC filings.
From the WSJ:
The company had held up the stock component of the U2 deal as evidence of the band's faith in Live Nation, as well as confidence in its new business model.
But that faith was shaken Wednesday when the band moved to sell the shares, forcing Live Nation to make up an estimated $19 million in losses.
Live Nation had guaranteed that U2 would receive $25 million for 1.6 million shares. But the current market value was just $6.1 million at the close of trading Wednesday. That leaves Live Nation on the hook for the balance, which the company said Wednesday in a SEC filing it would pay with cash on hand or borrowed money.
There could be more bad news coming from another of the company's marquee acts: Madonna. In April, Madonna is eligible to sell $25 million of stock under the terms of her contract, even though the stock's market value has plunged 83% since she struck her deal in October 2007.
The Live Nation business model has been questioned for some time, but the real significance of the U2 news is a shifting power dynamic between artists and the recording and promotion industry. Digital music is in the process of killing CD sales, and concert revenue and branding matter now more than ever. While music sales may be hurting in general, U2 and others are continually leveling the playing field between artist and distributor (of content, concerts, merchandise, etc.). Eventually, that will be good news for musicians and music lovers if not for Live Nation's shareholders.
Band merchandising of MA @ Apr 10, 2009 06:40:31 AM