Madonna Live
Nation Deal Explained
Buyer Beware
October 29. 2007
Madonna
Wall Street and several financial analysts have
slammed the Madonna Live Nation deal. A few publications have rendered
explanations as to why.
Warner Bros, who called Madonna their
drag queen just less than two years ago, are now calling her washed up
and not worth the money. What a difference two years makes.
Warner, not convinced they can smooth over the
shaky numbers, or her wrinkles according to the age conscious report by their
partner Bank Of America, basically balked at keeping her at such a steep price.
Well, if they’d sign artists with talent, they
wouldn’t have to worry about them aging and trying to sell them to a young
audience. Talent transcends age. A gifted artist is a gifted artist no matter
what age they are.
Resigning her at $120 million is poor business
sense, as Warner has the real books on Madonna’s numbers, and knows how much
they truly make off her releases.
Live Nation would do well to inquire on the true
contents of those accounting books, because when the discrepancies start popping
up, they will realize they’ve been bamboozled.
Furthermore, announcing inflated tour sales of
$200 million per jaunt and even worse, not taking into consideration that after
expenses, the ventures only bring in $50 million that must be split between you
and her, is foolish.
Madonna
Her last album was branded a flop by Reuters,
having sold a little over one million copies in America (1.1 million), and as
Jay-Z proved with the record sales manipulation scandal, even that can be
corrupted via crooked sales practices, as exposed by the RIAA (arrangements
artists have with certain retailers to run one copy of a CD through the register
multiple times to inflate sales tallies).
As there is no official sales tracking system
for the rest of the world, one can claim any amount sold worldwide, inaccurate
and inflated as it may be. Once again, what do the true books say. Live Nation
would do well to find out.
I’d be surprised if Madonna’s last CD,
Confessions on a Dance Floor Flop, even sold 3 million copies
worldwide. There were other more successful records that topped the charts
during that same time period, when Madonna didn’t, and those records did not
sell 8 million copies worldwide. That’s a dead giveaway. It’s sad when music becomes about perception
rather than truth and talent.
Live Nation also needs to take into account a
potential sales hit from boycotts if the Materialess Girl starts stealing
copyrighted works again, like she always does, already resulting in over two
dozen copyright infringement claims around the world against her. They need to
see to it that what she is releasing is actually hers, because often it is not. Buyer beware.
Furthermore, Whitney Houston is the biggest
selling female artist of all time, not Madonna, as the latter's sales are
grossly inflated.
Lastly, Warner Bros stock has been declining for
over a year. Spending that much money on Madonna, who is not worth it, will
destroy the company even faster. Regarding the current course they’re on, I see
that stock hitting the $3 per share realm in the future. As George Michael said in the song Freedom,
“Some mistakes were built to last.”
“It also refused to
match Live Nation's offer and even issued a memo explaining why she's not worth
the money, according to the New York Post.
Warner Music Group
boss Edgar Bronfman Jr apparently told employees in the memo: 'We remain
committed to maintaining financial discipline.
'We simply will not
enter into agreements with artistes that fail this test - whether or not the
artistes are well-known, and regardless of media reaction.” – New York Post
Warner Music's Madonna Complex
Investors were
understandably concerned that losing one its highest-grossing artists would only
add to the challenges, such as declining album sales in the industry as a whole,
that Warner already faced. Late last month, Warner’s stock fell as low as $9.41,
or nearly 66 percent below its 52-week high of $27.24, reached in November 2006.
(Remember when EMI
offered $28.50 per share for Warner Music last year? As another pop diva, Cher,
would say, “If I could turn back time…”)
Even so, some on
Thursday were seeing a silver lining. Consider the view expressed by Michael L.
Savner, an analyst at Bank of America. In a research note called “For $120
Million, She’s All Yours,” Mr. Savner suggested that it would have been a
mistake for Warner to try to keep Madonna on the terms she is reportedly seeking
from Live Nation.
The analyst pointed
out that, according to Warner, no one artist accounts for more than 3 percent of
its revenue, adding that the “loss will not meaningfully impact Warner’s
near-term sales.” (Disclosure time: Bank of America was among the many
underwriters of Warner Music’s 2005 initial public offering.)
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