Live Nation’s Business Model

The record industry is closely monitoring new music businesses in search of the next business model. The major labels are investing in internet start-up, social networking sites, and streaming music sites. They are also closely watching Live Nation, who has just signed a number of 360 deals with artists such as Jay-Z, U2, and Madonna.

Now it seems like a divorce is imminent between the two top executives of Live Nation. And it is over the very issue that Live Nation has banked it’s future on. Their 360 model involves extremely large payouts to these artists in the hopes of recouping their investment by having a hand in most or all revenue streams. The problem is that the jury is still out. It’s not proven that this business model will work. And Live Nation has been banking a lot of money that it will.

Well, this last week saw the last straw between the two executives in charge of the strategy of Live Nation. The chairman of the company is Michael Cohl and the Chief Executive is Michael Rapino. Cohl has been with Live Nation since 2006. Before that, he was with Concert Productions, which was purchased by Live Nation in ’06. He came into Live Nation with many of the artist relationships that led to the 360 deals.

It seems as though Cohl would like to take a little break from signing new 360 deals with artists such as Shakira until the market dictates whether this is the right strategy or not. Seems like good risk management. The only problem is that Rapino still wants to go strong on new multi-million dollar artist deals.

I guess this is a bit unfortunate just from the standpoint of not getting to see the full outcome from this strategy. If Live Nation takes a break and begins to manage their risk a little better, then they will become more like the record labels who are trying to do the same thing. If they continued on with more million dollar deals, there would be a definitive answer in the next few years as to whether Live Nation had discovered the new business model. They would either be wealthy beyond belief or would have crashed hard.

Stay tuned,
Erik
erikrostad.com