Musical Repercussions

June 12th, 2008

Remember the days when you waited in line at the music store to buy the new CD of your favorite artist? Remember when you brought your CD player with you to the gym? No? Me neither. I honestly can’t remember life without my iPod and it’s hard to think back to the days when MTV actually featured music on its programs. It’s quite clear that the state of the music industry has drastically changed over the past years, and so have the marketing strategies that record labels are using to try to stay on top of the game.

It’s undeniable that the music industry is struggling. Drastic declines in recorded-music sales have made it tough for traditional record labels to survive by selling music alone, so executives and producers are exploring any possible new way to pull in revenue. Today a variety of industry players are attempting to build broader businesses around each artist, through avenues such as touring and merchandising. Because this type of promotion and marketing has traditionally been handled by outside parties, a full-out war is emerging between music labels, concert promoters and ticket companies, all pushing for the same deals.

So, how do you stay ahead of the game? If you’re Live Nation Inc., the world’s largest producer and promoter of live entertainment, you fork out loads of cash and refuse to share your artists with anyone. In fact, Live Nation has pledged hundreds of millions of dollars to “buy” a variety of artists, including an estimated $120 million for Madonna and $150 million for Jay Z. In return, the company receives exclusive rights to release their recordings, promote their concert tours and sell a range of merchandise bearing their images. The industry refers to this marketing strategy as “360 deals,” coined for their all encompassing nature.

So the big question is: Does this kind of strategy work? Does money and exclusivity solve a music giant’s problems? The answer is still unclear, and it seems to be leaning towards no. For record companies, such deals have usually been with unconfirmed bands whose rights can be bought for a cheap price. And the strategy has been rough on Live Nation’s stock price, which has fallen more than 44% since its first big deal with Madonna, which was announced in October.

What’s more, these “360 deals” have caused internal turmoil inside Live Nation’s Walls. Chief Executive Michael Rapino would like to slow the pace of the deals and take time on each one, while the company’s chairman, concert promoter Michael Cohl, wants to quickly strike deals with as many as 15 more artists. Cohl’s desire to push this strategy beyond traditional limits has caused such internal strife that he’s threatening to leave Live Nation and take his artists with him.

So while 360 deals may seem like the only answer to a music player’s plight, in the end they may just be a recipe for a disaster. A truly bad note if you will. Perhaps the answer is creativity and innovation rather than writing checks and monopolizing an entire industry. The musical repercussions may just be too great.

Posted Under: Art & Design
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