WHEELS & DEALS SPECIAL: LABELS EYE TOUR REVENUE

With sales revenues shrinking, manpower dwindling and margins down to a razor edge, the major label hand has begun to covetously eye its bands’ touring revenue.

Talk of major labels negotiating a share in artists’ tour revenue is quietly sparking controversy in the talent-acquisition/representation community. And most recently, insiders share that Sony Music Group is now negotiating for a piece of the act’s tour revenue if the artist is to be given tour support.

The move, which is commonplace in the indie label world, marks an aggressive play by majors to diversify their revenue stream and transition out of depending on record sales as their sole revenue source.

However, at this stage of discussions, there are no guidelines or benchmarks established to set an industry standard. And the report from a few legal eagles that have encountered this issue recently is that labels are negotiating the most that they can get. For example: tour revenue participation in perpetuity; cross-collateralizing with past album cycles and even asking for a piece of the tour-merchandise revenue. An inside source shared that the music group may also apply this practice to developing acts currently on their roster that will need tour support for their next record. It appears to be an artist-renegotiation play, but this time it’s starting from the label side.

Talk of majors attaching themselves to other revenue streams have been going on for years, but now it seems to have finally come to fruition. Several label execs shared with us that this should have been in practice years ago since labels fork over hundreds and hundreds of thousands of dollars in tour support in order to break acts. And for the most part, it’s not a big windfall for majors since only a handful of acts break even per year.

One A&R exec suggested that majors underutilize a band’s brand name. Establishing, promoting and marketing the artist’s brand in addition to their music can justify participation in tours and merchandise in addition to records sales, but said exec also shared that this should be done with no cross-collateralizing between the three revenue streams for recoupment. Current examples of the trend are already in place at Sanctuary Music Group, Wind-up and in EMI’s mega-deal with Robbie Williams, in which they share in several different revenue streams.

A few artist managers indicated, if labels entered into 50/50 profit deals, then sharing in tour revenue may be justified. Not surprisingly, most artist reps we talked with were greatly opposed to labels sharing in tour revenue. In addition, several attorneys stated that labels are opening up a can of worms with this issue because now it throws other artist-label deal points to be renegotiable outside of industry standards. And at the end of the day, whoever has the LEVERAGE over the other will prevail. Same as it ever was.