Live Nation's Risky Strategy

Yesterday, Live Nation, the largest concert promoter in the world announced a 12-year deal to continue its long relationship with the group U2.

Under the terms, Live Nation will lock up rights to produce U2 events, make and sell all its merchandise and handle licensing. U2 also gives up control of its web site and fan club.

What's not included is just as important.

U2 stays with Vivendi's Universal Music Group. In fact the band extended its record label contract last year.

This is opposite of what Madonna did when she previously signed with Live Nation in a broader deal for $120 million starting next year. Live Nation will deal with distribution of her new content not Madonna's former label, Warner.

Life must be great for big music icons.

It's not so great for struggling and lesser artists.

Or for the music business in general where the long tail theory rewards the few while the rest remain in the ranks.

Live Nation needs big touring acts. That's its business. The big acts -- so far at least -- seem to think they don't need a record label.

Smaller acts -- even the promising ones -- seem to have no choice but to stick with the labels. Where are they going to go?

Radiohead and Nine Inch Nails considered, creative alternatives for traditional record distribution, marketing and promotion hasn't exactly set the world on fire -- other than for sheer innovation.

Elvis Costello's refusal to make a CD for his next album Momofuku -- vinyl and paid download only -- is different, but not the definitive cure for what ails the music business.

Live Nation is spending hundreds of millions to sign touring acts -- and that's a small world in and of itself. They're betting these groups and artists are evergreens and will be just as popular ten or 12 years down the line. I'm willing to give them the benefit of the doubt -- after all, it's their business -- but it's a risky strategy.

Just five years ago no one was talking about social networks. Radio was still the prime means for young people to be exposed to new music. The iPod was just introduced. Illegal file sharing was still in its infancy. In other words, a lot can happen in less than ten or 12 years.

Live Nation is also betting that it can give Ticketmaster a run for its money.

Ticketmaster is disliked by many young fans for its add-on charges and high prices. Number two concert promoter AEG Live has reportedly been in talks with Cablevision to take a 49% stake in the ticket company. Now this. Live Nation gets ready to offer some competition.

The ticket business is worse than the record business if you want love. Ticket prices are perceived as being too high. Just imagine how they will rise in order for Live Nation or AEG (if successful in buying a stake in Ticketmaster) to recoup these Madonna, U2 type mega deals.

This all goes to point out that Live Nation is not a record label.

It's not even a threat to record labels which traditionally have not been concert promoters.

More important, in my view, is that someone still has to aggregate the music across many genres in order to have a vibrant music industry.

Nine Inch Nails and Radiohead haven't done it yet.

The Charlatan's give away the music and sell-something-else approach has yet to resonate.

Hell, the record labels business-as-usual (fight digital, sue consumers, pray for subscription services) is a loser.

There may be no viable answers, but the question that must be addressed is how will music flood the marketplace -- paid or pirated -- so that artists, bands, promoters, managers and distributors can make a fair living.

That's the question.

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