One positive step I’ve seen in restructuring the music industry is the emergence of several new record deals and models for releasing records. Three of the most notable business structures are those instituted for Madonna, Radiohead, and Korn:

 

Madonna
Madonna avoided record labels all together, and signed an agreement with Live Nation, a company dealing primarily with concert venues. Under the $120 Million, 10 year deal, Live Nation will have control over all of Madonna’s music related business. During the length of the deal, Madonna is expected to put out 3 albums (for each of which she is receiving a $17 Million advance) and 4 concert tours.

One of the biggest debates is whether or not this deal could be profitable for Live Nation. The $17 Million advance per album alone seems hard to recoup on, but more important to Live Nation than record sales is the amount incredible amount of money generated from touring. Using the 360-degree model, Live Nation can use all music revenues generated by Madonna (including touring, and merchandising) to profit from the seemingly expensive deal.

 

Korn
Before the Madonna deal was signed by Live Nation, Korn had a similar approach in their new agreement with Warner Music Group. Also a 360 degree arrangement, the agreement between Korn and EMI is both a record deal and partnership. While agreeing to a more traditional record deal (for their next two studio albums), Korn and EMI will be partnering on all non-album activities such as licensing, touring, and merchandising. Given their record sales, touring successes, and the upcoming licensing of their music for the upcoming video game Haze, it is much more likely this deal will be very profitable for both Korn and EMI.

 

Radiohead
Radiohead decided to avoid a record deal all together and released their records on their own, allowing fans to set their own price for downloads of the album. They also recently released the album more traditionally lately by licensing the mechanical rights to the album to record labels.

Despite concerns that this model would not be very profitable for the band, with very low overhead costs the band seems to be doing very well for itself. Even after allowing consumers to name their own price, the physical album has been in the top 5 on the charts for the last several weeks.

Conclusion
All-in-all it is very exciting to be able to observe the changes taking place in the music industry. As we can see from these three models, the trend has been away from traditional record labels. It will be interesting to see which the prevailing model is in the future.

It is also important to note that so far the only artists able to negotiate these deals have been those with proven track records, although there is no reason that Radiohead’s model could not apply to smaller bands, since it requires little to no leverage on the artist’s part.