Ray of Light: The Madonna-Live Nation Deal

It’s official. Madonna is leaving Warner Music Group (WMG) in favor of Live Nation in a long-rumored landmark deal said to be worth $120 million. In exchange for the concert promotion company’s participation in a number of revenue streams, including recorded music, merchandise, ticket sales and the Madonna brand, the artist will get equity in Live Nation, plus a huge chunk of change.Many analysts think Live Nation (LYV) overpaid for the deal, and as far as monetizing Madonna herself, they’re probably right.

But Live Nation has to be viewing this in a much larger context, hoping that having Madonna as the charter artist in their “Artist Nation” program will give them credibility to sign up other entertainers, both established and up-and-comers.Fox (NWS) used this strategy in 1994 when, as a then-upstart network, they won the rights to broadcast the NFL. It put them on the map, allowing them to win affiliate stations and subsequently increase their reach.

Viewed through this lens, the premium Live Nation is paying is basically coming out of their A&R budget as they compete with the labels, who are themselves trying to horizontally integrate by doing 360-degree deals.So the battle has been joined. I would expect a major talent agency will try to elbow in on this turf as well — after all, isn’t that what Live Nation is essentially doing?

For artists, it’s good news, as it only adds to the ever-growing number of ways in which they can make a living, whether via the traditional recording labels, live events companies such as Live Nation, or even by going direct, like Radiohead (though I would submit that they’re the exception that proves the rule).

[Raghav “Rags” Gupta is VP of Consumer Services & Partnerships at Brightcove, where he has worked since ‘05, prior to which he was a senior executive at Live365. His blog can be found at www.ragsgupta.com . The views expressed here are personal and do not necessarily reflect those of any Company with which he is or has been affiliated.]

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