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Never EVER forget that this business runs on talent. Without the talent, there's nothing to sell. And talent is not fungible, except maybe in the case of the festival, which I will address below.
This is not the first time Michael Rapino and Live Nation have tried to reset the playing field. Just after Rapino got the gig, he came up with a three-tiered amphitheatre payment system. What you got paid was dependent upon how big a draw you were.
It failed.
Why?
Howard Kaufman.
Howard, an accountant by training, who made his bones with James William Guercio and then partnered with Irving Azoff and inherited the Front Line management clients when Irving moved on to MCA, was savvy. I remember discussing Fleetwood Mac with him. How much money he was gonna get them for their next tour. I asked him about a new album and Howard told me he'd be happy if Fleetwood Mac NEVER made a new album, because that would keep them off the road, where they could be making money, and there was no money in the recording anyway.
Howard knew where every dollar was buried in a live appearance deal.
This is where experience counts. Which is one reason the live business is run by oldsters as opposed to the recording business which is run by youngsters. The record label model is theft. Its goal is to not pay what it is supposed to. And the acts realized this, but had little leverage, but when they got it...they stopped wanting royalty payments, they just calculated how many albums they thought they'd sell, and they insisted on an advance. Theoretically, they might be entitled to further royalties if the album was a blockbuster, but if that was so...as one dealmaker told me, if the album went into royalties, they made a bad deal. As for the label? Sure, it can lose money on a star act by paying too much in advances, but not really. Because royalties are a small piece of income to begin with, and the act burnishes their roster and...
Now amphitheatres burgeoned. Whereas there used to be just a few, that had been around forever, like Tanglewood, regional promoters realized they could build their own amphitheatres, on low-cost land with minimum investment, these sheds didn't even require walls and they had endless lawns and there was a building frenzy. But most of these amphitheatres were built on the cheap, and the public realized it. People will show up anywhere to see a hit act, but not every act is a guaranteed sellout, so...people became less interested in going to the amphitheatre/shed. And then all these indie promoters were rolled up by Bob Sillerman into SFX, which became Clear Channel and then Live Nation, and Rapino was stuck with the amphitheatres. Rapino wanted the talent to help him out.
But it didn't.
Because Howard Kaufman had Jimmy Buffett, who got in excess of 100% of the amphitheatre gross, and other big acts and Howard said...
My acts are gonna skip the summer and play indoors this winter.
WHAT?
Of course it was a bluff. But it was not one that Rapino could play poker with. And if pushed, Howard would double-down and do as he said, to protect future income, so Rapino caved.
But this was when the live business started to resemble the record business. Concert promoters are inherently dishonest. But there are fewer streams of income and they are much easier to track down than recording royalties. So, to avoid dealing with an accounting, acts that could sell tickets demanded a guarantee akin to what they'd take out of the building on a successful night, just like the stars did with the labels. And as the labels stopped paying such healthy advances for records, because of the internet and the decline in sales, live became where all the money was and the acts wanted guaranteed income, they didn't want to take the risk of a percentage deal. And, once again, if the act went into percentage, that just meant the manager and agent made a bad deal.
But then it got even worse. Because promoters truly lost their power. There were no regional promoters with territories protected by Frank Barsalona. Every gig was up for grabs. And if Live Nation didn't pay, someone else would. There was always someone who would pay. Most especially the casinos, where the goal wasn't to make money on the gig, but to bring an audience to the tables.
So, Live Nation lost pricing power.
So, to ensure its market, Live Nation popularized the tour deal. We'll give you a boatload of money to do ALL of your dates. This was hard to resist, because if you went market by market, you never knew what might happen. There could be bad weather, an economic downturn...almost all big acts now take these overall deals. And AEG competes for said deals. Once again, superstar talent controls the business, not the promoter. The promoter hasn't controlled the business since Peter Grant, who knew Led Zeppelin would sell every ticket and wanted a 90/10 split, as opposed to the much worse deal the Beatles got with Sid Bernstein.
And the guarantees to the artists became so big, that ticket fees had to go up, because the promoter had to make money somewhere. And that's where they made it. Not all of it, not by a long shot, but the acts took essentially all of the gate revenue, there had to be a profit somewhere.
Of course if you can't sell out, the deal is different. It's all about leverage. And if you're an act that can't sell out arenas, inherently you don't make that much money, despite fan adulation, and Live Nation doesn't need you, so your deal is not going to be as good. Complain all you want, it'll do you no good. Just increase your ability to sell tickets.
So now we've got the Covid-19 era. Nobody's on the road, and this could sustain for another year or more. Live Nation is fine financially, it can borrow money, it's not going under, but it is taking a huge hit and therefore its stock is penalized. Amazon is selling during the Covid-19 era, Live Nation is not.
So Live Nation is trying to claw back a piece of the concert promotion pie.
Let's talk about festivals.
This is where a promoter makes beaucoup bucks. It takes a fortune, a truly deep pocket, to put one on. And even if you pay headliners multiple millions, you can still make much more than you can at the arena, so this is the goal of promoters, to have successful festivals.
But festivals fail all the time. Who should bear this responsibility?
