Friday, October 12, 2007

Madonna's New Music Deal

You can say a lot of things about Madonna, but you cannot call her an inept businesswoman.

As Michael Wolfe, of Vanity Fair, opined on CNBC this morning, the one-time Material Girl has made a beautiful timing move, playing off two entertainment distributors and hedging her risk for the next, probably last decade of her career.

In an industry in which music album sales are declining swiftly, Madonna has forsaken a conventional distributor, Warner Music, to sign with Live Nation, a concert promoter, for $120MM.

The singer's advance is $17.5MM for the 10 year pact, which weighs in at a nice million dollar-plus annual compensation. Madonna then receives 90% of concert admission, 50% of licensing revenues, and 70% of merchandising revenues.

In some ways, this deal reminds me of Howard Stern's contract with Sirius. The talent ends up taking more risk then the distributor, because a failure of the latter to perform leaves the former short of promised revenues and having nobody to make good on the contract.

Nobody seems to think Warner is making a mistake letting Live Nation take this deal. Madonna is, at best, a matured entertainer. Never exactly a signature voice to begin with, she's extended her career with ever more risque acts in which to position her rather uninteresting voice and commonplace songs.

Whether she will pay off for the concert promoter is anybody's guess, but Madonna certainly seems to have paid off for Madonna.

No matter how quickly recorded music continues to fade as a revenue source, she's locked in a rich price for Live Nation's right to present her artistic efforts for the next ten years.

If only the CEOs at some of our larger companies, like GM, GE and Ford, had the Midas touch that Madonna has.

Some things just aren't taught in school, are they? Or, evidently, by Jack Welch.

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