September 12, 2005

Trying New Business Models [8:29 am]

EMI Takes a Stake in Band [pdf]

The deal, which would give EMI a stake in almost every dollar the band earns worldwide over at least the next five years, would represent the first time a high-profile American band has wholly partnered with a record company, although similar experiments have been initiated with foreign and first-time performers.

Sources close to the band said that under the terms of the deal, EMI would pay the four-member band an estimated $15 million upfront — more than twice what the band might expect from a traditional recording contract. In return, EMI would get more than 25% of the band’s publishing, merchandising and touring revenue as well as profit from the group’s albums.

[...] Traditionally, record labels have focused almost solely on recorded music. In exchange for putting up the millions of dollars required to produce and package a hit act, music companies have kept most of the profit generated by album sales, leaving the lower-margin concert, merchandise and music publishing industries to others.

But as album sales decline and record labels look for new sources of revenue, many labels have begun exploring partnership deals similar to the Korn-EMI agreement. Music executives and artists say that if all-encompassing agreements become common, they could significantly shift the focus of the $11-billion recording industry and bring new heavyweights to the concert, merchandise and music publishing worlds.

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