Anybody on the talent side knows that it should be the promoter. The act's not sharing in the upside, the act is not doing its own independent festivals, with small exceptions, it depends on the promoter in this case. But, if the festival fails, the act survives. Whereas the promoter takes a huge hit.
Why should the act shoulder this responsibility? The festival happens every year, hopefully, whereas the act can't play the festival every year, no way, ticket buyers won't stand for it.
So, Live Nation wants a smaller guarantee. I can kind of understand that, but I'd need bumps dependent upon ticket sales. But in truth I don't want to risk an accounting, the promoter is inherently dishonest, if for no other reason than the act gets such a good deal.
As for penalties...
Let me see... I plan a year in advance. You book me for all these festivals, and if they don't happen...where does this leave me? I can't book a tour to replace these gigs at this late date. Never mind sell tickets at this late date, maybe all the money's been taken out of the market already, by acts going on sale even in excess of a year in advance. I've got to sit on the sidelines. NO WAY! The promoter wants to make the big bucks, it's got to take the big risks. The act is getting a flat fee. Unless Live Nation wants to put bonuses in contracts, like Live Nation stock... But agents won't want that, because what happens to it. The act gets its stock and it is happy. Does the agent or the agency get the Live Nation stock? What happens if the agent leaves the agency? At what point is the stock cashed out, and who makes that decision?
Now the reason Live Nation is such a good business is because of sponsorship. But to ensure that sponsorship, it's got to own a bunch of festivals and guarantee shows. But if there are no shows... Acts don't share in this sponsorship money, why should they take the hit if it evaporates? And, once again, the act doesn't have stock in Live Nation either, in almost all cases.
Going point by point, ticket prices have always been set by the promoter and agent and manager in concert, with the agent and manager having almost all of the power. The act is never gonna give this up. Of course, festivals are different. Because it's not the act's sole responsibility to sell the tickets, there is other talent, and the payments are flat fee and huge.
As for guaranteeing the act will promote said festivals via social media, et al... What, are they working on Maggie's Farm? Are they sold-out YouTube and Instagram influencers? Acts come and go, the promoter remains. The act has to guard its credibility, it can't be beholden to the promoter.
Streaming rights? Wait a second, right now they're not worth much, but you never know in the future. And maybe I've had an off night, there are a thousand reasons why I may not want to stream, I performed poorly, I looked bad, that's my decision and I want to retain that right unless you want to pay me for it.
Billing?
If you don't put me at the top, the entire world will no longer see me as a superstar! It'll hurt my image and income forevermore! Billing is heavily negotiated in movie contracts, but now you want me to forgo my right for concerts? Actors play a role, the act is the act, singing from its heart, there's a lot more at stake, no way!
Cancellation?
I agree, a penalty if I pull out for no reason is reasonable. Assuming it's outside our agreement as to what is grounds for cancellation. If a member is in the hospital, or their spouse is having a baby, or their parent died...put it in the contract, let's negotiate it, what, am I working for Procter & Gamble now? And, once again, give me all my money if you cancel. You convinced me this was a good prospect, I bought into it, I gave up other opportunities, we're not in bed together, when the TV network cancels my contract/show, like NBC did with Megyn Kelly, they pay up, as per the contract. Maybe they negotiate a lower price point, but the contract is a starting point, you want me to give up all my rights right up front?
And the dirty little secret is when concert promotion was regional, and you dealt with individuals who owned the company, you gave back, you worked with the promoter if they lost money, because you wanted them to stay in business, so they could pay you again. But Live Nation is a public company and Rapino makes more than almost all the acts and me, an individual act, has to shoulder the risk?
But all of this is negotiable. Every single deal point.
But who is going to negotiate?
Live Nation controls a good chunk of talent through their Maverick management division, or whatever they're calling it this week.
Which leaves Irving and Coran as the big kahunas here.
These are the same managers who don't pay agents 10% on their acts. This has evolved just like concert deals. If I'm selling out arenas every night, why do I need to pay an agent 10% when really it's mostly a matter of paperwork?
And Irving and Howard Kaufman were partners. And Coran might be ten years younger, but has gotten quite an education since the days Dave Matthews was opening for the Samples.
Irving and Coran are not budging an inch, no way. And why should they? They're individuals and Live Nation is a corporation. And if Live Nation were to go out of business, someone would pop up to take their place. If the Eagles or Dave Matthews can't go on the road, there is no substitute for them, nada.
So this is just a trial balloon. And believe me, those acts with power, who can sell arenas, are never gonna fall for it.
But let's also say that Live Nation pays a ton to all the players. Look at the amount they pay WME and CAA every year. Are these agents on the side of the acts, which can fire them at any time, or the promoter?
Then again, do you really need an agent at all? Not if you're making big, worldwide touring deals, which is why some of these acts no longer have agents. To a great degree, the agent is an antiquated concept, when there are two big buyers, Live Nation and AEG, that control the lion's share of the market.
The act is always right. Acts come and go, record companies and concert promoters remain, and will screw the act every time. Which is why you need a savvy manager. Howard Kaufman got Aerosmith by telling the band he'd make them more money in two years than they'd made in their entire career!
Live Nation has leverage, but not that much leverage. In truth, their leverage only applies to acts that are not guaranteed arena sellouts. And why should acts help Live Nation through this Covid-19 era, Live Nation is not helping the acts!
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