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Developments that will have a profound impact on what the biz looks like in 2010.
1. Ticketmaster-Live Nation Merger Pact
Just as the nation’s largest concert promoter and ticketing company had begun making competitive inroads onto each other’s turf, Live Nation and Ticketmaster Entertainment signed a merger agreement in February that sent a shudder through the live entertainment business.
In addition to dominating their respective core markets, both companies boast a formidable stable of acts. Live Nation has long-term multirights deals with Madonna, U2, Jay-Z, Shakira and other superstars. The Front Line division of Ticketmaster Entertainment has ties with some 200 clients, including such heavyweights as the Eagles, Aerosmith, Jimmy Buffett, Kid Rock and John Mayer. The combined entity would also control a huge customer database. The marketing efficiencies would be enormous, as would the value to sponsors.
The U.S. Department of Justice is expected to conclude an antitrust probe of the proposed merger in early 2010. The union of Live Nation and Ticketmaster is about content, live and otherwise, and the ability to market and sell it, before, during and after a concert. The combined entity would be able to tap into&lsaquoor control&lsaquorevenue from ticketing, merchandising, sponsorships, e-commerce and recorded music. Pass or fail, this deal heralds the future of music.
2. Terra Firma fails to restructure EMI debt
Terra Firma was on a tightrope all year as it grappled with the £2.7 billion ($4.5 billion) in debt it took on to acquire EMI Group. Terra Firma’s lender Citigroup reportedly rejected the private-equity firm’s offer to inject £1 billion ($1.7 billion) into EMI in an apparent bid to get the bank to forgive the same amount of debt. Now the two sides’ talks will likely center on a debt-for-equity swap by Citigroup. The outcome of this latest maneuver could be that Terra Firma will have to share ownership of EMI with the bank&lsaquoor perhaps be forced out altogether.
3. Recorded-music sales plunge again
The plunge in recorded-music sales that began in 2001 showed no sign of abating in 2009. Through the week ending Nov. 29, U.S. sales of albums and track-equivalent sets (where 10 digital tracks equal an album) were down 8.7%, accelerating from a decline of 7.3% during the same period in 2008. CD sales plummeted 19.5%, worsening from a drop of 19% a year earlier. Meanwhile, growth in digital track sales slowed sharply to 9.7% through Nov. 29, down from 28.3% a year earlier. Lower growth rates are inevitable as the digital market expands, but the depth of the slowdown adds to the industry’s already deepening worries over falling sales.
4. Apple buys Lala
Any music-related acquisition by Apple and its iTunes store would be big news. But the company’s December acquisition of Lala was particularly intriguing. What does the largest U.S. music retailer, which dominates the market for purchased song downloads, want with a company mostly known for streaming music? The deal may point to Apple’s interest in cloud-based applications that enable users to access music and other entertainment content from any device. And that, in turn, provides yet more evidence that the future of Apple’s lucrative iPod product line will be firmly rooted in Web-connected devices like the iPhone and the iPod Touch and that the days of download-based players like the iPod Nano are numbered.
5. Taylor Swift, media juggernaut
Fueled by runaway sales of her album “Fearless,” Taylor Swift’s star exploded into a supernova, lending a much-needed commercial boost to country music. She was everywhere, performing on “Saturday Night Live” in January, hosting “SNL” in November, portraying a murdered teen on CBS’ “CSI,” appearing on “The Oprah Winfrey Show” twice, shooting a tongue-in-cheek rap video with T-Pain and cleaning up at the Country Music Assn. Awards. Perhaps the most remarkable aspect of Swift’s ubiquity: She never lost her head in the glare of the media spotlight, even after Kanye West disrupted her acceptance speech for best female video at the MTV Video Music Awards.
6. Late fees strengthen publishers’ hand
After the U.S. Copyright Royalty Board issued its final ruling in January on new mechanical royalty rates, the National Music Publishers Assn. capitalized on the leverage it gained from the inclusion of a 1.5% late fee on tardy royalty payments. Under a settlement with the RIAA, which had appealed the fee, the major labels agreed to deliver publishers a windfall of more than $264 million in mechanical royalty payments comprising pending and unmatched royalty money. They also agreed to stop withholding song royalties on an album when the royalty split for a single song is the subject of a dispute among songwriters or when there’s a dispute involving CD mechanicals for that album.
7. Michael Jackson sales frenzy
Michael Jackson’s June 25 death set off one of the biggest sales explosions ever seen for an artist’s catalog. As Sony scrambled to meet demand for product, U.S. sales of the late artist’s solo albums totaled 422,000 units in the week of his death, surging from 10,000 units in the prior week, according to Nielsen SoundScan. In the following week, sales of his solo titles hit 794,000 units, benefiting from a full seven days of sales and replenished supplies. From his death through the week ending Nov. 29, Jackson’s U.S. sales totaled 7 million albums, 10.2 million track downloads and 1.3 million DVDs, skyrocketing from year-to-date sales before his death of 300,000 albums, 1.2 million track downloads and 70,000 DVDs.
8. Miley Cyrus embraces paperless ticketing
Miley Cyrus’ 2007-08 Best of Both Worlds tour provided many consumers with a bitter introduction to secondary vendors, who scooped up tickets and sold them at huge markups. So it was big news when Cyrus struck back at resellers by embracing paperless ticketing for her U.S. fall tour this year. AC/DC, Tom Waits, Bruce Springsteen and John Mayer are among the other acts that have sold paperless tickets through Ticketmaster. But Cyrus’ 2009 tour was the first by an arena-level touring artist to use paperless for all ticket sales. While secondary vendors predicted chaos, Ticketmaster says the sales came off without a hitch.
9. Vevo launches
Already a pioneer in the monetization of online music videos, Universal Music Group broke new ground by spearheading the Dec. 8 launch of Vevo – a label-owned and -operated Hulu for music – powered by YouTube. The difference between Vevo and previous efforts to generate revenue from videos is that stakeholders Universal and Sony Music Entertainment – with EMI Music licensing its content but not taking an equity stake in the venture – will control ad sales and content. By hosting all of the content in one spot and syndicating it to others, Vevo will create a scarcity of inventory, with the hope of creating higher per-impression ad rates and broader sponsorship/branding opportunities.
10. New music discovery initiatives
Google partnered with MySpace and Lala to embed free, full-track streaming in music- and artist-based search results, which also point users to Pandora, imeem and Rhapsody for more information. Facebook tapped Lala for a music-gifting program, allowing members to buy a 10-cent permanent stream or an 89-cent digital rights management-free download for their friends. Apple’s acquisition of Lala will pose a short-term challenge to these services, but with the recording industry keen on encouraging the development of non-Apple music services, expect to see Google and Facebook provide their users with other music discovery options.
