After paying mega-millions to Madonna, Jay-Z, Shakira and Nickelback for the rights to distribute their respective future albums, Live Nation is now talking about outsourcing the job back to one or more of the major music labels, The Post has learned.
Rather than an overall deal with just one label partner, CEO Michael Rapino is considering doing licensing deals on an artist-by-artist basis, a source inside Live Nation said.
Under that scenario, Warner Music Group could end up handling the marketing, promotion and distribution of albums by the very acts that defected from it to join Live Nation: Nickelback and Madonna.
“Rapino wants to outsource everything,” said a second source close to the situation. “He doesn’t want to build an infrastructure or carry any overhead.”
The move is mirrored after the “rent-a-system” model used in Hollywood, whereby one studio produces a movie but licenses all the other functions to another studio that already has a distribution and marketing infrastructure.
Live Nation’s talks, which sources say are still in their early stages, represent the latest retrenchment from the strategy of former chairman Michael Cohl, who sought to transform the touring giant into a multi-faceted powerhouse, including a record company.
News of the potential outsourcing move follows last week’s dismissal of industry veterans Bob Ezrin, Bob Cahill and Bill Hein, all of whom were Artist Nation employees hired by Cohl to create a label infrastructure for Live Nation’s newly signed acts.
The new thinking on records represents a potentially pricey shift in strategy for the company, which is paying $30 million just for the rights to Jay-Z’s next three albums, and similarly big figures to the three other superstars it has signed to recording contracts.
Instead of banking all the upside on album sales, as was once envisioned with these so-called “360 deals,” Live Nation would likely collect a less lucrative outsourcing royalty of between 25 percent and 35 percent, based on other industry licensing deals.
It would then be responsible for using that money to pay the artist’s royalty – a fee that, at the superstar level, can come close to equaling the licensing royalty the company is apt to get from a label.
Sources cautioned, however, that without a new album due to Live Nation for at least 18 months, the company is in no rush to make a decision.
Another option is for Rapino to bypass the labels and strike exclusive deals directly with retailers like Wal-Mart or Target to handle those functions, similar to what The Eagles did with Wal-Mart.
As for Cohl, who still serves as a consultant to Live Nation, one source said he and Rapino are moving closer to a complete separation agreement.
A source said Cohl could potentially take The Rolling Stones and a number of other acts with him to create a new business. Another source suggested that a likely scenario would involve the Cohl entity continuing to work through Live Nation.
Live Nation shares closed up 91 cents, or 7.7 percent, at $12.72.