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I.B. BAD PONDERS THE
NEW PARADIGM

BRAVE NEW WORLD: John Janick and Steve Berman’s Interscope is on a mini-roll, as albums from The 1975, Kendrick Lamar and now Gwen Stefani have topped the charts in three of the last four weeks. The label-initiated innovative Target commercial that aired during the Grammys telecast significantly raised the awareness level for Stefani’s album, while some believe that the short-term windowing of the 1975 and Stefani releases may have helped initial sales.

The windowing tactic is becoming a go-to move for major acts and their labels as the business continues to experiment in an effort to further monetize streaming. Both Sony Music and UMG are in the process of establishing windowing policies, with two- to four-week exclusives on paid tiers being the likely standard, though the ultimate decisions are expected to be made by the labels and artists on a case-by-case basis. The majors now believe that Spotify will begin to experiment with windowed paid-tier exclusives in an effort to further expand a subscriber base that recently passed the 30m mark.

The surprise-release gambit worked for Beyoncé in 2012 and Radiohead in 2007, but the more common these nontraditional releases become, the more problems they appear to be creating. One inevitable downside is that the absence of a conventional setup, with a lead single, promo tours, TV appearances and other standard marketing practices is killing physical sales—once the initially digital release becomes available in physical form—to the dismay of retailers and labels alike. This is not simply an issue for the U.S.; it’s becoming a worldwide dilemma, making it impossible to orchestrate a coordinated global rollout. The labels lack leverage in their efforts to entice big acts to participate in album setups, because the money in now primarily in branding and touring, not in records. It appears that this new paradigm will continue to be a severe problem for rights holders.

Some recently released stats shed light on the present state of the music business. While streaming edged ahead of digital downloads 34.3% to 34% to become the top domestic revenue source in 2015, according to the RIAA, physical outpaced digital in U.S. album sales with just over 57% of the market. Surprisingly, vinyl revenues outpaced combined ad-supported freemium streaming revenues last year, $422m to $385m. Looking ahead, worldwide physical sales are expected to account for 45% of the total this year.

Although sales continue to decay, the digital business is proving to be profitable for the labels, thanks in large part to the elimination of costs related to manufacturing, distribution and returns, as well as some massive hit singles. But the publishing companies had no gigantic overhead of their own to reduce, and thus haven’t managed to make up for the precipitous decline in mechanical royalties. As a result of these ever-thinner margins, publishers and songwriters are increasingly dependent on performance royalties, rendering radio promotion more and more important to them. So much so that red-hot hitmaking writer/producer Max Martin is said to be choosing his projects based in part on the effectiveness of a label’s promo staff.

ACTION: ZAYN, the first One Direction alumnus to launch a solo career, is proving that his appeal transcends the parameters of a boy band. The Sarah Stennett-managed artist’s RCA debut album is rolling toward a #1 debut, with 120-130k in sales, and 160-170k with tracks and streams factored in. One would expect that ZAYN’s former 1D bandmate and soon-to-be competitor Harry Styles is closely monitoring the situation, as the artist and manager Jeffrey Azoff consider the multiple options before them.

Look for Live Nation’s Maverick management to make a major move and bring a top player inside to help run it—someone who doesn’t presently manage an act. Who is this high-profile individual, and what’s behind this unconventional move?

L.A. LAW: John Branca’s management of the Michael Jackson Estate and its brand have been wildly successful, as he has taken the Estate from $500m in the hole and teetering on bankruptcy to $500m in the black. Branca has achieved this dramatic turnaround through such moneymaking ventures as the concert film This Is It, the musical with Cirque de Soleil and the Immortal World Tour, culminating with the $750m payoff for ATV Music. Little wonder that 60 Minutes described the work he’s done on the Estate’s behalf as “the most remarkable financial and image resurrection in pop culture history.” Is another major act about to hire Branca to help manage their brand?

Avenged Sevenfold, managed by Larry Jacobson, and Rita Ora, managed by Stennett, have brought in top-flight lawyers Peter Paterno and Howard King to test the seven-year statute, as the acts seek to get out of their deals with Warner Bros. and Roc Nation, respectively. The word is that one of these acts will walk, while the other will get a more lucrative new deal. Paterno has successfully employed this strategy with Metallica, who left WMG, and Thirty Seconds to Mars, who renegotiated their EMI contract.

NAMES IN THE RUMOR MILL: Irving Azoff, Dennis Kooker, Guy O, Jon Platt and Michelle Jubelirer.

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