While the big record labels struggle to figure out a model that can sustain them, at least one company has the music business licked: CKX Inc, the guys who own the rights to the American Idol franchise. CKX generated $85 million from American Idol last year, up 25% from the $68 million it brought in during 2006.
Where’s that money coming from? Everywhere. News Corp.’s (NWS) Fox pays CKX a fee for the show. There’s merchandise, sponsorships, tours, etc. And there’s also revenue from good old-fashioned music sales. But CKX doesn’t sell music itself. It simply takes an advance plus royalties, from Sony BMG, which does release albums by the show’s contestants. Great work if you can get it. Unfortunately, no one else can — despite many other attempts to launch music contests/shows, no one’s come close to matching Idol.