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This is Celia Hirschman with On the Beat for KCRW.
Last week, rock band Nickelback inked a $100 million, ten-year deal with record label newcomer Artist Nation. Nickelback is now the fourth major talent to sign to the new label, which is a division of the concert promoter, Live Nation.
Artist Nation launched their company late last year with an announcement that Madonna had also signed a $100 million, ten-year deal. The company followed up this past April with the announcement that Jay-Z signed to a $150 million, ten-year deal. And just last week, Artist Nation signed international superstar Shakira for a reported $70 million, in a ten-year term.
That's almost half a billion dollars spent on four acts in less than a year! How will Artist Nation, a division of the publicly held company, Live Nation, ever hope of recouping?
The answer may surprise you. I think Madonna and Jay-Z were really figurehead signings. These two outstanding artists don't need to recoup every cent their deals. Their presence says to other major talents, join us. We have the business model for you.
Artist Nation is nothing like the established record company. Traditionally labels pay large sums of money, (but never more than $100 million), for the opportunity to finance, manage and commission the bands' recordings. The stronger the recent sales history is, the larger the deal is. Touring superstars have never allowed record labels to commission their live income before. Touring contracts and the income generated has always been sacred ground for managers and artists. That's what makes the Artist Nation model so unique.
These deals are virtually three hundred and sixty degrees in their scope. Three-sixty deals will earn the company income on new studio recordings, all touring income, merchandising sales, sponsorship deals, licensing agreements, fan club sales, website income, film and television projects. Most traditional labels that offer 360 deals don't have the muscle to manage the touring side well, making a 360 deal unattractive for any major talent. But Artist Nation's parent company Live Nation represents some of the biggest touring acts in the world, so that area is well covered.
Everyone who signs after Madonna and Jay Z will need to recoup their deals. Nickelback and Shakira will be able to do that, easily. Nickelback has sold almost 30 million albums, generating $60 million on their tours. Shakira has sold over 50 million records worldwide and is a huge international touring superstar, with dozens of number one records around the world.
But here's what makes the model most interesting. Though Nickelback and Shakira have announced new deals, both still owe multiple albums to their previous labels. So Artist Nation is not going to be able generate any income from record sales from these bands anytime soon. But they will be able to commission income from the artists' touring almost immediately.
What this really means is that Live Nation, the parent company, just made four mega-deals, which will give them strong leadership positions in the market, while their label deals can help finance the new record label yet to open.
All and all, it's a very interesting way to build a business.