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<i>Commentary:</i> Favored-Nation Clauses: Live Nation's Expansion Into 360-Degree Deals with Artists

By Paul Menes
May 28, 2008
Like a lot of you, I've been watching the major record labels try unsuccessfully for some time to replace the CD and revamp their business model. Napster launched and didn't go away, instead chipping away at ' and eventually crumbling ' the labels' foundations. Many artists and employees, some friends and colleagues among them, lost their jobs in a shrinking industry.

Quicker Return

Artist development, always a major component of a label's value (and eventually, a valuable catalogue), became almost non-existent. The major labels are no longer run by true music men and women, the kind of visionaries, mavericks and dreamers ' like Sam Phillips, Jerry Wexler, Berry Gordy, Chris Blackwell, the Ertegun brothers and Clive Davis, among others ' who built an industry from scratch into an innovative and creative cultural force.

The majors' current deals reflect their need to find new and much quicker sources of revenue, by taking portions of artists' touring and merchandising monies as a condition of signing them, and consolidating or merging with other record companies to achieve 'economies of scale' in their back-office activities. The labels' financial reports and share prices show a lack of success so far.

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