Moses Kagan's Aurora Borealis

Recently had lunch with Brett Gurewitz , former guitarist from Bad Religion and founder of Epitaph Records. Brett's very switched-on about the music industry, having spent a lot of time considering the impact of the internet on his distribution model.

Among other interesting things he told me, one stands out: Companies like Live Nation are now generating so much revenue from in-concert advertising that they are striking deals with artists which pay the artist more than 100% of gross ticket sales.

Consider this: The fragmentation of media audiences has advanced to the point where mass-market advertisers (Sony, Nike, etc.) are going to the trouble of buying eye-balls by the 10,000, instead of by the 1,000,000.

Two related ideas spring from this:
1. Measurement of effectiveness is going to get much harder (and potentially more rewarding for those who understand how to do it).
2. Building a sales network for live event advertising which is capable of delivering eyeballs at scale (in the way that Live Nation has) would be a very good idea.

Labels: Epitaph, Live Nation, music

News over the wire today that Madonna has signed a 10 year record and concert promotion deal with Live Nation, the concert promotion company. Losing out on the deal was Warner Music Group, Madonna's label until now.

Madonna's defection to a promotion company is symptomatic of the changes riling the music business. As the price that customers are willing to pay for recorded music trends ever closer to zero (mostly as a result of the ubiquity of P2P file sharing), the revenue generated by traditional record companies continues to decline.

But it's not that music is less popular. In fact, the concert business is stronger than ever.

What's going on?

The continued strength of the concert business is testament to consumers' increasing emphasis on experiences. People, particularly well-off people, are allocating more and more money to purchasing experiences, including restaurant meals, travel, manicures, nightclub bottle service and, yes, concerts. None of these things are vulnerable to disruption by technology: you can't rip a trip to Thailand.

In the earliest days of the music industry, artists toured to promote their records. Increasingly, artists (like Radiohead and Nine Inch Nails) will give away their recorded music to promote their tours.

And, in parallel, the artists and promoters will either acquire the record companies (possibly out of Chapter 11) or, as in the case of Live Nation and Madonna, displace them.

Labels: Live Nation, Madonna, music, Record