Madonna is about to leave Warner Music Group (WMG) for concert promoter Live Nation in a $120 million deal, the Wall Street Journal reports. Live Nation will promote her concerts, sell her merchandise, and distribute her next three records. Like the Radiohead giveaway, this is being described as a blow to the big music labels. But WMG investors should be celebrating.
Why? Because while the company’s management apparently tried hard to dump truckloads of cash on Madonna, she wouldn’t let them — and has thus saved them tens of millions of dollars. The Journal says that Madonna’s LYV deal calls for the company to pay her a total of up to $60 million for three albums; in order for the company to recoup its advance, it would have to sell 15 million copies of each album. That would never, ever happen…
Madonna has long passed her peak as a recording act; she makes her money on the road now. And even if she was burning up the charts, she still wouldn’t clear 15 million copies an album. The best selling album in the U.S. last year was Disney’s High School Musical soundtrack, which sold 3.7 million copies; the best selling “real” music act was Rascal Flatts, which sold 3.5 million copies. The U.S. represents about a third of the music market, but even the most optimistic foreign sales estimates wouldn’t get those totals into double digit millions. And CD sales are only going to get worse.
But not only will Warner not lose money by overpaying Madonna, it will continue to make money from Madonna. That’s because the company will continue to own all of the Madonna recordings that people still want to buy — her catalogue from the 1980s and 90s — and has the rights to repackage them as much as they’d like. Live Nation, in essence, will be promoting Warner’s assets for them, for free. Now that’s a groundbreaking deal.