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Jay Z, Live Nation strike $150-million deal

Glenn Gamboa | DROPS

April 13, 2008

Remember a few months ago when there were rumors about Jay-Z looking for a $100 million contract to start a new label, and many in the music industry snickered at the possibility of anyone paying that?

So-called "experts" were talking about how Jay, 38, was too old to command such a price, pointing out how his recent "American Gangster" album only went platinum, despite being critically acclaimed. They crowed that the days of the massive music contracts were over, because struggling music sales mean that artists can't command those prices any more. They jeered that such demands from Jay were 10 years too late, both for him and the industry.

Well, who's laughing now, chumps?

Word leaked out earlier this month that Hova will get

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$150 million from Live Nation for a 10-year partnership for all of his music-related businesses and possibly a piece of other new ventures. The deal reportedly includes a $10 million advance for each of his next three albums after he fulfills his Def Jam contract with a new album, expected late this year. It also may include up to $50 million in seed money for him to launch a new label, where he can groom the next Rihanna and Kanye West as he did for Def Jam.

Jay-Z's Live Nation labelmates are no slouches, either. There's Madonna, who landed $120 million for a 10-year deal for her music-related businesses after the release of her "Hard Candy" album on Warner Bros. later this month. And U2 has signed with the company in a reported $100 million deal for a 10-year partnership for all their music-related businesses except for their album releases, which will still be handled by Interscope.

So has Live Nation grossly overpaid for these artists because none of them would have been able to extract similar sums from any major label? Perhaps, though, when you add in all the touring and merchandising revenue that Madonna and U2 generate, it doesn't seem nearly as crazy, especially since it most likely locks all three artists into the new ticketing company it will launch next year to take on Ticketmaster.

And whatever shortfall, if any, that comes from these deals - and the dozens of others that are sure to follow - Live Nation may make up for it by showing how anemic and flat-footed the music industry is these days.

At this point, why would any veteran artist sign with a major label when Live Nation is throwing around this kind of money? If an artist doesn't like the Live Nation model of partnerships, they could simply build their own model the way Radiohead and Nine Inch Nails have.

Major labels have been saying for years now that the 360-

degree deal, where the company partners with artists for a share of revenue from all their music-related businesses, was the wave of the future. It turns out they may be right, but they didn't really do anything about it.

If they wanted to sign their veteran artists for 360-degree deals, they would have to be able to compete with Live Nation on the concert-promotion front and the merchandising front. But where are the labels' powerful new concert-promotion divisions? Where are their new powerhouse merchandising arms? Oh, right, they don't have any.

They were counting on companies like Live Nation to partner with them because they were so big and powerful. Instead, Live Nation turned around and invested in new companies and big-name executives and artists to beat the labels at their own game. It's similar to how Apple ended up taking the sale of music on the Internet away from the music industry.

That was an uppercut the music industry still hasn't recovered from. What Live Nation and its flurry of deals may deliver is the knockout blow for the current major-label model.

E-mail Glenn Gamboa, or contact him at 631-843-3434.