Death of a global pop icon reveals fragility of the live music business model

Valerie | 07 Jul 2009, 10:41

As millions of fans across the globe gather at the AEG-owned Staples Centre memorial ceremony in Los Angeles today to bid farewell to the King of Pop, spare a thought for Randy Phillips, the promoter who committed $50 million (£31 million) to Jackson’s comeback.

According to industry estimates, Mr Phillips, the chief executive of AEG Live, the company behind the O2 arena spent up to $30 million on production costs for the Jackson shows, and advanced the singer $10 million to $20 million. That meant that on the news of Jackson’s death, AEG was $50 million down — and there were $85 million in sold tickets to refund and 50 nights to fill.

AEG Live says the cancellation of Michael Jackson’s string of 50 concerts will be offset by insurance, potential DVD sales of his last rehearsal – and perhaps by replacing the O2 booking with a nine-month tribute. Despite the handling of the financial aftermath being hailed as a “PR masterclass”, the implications for the music industry are clear: what the death of a global pop icon illustrates is the fragility of betting on the power of live music as a panacea to the challenges faced by the music industry.

As this article notes, in a climate of declining CD sales, it’s not surprising that industry veterans have turned their attention to the concert business as a way to bolster their bottom line. In exchange for putting up money for touring, music-video production, and other expenses,  music companies want to profit from more than a band’s albums and recording masters, and get a piece of the brand itself. However, it is becoming more apparent that whilst revenues from live events are certainly growing, it must be acknowledged that it is simply getting an increasing share of a decreasing pie.

Speaking at the Palais des Festivals in Cannes earlier this year, Brian Message, manager for artists such as Radiohead brought home this point, arguing that the “gravy train of the past is gone” and the music industry needs to confront a new world order if it is to survive. 

As Message explained, there is no longer one model that will work. The music industry needs to think about new, innovative ways to monetise content, develop multiple revenue streams and engage music fans in the way they choose– and today, that means tapping into and exploiting new distribution channels brought about by the digital age.

A live feed of the memorial service will be made available free to television networks and tellingly, media commentators are predicting Jackson’s memorial will be the “biggest thing ever in the history of the internet”.  This is surely a sign of the changing times and an indication of what lies ahead which the music industry must embrace if it is flourish.