Magazine article The American (Washington, DC)

What a Drag It Is Getting Old: Many Think the Struggling Music Industry's Future Is in Live Performances. but Aging Acts like the Rolling Stones Account for the Lion's Share of Revenue. What Happens Once They're Gone? Jillian Cohan Investigates and Finds Hope in Entrepreneurship

Magazine article The American (Washington, DC)

What a Drag It Is Getting Old: Many Think the Struggling Music Industry's Future Is in Live Performances. but Aging Acts like the Rolling Stones Account for the Lion's Share of Revenue. What Happens Once They're Gone? Jillian Cohan Investigates and Finds Hope in Entrepreneurship

Article excerpt

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You can't steal a concert. You can't download the band--or the sweaty fans in the front row, or the merch guy, or the sound tech--to your laptop to take with you. Concerts are not like albums--easy to burn, copy, and give to your friends. If you want to share the concert-going experience, you and your friends all have to buy tickets. For this reason, many in the ailing music industry see concerts as the next great hope to revive their business.

At a November touring-industry conference, promoter Charlie Jones, a partner in the Austin, Texas, company that produces Lollapalooza and other American music festivals, told his colleagues a story. The night before, Jones had been reminiscing with a friend about his most memorable concert experience. The show had been held in an ancient amphitheater on an island off the coast of Italy. Jones's buddy pointed out that concerts, whatever their trappings, have a long, long history. "He said, 'You were attending a show at avenue that's been around for 3,000 years,'" Jones recalled.

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"It's a testament that the live entertainment industry has been around for 3,000 years," he told the crowd. "It's not going anywhere. Recorded music has been around for [much] less.... In the big picture, it's going to be a blip on the radar."

It's a blip that already is fading, to the dismay of the major record labels. CD sales have dropped 25 percent since 2000 and digital downloads haven't picked up the slack. As layoffs swept the major labels this winter, many industry veterans turned their attention to the concert business, pinning their hopes on live performances as a way to bolster their bottom line.

Concerts might be a short-term fix. As one national concert promoter says, "The road is where the money is." But in the long run, the music business can't depend on concert tours for a simple, biological reason: the huge tour profits that have been generated in the last few decades have come from performers who are in their 40s, 50s, and 60s. As these artists get older, they're unlikely to be replaced, because the industry isn't investing in new talent development.

When business was good--as it was when CD sales grew through much of the 1990s--music labels saw concert tours primarily as marketing vehicles for albums. Now, they're seizing on the reverse model. Tours have become a way to market the artist as a brand, with the fan clubs, limited-edition doodads, and other profitable products and services that come with the territory.

"Overall, it's not a pretty picture for some parts of the industry," JupiterResearch analyst David Card wrote in November when he released a report on digital music sales. "Labels must act more like management companies, and tap into the broadest collection of revenue streams and licensing as possible," he said. "Advertising and creative packaging and bundling will have to play a bigger role than they have. And the $3 billion-plus touring business is not exactly up for grabs--it's already competitive and not very profitable. Music companies of all types need to use the Internet for more cost-effective marketing, and A&R [artist development] risk has to be spread more fairly."

The 'Heritage Act' Dilemma

Even so, belief in the touring business was so strong last fall that Madonna signed over her next ten years to touring company Live Nation--the folks who put on megatours for The Rolling Stones, The Police, and other big headliners--in a deal reportedly worth more than $120 million. The Material Girl's arrangement with Live Nation is known in the industry as a 360-degree deal. Such deals may give artists a big upfront payout in exchange for allowing record labels or, in Madonna's case, tour producers to profit from all aspects of their business, including touring, merchandise, sponsorships, and more.

While 360 deals may work for big stars, insiders warn that they're not a magic bullet that will save record labels from their foundering, top-heavy business model. …

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